With health systems pursuing cost-cutting measures in tandem with new revenue opportunities, pharmacy offers a frequently overlooked—but high-value—opportunity to meet both needs. Done well, health system-owned pharmacy services improve patient engagement and avoid unnecessary clinical costs. As a bonus, giving patients the opportunity to fill their prescriptions within the health system drives revenue inside the hospital—rather than to the pharmacy down the road.
Yet pharmacy has remained an ancillary service, not a core component of health system strategy. Why? Because many don’t know the necessary components to build out a pharmacy growth infrastructure.
Pharmacy growth starts with a readiness self-assessment
Chronis Manolis, Chief Pharmacy Officer at UPMC, shared his experience growing UPMC’s pharmacy department and business line. To explore pharmacy’s growth opportunity at UPMC, Chronis met with the organization’s Chief Medical Officer, Chief Operating Officer, and Head of Infusion Pharmacy. Together, they took four steps to assess the viability of their pharmacy growth engine. Here’s how health systems can evaluate their pharmacy growth potential:
- Take inventory of your assets. What existing pharmacy capabilities does your organization have? Where could your organization have a competitive advantage? UPMC determined that retail pharmacy services would be difficult to offer due to the number of competitors, but believed their specialty pharmacy and home infusion programs could be competitive if they invested in those areas.
- Understand the payer mix in your service area. Do you have more government or commercial payers? A higher proportion of government payers may make it easier to introduce new pharmacy offerings. In contrast, commercial payers—particularly those with PBMs or pharmacy arms—may be less open to contracting with newly launched pharmacy services.
- Assess the robustness of your specialists. Do you have sufficiently robust specialties (e.g., oncology, rheumatology, gastrointestinal departments) to drive revenue toward a health system-owned specialty pharmacy? UPMC conducted focus groups with leaders across key specialties to pressure-test their proposed clinical model and understand what it would take to get their buy-in.
- Commit to building a better clinical model. Given the competitive environment and acuity of the patient population, payers expect a differentiated model. This is the health system’s opportunity to provide a next-level pharmacy experience that seamlessly integrates with patients’ clinical care
Once health systems establish that their organization has the right assets, a favorable payer mix, and sufficiently robust specialists to launch a pharmacy service, they can begin to plan their path forward. This may include discussions around how much of an investment it will take, how to get physicians and payers on board, and if partnering with a vendor would be the best course of action.
Build a business case and start small
Pharmacy tends to receive the blame for inappropriate readmissions, adverse reactions, and general increases in healthcare costs. These costs are then often passed on as increased insurance premiums for health plan participants. However, a different world—one where clinical costs are contained through patient engagement—is not only possible but already exists, as demonstrated by UPMC.
With UPMC’s 90,000 employees and nearly 150,000 plan members, controlling pharmacy costs was a massive undertaking. Working with Arrive Health, UPMC leveraged integrated technology to highlight its own pharmacies within the ePrescribing workflow, essentially re-directing revenue back into the system. Providers who make frequent prescribing decisions can now see convenient UPMC pharmacy options for their specialty medication orders. For patients where UPMC pharmacies are in-network and affordable, the Arrive Health technology ensures a more seamless care experience.
The key to UPMC’s success was starting with a handful of specialties to prove the business case of a highly differentiated, patient-centered clinical care model. From there, with technology and analytics supporting opportunity identification, point-of-care decision support, and capture, they turned an ancillary service into a growth engine for the system.
“Pharmacy growth is low-hanging fruit. You can’t turn on the news without hearing about new drugs, yet health systems typically haven’t prioritized this as an area of focus. But there is significant revenue and differentiated clinical opportunity if systems can refer directly to their pharmacies. If you do pharmacy growth right, you get clinical benefits and patient satisfaction. It’s a self-fulfilling circle.”
– Chronis Manolis, Chief Pharmacy Officer, UPMC
To learn more, check out Part 1, Part 2, and Part 4 of this blog series.
