Is your hospital still operating pharmacy as a cost center? Time to update that old approach.
As a pharmacist and executive pharmacy leader, I nodded in agreement when reading McKinsey & Company describe pharmacy services as a critical source of value for health systems, and was not surprised that the firm also considers pharmacy to be an untapped opportunity for strategic growth.[1] But new research from Maxor shows a changing approach as more leaders look to transform their pharmacy services from cost centers into revenue streams.
Survey snapshot: low pharmacy capture rates, missed revenue opportunities
Maxor commissioned Sage Growth Partners to independently recruit and survey 78 executives and pharmacy leaders at hospitals and health systems in Q2 of 2024. The chief medical officer of a health system shares a perspective that aptly echoes the state of hospital pharmacies today: “We look at pharmacy as a cost center and not a revenue stream.”
Another research participant, the associate vice president of finance at an independent community hospital, says that the organization is not “maximizing opportunities” to generate new revenue and drive cost savings because like many health systems, [we continue] to do “the same things we’ve always done. We haven’t changed as the environment changed.”
As a result, hospitals and health systems are leaving money on the table by not identifying and executing strategies to simultaneously drive new revenue and reduce expenses. Consider this revealing survey finding: 50% of respondents either didn’t know their organization’s pharmacy capture rate or reported that it is under 30%. From my perspective, that is a strong indication that health systems and hospitals have plenty of room to improve pharmacy services, and organizations that fail to take action now will continue struggling with unsatisfactory capture rates for the foreseeable future.
Leaders are poised to transform pharmacy services to thrive in the next 3-5 years
Nearly three-quarters (70%) of survey respondents said their hospital or health system plans to expand pharmacy services in the next three to five years. But only 29% of respondents were “very confident” their organization can meet the demand for pharmacy services.
Our survey findings, however, show the undeniable power of working with an external partner on pharmacy transformation. In fact, 72% of health systems that align with an external pharmacy services partner capitalize well on cost-savings and revenue generation, while only 32% operating pharmacy services without a partner capitalize well on cost-savings and revenue generation. Strategic partners help hospital and health system pharmacies maximize key value drivers, including; payer access and limited distribution drugs, pharmacy benefits management, and specialty pharmacy capabilities.
What hospital pharmacy services need now: real-time data and analytics
Despite the aforementioned low rates of pharmacy capture, the survey results show that only about a quarter of hospitals and health systems are currently using real-time data and analytics to inform strategies that address script leakage. That makes it difficult to discern where leakage is occurring so it can be reduced or eliminated.
However, that is also changing. Our research shows that the majority (73%) of hospital and health system leaders are interested in leveraging real-time data to gain a clearer understanding of script leakage—signaling that more and more health systems and hospitals are likely to partner for those capabilities in the short-term. When it comes to selecting a pharmacy services partner, the survey findings show that health system leaders have a strong preference for pharmacy-solution specific vendors for outpatient/retail and 340B programs, and they consider pharmacy-solutions specialists to be equally as strong as large vertically integrated players for inpatient, PBM, and specialty pharmacy.
“The right partner brings expertise in the areas we are lacking, as well as specialized experience and scale to drive profits to our facility by helping us capitalize on unrealized revenue through better processes,” according to survey respondents.
The biggest risk? Not taking action to transform pharmacy services
With the ongoing workforce crisis and rising drug and pharmacy costs, health system and hospital leaders simply cannot afford to continue operating pharmacy as a cost center when it should instead be generating revenue. The risks of inaction are clear: loss of prescription volumes, poor clinical outcomes, suboptimal management of pharmacy frameworks, increased risk of drug-on-drug interactions, increased readmissions, and channel competition with national vendors.
Our research illustrates the power of partnering to develop integrated pharmacy strategies supported by an ecosystem of care that creates value for the organization and improves adherence rates and health outcomes for patients.
