Hospital Pharmacies and Budget Management: How Technology Can Help
The hospital pharmacy must play its part by leveraging technology to control the costs of doing business and supporting the enterprise in addition to focusing on patient care.
Hospital pharmacies are one of the busiest hubs in any health care system. In addition to dispensing and keeping track of medications, pharmacies are faced with administrative tasks that consume valuable time that could be spent focusing on crucial initiatives like patient care. One of the biggest and most time-consuming challenges they must address on a regular basis is cost control and budget management. This has always been an obstacle for health care organizations, as many facets of cost management are uncontrollable, like rising drug prices, new biologics that provide better patient outcomes, and shifting patient needs.
Nothing has shed more light on the challenges of balancing hospital spending than the COVID-19 pandemic, which drove up hospitals’ costs while significantly reducing the income they usually generate through outpatient visits and elective procedures.1 With so many changing factors that hospitals can’t control, organizations must focus on managing what they can, especially considering some only have 12 to 45 days of cash on hand.2 Exacerbating this challenge is the fact that 60% of hospital pharmacists have been given a cost savings goal due to budget tightening as a result of COVID-19. And for 39% of those pharmacists, their savings goal is as large as $300,000.3 The hospital pharmacy must play its part by leveraging technology to control the costs of doing business and supporting the enterprise in addition to focusing on patient care.
Streamlining Budget Management With Technology
Manual budget management is extremely time-consuming for hospital pharmacy staff, who often lack the resources to compare prices and ensure they’re optimizing the negotiated contracts and prices available to them. Additionally, staff are more likely to make mistakes if they’re using manual processes, which can lead to suboptimal cost management. That’s why technological solutions can be so helpful for hospital pharmacies. In addition to streamlining the task and reducing the amount of work needed by staff, the real-time data they provide enables hospitals and health care systems to see exactly when prices and inventories change so that they can adjust and pivot as needed. This is crucial because of fluctuating costs. For example, GoodRx data from January 2021 showed that 832 drugs in total increased in price by an average of 4.5%.4
Hospitals may also experience significant shifts in the types and quantities of drugs they need. When the COVID-19 pandemic hit, demand for the drugs necessary for sedation and intubation skyrocketed, and hospitals treating influxes of critically ill patients needed more of these medications than ever before. This major change impacted hospitals down the line, as they had to monitor their spending more carefully on medications that they keep permanently stocked as well as things like personal protective equipment. Not to mention, this is all on top of rising overall costs. According to the most recent report from the American Society of Health-Systems Pharmacists (ASHP) Research and Education Foundation,1 the average total drug spending per hospital admission increased by 18.5% in 2017 compared with 2015. As a result, 1 in 4 hospitals had to cut staff and more than 90% had to identify alternative therapies to cope with drug shortages or sharp price increases. Once again, price monitoring technology is poised to help. By tracking purchasing options from different wholesalers and monitoring an organization’s historical spending, these solutions can make suggestions as to the most cost-effective options that will still provide the best patient outcomes—every hospital’s top priority.
Looking Forward
Budget management is more important now than ever, and with changing legislation around drug pricing,2 costs are likely to keep fluctuating. Now is the time for organizations to consider implementing tools that can help them stay organized and on track, as the health care system must remain poised to react to unpredictable events like the COVID-19 crisis. Access to real-time data and cost information can assist with preparation by enhancing price transparency, providing hospital pharmacists with updates on price fluctuations, and more. This can lead to improved evidence-based purchasing and, potentially, significant savings for hospitals.
About AJ Rivosecchi
AJ Rivosecchi is a Product Manager at Kit Check. He completed his undergraduate studies and Pharmacy school at the University of Pittsburgh, graduating Summa Cum Laude with a Doctor of Pharmacy (PharmD) degree. He has over 10 years of hospital pharmacy experience, most recently serving as the Manager of Pharmacy Operations for UPMC St. Margaret Hospital in Pittsburgh where he championed many process improvement projects including implementing a controlled substance diversion monitoring program in conjunction with nursing leadership. AJ was active in Health System Pharmacy Operations planning and initiatives including policy review and development, chairing the UPMC Pharmacy Operations Finance committee and serving on the Health System Pharmacy Operations Construction and Diversion committees. AJ has extensive experience in all aspects of health system pharmacy operations, controlled substance management, coordinating diversion investigations, peri-operative pharmacy services, and pharmacy automation.
References
1. John Commins. Pandemic Continues to Strain Hospital Volumes, Margins, Revenues in 2021. Healthleaders.Updated February 22, 2021. Accessed June 14, 2021. https://www.healthleadersmedia.com/finance/pandemic-continues-strain-hospital-volumes-margins-revenues-2021
2. Findings Brief: NC Rural Health Research Program. The Cegil G. Sheps Center for Health Services Research, The University of North Carolina at Chapel Hill. May 2020. Accessed June 14, 2021. https://www.shepscenter.unc.edu/wp-content/uploads/dlm_uploads/2020/05/Most-Rural-Hospitals-Have-Little-Cash-Going-into-COVID.pdf
3. 2020 Hospital Pharmacy Operations Report. Kit Check. 2021. Accessed June 14, 2021. https://kitcheck.com/wp-content/uploads/2021/03/2020-HPOR-final.pdf.
4. Marsh T. Live Updates: January 2021 Drug Price Increases. GoodRx. Updated January 19, 2021. Accessed June 14, 2021. https://www.goodrx.com/blog/january-drug-price-hikes-2021/
5. Vermeulen LC, Eddington ND, Gourdine MA, Jorgenson J, et al. ASHP Foundation pharmacy forecast 2019: Strategic planning advice for pharmacy departments in hospitals and health systems. American Journal of Health-System Pharmacy. 2019. https://doi.org/10.2146/sp180010
6. Van Antwerp G, Naaz B, Korba C. State drug pricing policies: Drug companies and PBMs should prepare for continued activity. Deloitte Insights. Updated July 16, 2020. Accessed June 14, 2021. https://www2.deloitte.com/us/en/insights/industry/life-sciences/state-drug-pricing-legislation.html
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