Cape Cod Hospital's Pharmacy Helps Weather the Economic Storm
Cape Cod Hospital and nine regional hospitals are cutting costs by creating a buying block and sharing protocols - an approach generally available only to larger institutions.
When the economy bottomed out three years ago, Cape Cod Hospital was just one of countless institutions forced to tighten its belt. In August 2008, facing a $25 million shortfall for that fiscal year, the hospital laid off 91 employees.
Hospital administrators also set their sights on non-salaried opportunities for cost savings and began cutting back on material supplies. But cutting back on paper towels can only save so much.
To address the growing, and ongoing need to manage the escalating cost of providing health care, CCH, led by Peter Scarafile, VP and head of the pharmacy department, is participating in a unique cooperative approach among some of the region's smaller hospitals to take advantage of the purchasing power advantage usually reserved for larger hospital groups or professional associations.
Instead of purchasing high cost, brand name pharmaceuticals independently, 10 regional hospitals have banded together to identify opportunities for cost savings through collective bargaining.
The hospitals are also working together to share entire protocols toward establishing standardized best practices. Some of these best practices involve "care maps," which, when standardized, save money and improve outcomes.
"What we are doing is sharing resources then implementing best practices," explained Scarafile, referring to the shared resource of Novation, a consulting service and buying group based in Texas.
"Through our buying group we can identify the high cost items," Scarafile said. "Then through collaborative action we come up with a strategy, usually either to combine buying power or establish and share best practices."
By working together, the hospitals have been able to take advantage of more beneficial pricing for the same brand-name drugs or generic equivalents. Where the savings does not justify generic substitutions, the hospitals seek out drugs that, while not a direct chemical equivalent, obtain the same therapeutic outcome. Examples include prostate cancer drugs, which are all very similar, clotting drugs, treatments for immune deficiencies or anesthesia gases.
"We try to pick out big-ticket items that have opportunities," said Scarafile. "Oncology is very difficult, as there are a lot of branded drugs and it's a very emotional thing."
Most drugs administered at a hospital are part and parcel of routine care and particularly in an emergency situation, patients would not normally have any knowledge of the specific drug they are receiving.
"Sometimes it's just a personal preference on the part of the physician," said Scarafile, "so we will try to educate the doctors."
When asked if the investment in a buying agent is worth it, Scarafile replies with a resounding yes, with a qualifier.
"Our number one priority is outcomes," Scarafile said. "We are not going to make a decision on dollars. Our goal in the beginning is to maintain, to increase quality."
Since the beginning of the pharmacy's buying program, CCH has benefited from between $300,000 to $350,000 in savings.
"The bottom line is that for every $1 we invest in this consultant we get $3 back," he said. "That's a pretty good ROI."
Scarafile continued, "Every bit of money you don't spend on material you can invest in the physical plant of the hospital…for example, in better machinery. In a non-profit, everything saved is turned back in to the patient."