How Is It Pharmacy Automation Drives Budget Savings and Sustainability? Hospitals

Category: Pharmacy Advances Written by Dr. Charles Shively / November 11, 2014

All Pharmacies Face Budget Cuts

Let’s not muck about !!! (Australian/British expression for hesitation and procrastination)

It’s time to use pharmacy automation “across the board” to drive budget savings and improve sustainability.

A common denominator in budget management for hospital pharmacies (for profit and not-for-profit) and independent, chain and grocery pharmacies is SWB (salaries, wages and benefits) expense. Adding SWB to inventory control (purchasing approaches) with new patient engagement demands, effecting budget cuts to impart sustainability is in the forefront of thinking by pharmacy managers today. Separate from these common budget management areas, however, the budget management process diverges for hospital pharmacies and community pharmacies.

Hospitals focus on readmission rates, meaning use, real-time benefit verification , ePA (electronic prior authorization) and patient care transition among others. Community pharmacies now focus on fully integrated workflow, MTM (medication therapy management), adherence tracking and medication synchronization with compliance packaging and consultation. How are these organizations achieving successful budget management? The answer: Pharmacy Automation.

Hospital Budget Management

Hospital Senior Management is challenging their pharmacy directors to drive down SWB in for-profit pharmacies to below 50% of net profit. Those hospitals which have not-for-profit pharmacies often need meet levels of SWB below 60% of net profit. How can pharmacy directors meet these budget goals? Yes, by using pharmacy automation. Also, in many hospital pharmacies, budget reductions are targeting a goal for medication inventory purchases of not more than 12% of net profit. Recent information from the government’s 340B program has indicated over 70% of hospitals are using this medication purchasing approach to reduce drug expense. For those interested in learning how the 340B program can be implemented in hospital pharmacy settings (and community pharmacies also), visit This program was enacted through legislature efforts in 1992 by the US government.

As hospitals look to better manage budgets, monies lost due to readmission within thirty (30) days of Medicare and Medicaid patients…for the same diagnosis… is significant and has become a top priority. No insurance reimbursement is made to hospitals should this 30-day readmission occur. The Affordable Health Care Act has demanded attention to effecting better transition care…from the hospital to the patient’s prior setting (home, skilled nursing facilities, long term and assisted living) to prevent return to the hospital within a 30 day period. This demands hospital staff additional time involvement…including increased pharmacist involvement. With the average readmission cost…for the same diagnosis…costs are typically $13K or more for the one instance. This translates into a national readmission cost estimate of $17.4 Billion annually for Medicare patients alone ( Obviously, hospital administration today are super-attentive to this area of their budget….particularly as they are further financially fined by CMS (Center for Medicare and Medicaid Services) when excessive readmissions occur past allowable targets. Data just released ( summarizes the first six months of effort in this area through surveys of selected hospitals and their emergency room physicians…and it isn’t positive. Disappointedly, the survey results show a 47% increase in the number of emergency room visits rather than the anticipated reduction as proposed by the Affordable Health Care Act and this increase is attributed to the mandated larger number of enrollees in Medicare and Medicaid. A survey of all United States hospitals by CMS would appear to be necessary to validate this as a national trend. Humm……….

Other Areas for Budget Reduction

One effort many hospitals are now using…including their pharmacies…is real-time benefit verification and ePA (electronic prior authorization). Rather than paper billing “after the fact”, without knowing the overall hospital budget impact, payment for services verification is completed prior to the service to better help hospitals anticipate their budget exposure for service. The implementation of electronic medical records…and patient portal access…has only increased budget expense with a payback of more than $44K over 4 years for the organizations who became involved in 2011-2012. The value of electronic medical records, as required by the Affordable Health Care Act’s “Meaningful Use” commitment had improved patient care coordination and communication between physicians, healthcare service providers and pharmacies. Budget expense to implement EMR (electronic medical records)…also with patient engagement targets for use…has been very impactful to hospital budgets. The $44K “reward” for meaningful use involvement is as some say “a drop in the bucket”.

Automated Pharmacy Dispensing’s Role

Many hospital administrators have taken the advice of their pharmacy directors…based upon thorough evaluation of budget impactors…and implemented use of automated pharmacy counting or dispensing equipment solely because pharmacist overlap hours and early/late pharmacist and technician efforts have reduced SWB….while allowing extra time during the day for the patient care transition effort to reduce hospital readmissions.

How would this help your hospital pharmacy circumstance…and drive budget savings and sustainability?

SPECIAL THANKS to Tom Modeen, Senior Automation Specialist at RxMedic for his insights into today’s pharmacy issues.

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Thank for sharing!

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