Many facilities consider opening an outpatient pharmacy in the hopes of increasing revenue and providing improved patient care. Whether these pharmacies succeed is dependent on various factors, making it key to identify the elements specific to your operation that will allow the venture to flourish. In our case, forecasting, strategizing, and identifying and capturing a large percentage of employee prescriptions laid the groundwork for an effective business service line.
Adventist Hinsdale Hospital, in Hinsdale, Illinois is a 320-bed licensed facility that is part of a four-hospital system in the Chicago metropolitan area. The highly successful outpatient pharmacy has operated for over 22 years. The financial strength of the outpatient pharmacy can be attributed to the incentivization of our employee base to utilize this internal prescription service—specifically, capturing a high percentage of maintenance and acute need prescriptions from our staff members.
To achieve our goals for opening an outpatient pharmacy—improved employee prescription benefit management, a convenient prescription service for all employees, and service to unique patient populations—the primary tactic that made sense for our hospital was the facilitation of internal fill of employee prescriptions. Our location in the facility’s second basement precluded us from taking advantage of a large volume of patient foot traffic. We have been able to provide some patients with difficult-to-locate and niche medications—especially large volumes of pain medications that a typical retail establishment might not carry, and some compounded products—but our primary strategy for ensuring profitability is based on incentivizing our employees to fill their maintenance prescriptions at our outpatient pharmacy.
Methods of Incentivizing Employee Prescriptions
Over the past six years, we have annually focused our efforts to capture an increasing percentage of employee prescriptions. The outpatient pharmacy manager meets each year with the benefits department to establish the goals of the prescription benefit plan. While many hospitals opt to transfer more prescription medication costs to employees via higher copays or health insurance premiums, we have chosen instead to focus on securing a higher internal fill rate of this prescription business to avoid the higher prescription benefit costs typical of traditional pharmacy benefit management routed through outside retail pharmacies.
Our central strategy to capture increased employee prescriptions has been decreasing medication copayments to entice employees to use our service. Prescription volumes rose steadily as our employees increasingly took advantage of our convenient service and reduced copays, in particular avoiding the increased financial penalty for filling maintenance prescriptions at outside pharmacies.
Convenient Pharmacy Hours
Another way we incentivize employees to use our service is by offering convenient hours so prescriptions can be picked up while employees are at work. From Monday through Thursday we are open from 7am until 6:30pm in an effort to capture prescriptions from first-, second-, and third-shift employees. On Friday we close at 4:30pm, and on weekends we are open from 8am until 1pm. Providing convenience for our staff to pick up their medications while they are at work has allowed us to gradually increase our utilization each year.
These methods of incentivizing employees to fill their prescriptions at our outpatient pharmacy have been extremely successful. In the past two years, we have reduced copays down to the lowest possible level. Each year for the previous two years, after the lowered copay was implemented in the beginning of January, we experienced immediate 25% volume increases. Our total employee prescription capture rate is approximately 55%, which is the highest in the history of our facility. Approximately 75% of our total prescription volume is employee prescriptions. Last year we filled 37,523 employee prescriptions, saving our benefits department between $200,000 and $300,000 via prescription benefit management–related cost avoidance.
Managing the 340B Program
Government-based 340B drug pricing programs can offer significant cost savings; however, some financial restrictions built into these programs can limit the success of an outpatient pharmacy model predicated on a significant volume of 340B patients. Successfully utilizing 340B pricing in an outpatient pharmacy model still requires a sufficient volume of 340B patients. Typically, those patients are funneled to the pharmacy from local clinic physicians, which can make it challenging to consistently secure a high percentage of these patients.
The drug product procurement restrictions inherent to 340B also can have a disadvantageous effect on the bottom line. For some products, such as chemotherapy, 340B pricing is quite attractive. Thus, outpatient cancer clinics with 340B eligibility consistently take advantage of deep discounts. However, for other products the 340B discounts may not be as advantageous as contracted GPO discounts.
It is important to review the 340B discount levels offered for those products commonly prescribed to your client population and compare those numbers against your GPO contract pricing. Consider product-sourcing flexibility as well. Under 340B, purchasing is restricted to a single NDC, so if that product is available at a lower cost under a different NDC, you will not have the option of switching to utilize the lower-priced product.
In our experience, it can be challenging to ensure a sufficient volume of 340B-eligible patients to cover the operating costs of an outpatient pharmacy. Furthermore, reliance on 340B discount pricing can result in losing money due to reduced profit margins on employee prescriptions when contracted GPO discounts cannot be accessed. A facility that is considering opening an outpatient pharmacy to utilize 340B pricing must determine beforehand if sufficient potential volume exists to support the planned pharmacy, determine if the predicted drug utilization mix aligns strategically with the most advantageous 340B pricing, and evaluate how an effectively managed internal employee prescription program balances against the price discounts offered through the 340B program.
Tips for Outpatient Pharmacy Decision-making
To determine the feasibility of opening a successful outpatient pharmacy driven by employee prescription capture, it is essential to accurately forecast your volume and project how much of it can be secured. Explore how you will incentivize your employees to use the service, estimate the percentage of employee prescriptions that can be captured, and approximate the resultant dollars that will be saved for the institution each year. Compare this amount with your startup and yearly operating costs to generate an accurate business plan. Startup costs may include construction, licensure, informatics hardware and software, labor, and initial drug inventory costs; annual operating costs primarily consist of drug and labor costs.
Enhanced Pharmacy Perception
One of the most significant benefits of managing a successful outpatient pharmacy has been the increasingly positive perception of pharmacy throughout our organization. Delivering savings generated by the pharmacy department’s efforts of between $200,000 and $300,000 per year for the health system has proven to administration the value of a well-planned and effectively managed outpatient pharmacy service line.
Jack Durley, BS Pharm, is director of pharmacy at Adventist Hinsdale Hospital in Hinsdale, Illinois. He received his pharmacy degree from the University of Illinois College of Pharmacy. Jack’s professional interests include the effective application of technology to enhance the medication use process, appropriate use of medication error data in hospitals to improve medication safety, and trends in hospital pharmacy staffing models that promote engagement, improved performance, and employee turnover stability.
Enter our Sweepstakes now for your chance to win the following prizes:
Just answer the following quick question for your chance to win:
Entries are limited to one entry per person in any active sweepstakes.
Thank you for your entry.