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Raising pharmacy’s financial efficiency

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While there are many similarities between retail pharmacies and other retail businesses, two key factors provide a unique opportunity to improve operations and financial efficiency, in turn enabling better patient outcomes.

The ability to develop close relationships with other players in the health care industry value chain, and the opportunity to utilize relevant data in order to proactively work with them, provide pharmacies with an advantage other retailers don’t enjoy.

If they are strategic about layering in this unique value proposition, chain pharmacy managers should improve their ability to meet the high-level goals of growing revenues both for the prescription drug segment of the business and for the over-the-counter medical and nonmedical products they sell, as well as improving profitability.

Maulik Bhagat_Michael Kim_AArete

Maulik Bhagat and Michael Kim of AArete

Pharmacies can and should follow standard retail efficiency plays, but the more specialized — and potentially fruitful — aspects of improving business performance merit a close look below the surface.

Benefits of working with ACOs

There is an opportunity for retail pharmacies to enhance their seat at the table with health care payers and providers. The emphasis on value-based care through accountable care organizations (ACOs) is a key opportunity for retail pharmacies.

ACOs are networks of providers and/or payers that share both medical and financial responsibility for the outcomes of the care they provide to patients. With a goal of reducing unnecessary care and improving quality, the primary care physician is at the center of the ACO, managing patients’ care and touchpoints with specialists. Providers are held accountable financially through bonuses or penalties for meeting quality metrics and reducing spend. Communication and data sharing is at the center of this coordinated model, with many providers maintaining regular communication with patients.

Since the passing of the Affordable Care Act, ACOs have matured into delivery models that include multiple specialties in their networks in order to improve care across the entire care delivery spectrum.

Since they place a high value on care coordination, ACOs maximize utilization through in-network providers, follow consistent and complementary policies and practices, facilitate effective communication, and impact their members holistically, to provide them with the best care possible at a reasonable cost. And as prescription and over-the-counter drugs are a key constituent of any holistic health care delivery ecosystem, pharmacies can develop strategic relationships with ACOs to become an integral part of this care delivery continuum.

This is made possible through the analysis of additional dimensions of data uniquely available to retail pharmacies, combined with having direct contact with patients. This combination can potentially capture incremental profits through strategic risk-sharing agreements that enable better care coordination and influence better patient outcomes.

Using data across value chain

Retail pharmacies can add more dimensions of data and help with data enrichment for mutual benefit to themselves and ACOs, again enabling improved patient outcomes. In addition to their sales and drug event data, retail pharmacies now possess data that is both clinical and meaningful to the patient journey, primarily as a result of electronic medical records. This data augments drug event data to better understand patient risks and outcomes to influence point-of-service care coordination, triage and education.

An improved level of coordination and information sharing is at the core of this mutually beneficial relationship, supported at the foundation by an effective solution for storing and analyzing relevant patient information related to both care and specific financial data.

Retail pharmacies are a key source of member contact that generates valuable information to better inform ACOs on emerging risk, helping them to manage their member populations proactively. With more data and analytical insights, retail pharmacies can exert more influence on shared savings agreements, as they are more accountable on patient outcomes.

Ultimately, enhanced coordination of care means more holistic and integrated care delivery for ACOs and better outcomes for patients, with pharmacies serving as a key conduit of information gathering as well as dissemination.

Another contact point: Pharmacies

As noted before, building relationships with ACOs and utilizing data proactively can ultimately lead to better health outcomes. But retail pharmacies can add another point of contact for patients. When contact between doctors and patients is quite limited between visits — a common occurrence for patients who don’t require a large number of in-person visits with medical staff — pharmacies can step in to fill the care coordination void and serve as a form of quality control for care as well.

Consider a patient recovering from a knee injury who also has pre-existing conditions for which she takes a few prescription medicines on a continuing basis. With visits to a number of medical professionals to deal with the chronic condition and knee injury, a simple oversight — whether on the part of the patient or the prescribing physician — could easily lead to drug duplication or drug conflicts, ultimately having a negative impact on the patient’s health outcome while increasing the risk and costs from the resultant acute episodes of care.

When a pharmacy has partnered with an ACO and actively shares information about individual members, they can intervene at the preventive stage of a health issue to provide relevant information or trigger points that enable timely action. A pharmacy in this situation is a vital connection between patient and physician, alerting the ACO to potential issues as soon as they arise while ensuring that any dangerous drug doses or combinations are avoided during a discussion with the patient at the point of service.

Similar considerations apply to the use of various OTC medications as well. When a pharmacy has a system in place for effectively managing data and providing timely reporting about patient purchases, it can flag potentially negative interactions between prescriptions and O-T-C medications, or even two different OTC drugs, and share that information with the patient.

Working with behavioral health patients is another side of this relationship where pharmacies can provide invaluable input. By sharing information about refills, use and other patient actions, designated retail pharmacies can funnel more information to ACOs and improve both visibility and cost effectiveness for providers as well as results for patients.

Another aspect to consider is working with ACOs to provide reminders, guidance and suggestions. ACOs that are focused on quality metrics — and associated bonuses and penalties — related to the number of patients receiving a flu shot or other preventive health measures can use retail pharmacies as a powerful point of member interaction, influence and care delivery.

Developing this type of relationship and gaining the benefits that come with better patient insights means that retail pharmacies need to adopt an approach that allows them to dig deep into the many dimensions of data they regularly produce and aggregate, and then draw meaningful connections and actionable insights from them. This will help them optimize their data capabilities to structure and benefit from strategic shared-savings agreements with ACOs.

Among the key requirements, they will need to understand the complexities of ACO contracts, leverage their data and influence in the care continuum, and accurately project financial implications while keeping true to their overall goal of positively impacting the health of the societies they operate in and public health at large.

Maulik Bhagat is a managing director in the health practice of AArete, a global consultancy specializing in data-informed performance improvement. Michael Kim is a director in AArete’s retail practice, and heads its Center of Data Excellence. They can be reached at mbhagat@aarete.com and mkim@aarete.com, respectively.


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