Transcript Slide 1
External Benchmarking
Challenges, Limitations, and Strategies
Prepared for ASHP members by the Section of Pharmacy Practice Managers Advisory Group on Pharmacy Business Management
http://www.ashp.org/Import/MEMBERCENTER/Sections/SectionofPharmacyPracticeManagers/AboutThisSection/SA GonPharmacyBusinessManagement.aspx
External Benchmarking
Provides a tangible means for hospital administrators to compare operational and financial data
At the unit level
At the department level
At the organization level Allows administrators to target key areas for cost control and performance improvement
Why is it here?
Shrinking margins and rising costs for pharmaceuticals Changes to prospective reimbursement Improved operational performance
Do more with less Demands for quality and safety, along side increased patient acuity
Shifting complicated care from inpatient to the ambulatory setting
Externally Benchmarking a Pharmacy Department
a tool to assist with external labor productivity monitoring and financial performance
Strength:
to find and implement best practices of peer organizations (includes patient care services)
Weakness:
productivity targets from external benchmark vendors are at odds with pharmacy department goals for expanding clinical services and implementing best practices
Challenges with Externally Benchmarking a Pharmacy Department
Assesses pharmacy value and productivity using staffing and workload ratios derived from product distribution not clinical services Unable to associate total cost of care with individual department costs and services (including clinical practice) Unable to measure patient outcomes and the impact quality and safety measures have on patient outcomes
EXTERNAL BENCHMARKING LIMITATIONS USING VENDORS SYSTEMS AND STRATEGIES TO OVERCOME
Origin of Key Data Elements in External Benchmarking
Operating statistics provide the foundation for data reported to an external benchmarking software system
General ledger
Payroll
Charge master
Monthly financials
Manual statistics reported by departments Billing and coding data
Frequently Reported Pharmacy Data Elements
Operating statistics
Drug expense, gross charges, labor expense, paid hours, worked hours, orders processed, doses administered, gross drug charges, inpatient gross drug charges Facility information
Patient days, admissions, discharges, clinic visits, case mix index Staffing configuration
Paid FTE’s, skill mix (% pharmacist, % technicians, % management, % other), overtime hours
External Benchmarking Software Systems
Limitation:
Reported productivity ratios and performance indicators are flawed and used inappropriately within hospitals
Strategy to Overcome:
Understand the mathematical formulas behind all reported ratios
Insist on including drug cost and total pharmacy cost performance ratios side-by-side with productivity ratios
External Benchmarking Software Systems
Select productivity and cost ratios wisely preferred ratio denominators include
Patient discharges rather than patient days Orders processed rather than doses dispensed
Productive Ratios used to Evaluate Pharmacy Services
Labor Productivity Ratios Cost-Based Productivity Ratios
Drug cost per adjusted patient day Hours worked per adjusted patient day
(Hours worked per 100 CMI-weighted revenue-adjusted patient days) (Hours worked per 100 Pharmacy Intensity weighted patient days)
Hours worked per adjusted discharge Labor cost per adjusted patient day Hours worked (paid) per 100 orders processed Hours worked per 100 admissions Hours paid per adjusted patient day Hours paid per adjusted discharge Hours worked per patient day FTEs per dose billed FTEs per order processed FTEs per occupied bed Total pharmacy cost per adjusted patient day Drug cost per adjusted discharge A Labor cost per adjusted discharge Total pharmacy cost per adjusted discharge A Drug cost per 100 orders processed Labor cost per 100 orders processed Total pharmacy cost per 100 orders processed FTEs per adjusted patient day A Preferred metrics.
External Benchmarking Software Systems
Limitation:
Case Mix Index (CMI) is a flawed measure, routinely used to approximate pharmacy-specific patient acuity and medication resource consumption
Strategy to Overcome:
Adjust acuity using a pharmacy intensity score rather than CMI
Example
DRG
Hip Replacement Kidney Transplant
CMI
3.2 (17% of highest DRG) 3.2 (17% of highest DRG)
Pharmacy Intensity Score
7.8 (8% of the highest DRG) 27.5 (28% of the highest DRG)
External Benchmarking Software Systems
Limitation:
Characteristic questions do not reflect current pharmacy best practice, nor assist with selection of a meaningful peer group
Strategy to Overcome:
Evaluate characteristic question responses carefully and select a peer group of 15 -20 organizations that are most similar to yours
Work to understand everything about each hospitals pharmacy department
• Clinical Services • Practice Model • Distributive Services – • Hours of Operation • How data elements are reported
Compare your services to your peer group with respect to the implementation of best practices
External Benchmarking Software Systems
Limitation:
Department definitions and divisions do not allow for data to be submitted to draw meaningful comparisons
Outpatient drug costs are soaring each year from infusion centers and high cost procedure areas
Inpatient drug costs are now the minority and approximated with a revenue adjustment factor
Strategy to Overcome:
Develop a system to segregate inpatient drug costs from all other drug costs
Benchmark inpatient costs as a single department, to prevent high cost ambulatory drug from influencing inpatient performance
External Benchmarking Software Systems
Limitation:
Drug expenses are not reported or grouped in a meaningful way to reflect areas of major drug expense
Strategy to Overcome:
Evaluate your drug expense breakouts by drug class categories and ensure they are consistent across your peer group
External Benchmarking Software Systems
Limitation:
Normalizations are not applied consistently across hospitals e.g. Hospital expense for radiologic contrast media, volatile anesthetics gases, hemophilia factors, IVIG, and albumin may not always be reported as pharmacy drug cost
Strategy to Overcome:
Understand the normalization system and confirm they are applied equally across all hospitals in your peer group
Categories for reporting Inpatient drug expenses in vendor benchmarking reports
The following categories of drug expense should be included in computation of cost ratios for the Inpatient Pharmacy Department:
Drug Expense Categories Drug Expense Source of Data Category Definition Anti-Infective Drugs 3,918,000 Hospital All anti-infective drugs Oncology Drugs 2,015,000 Anticoagulants and Thrombolytic Drugs Transplant Drugs Blood and Immune System Modifiers Large and Small Volume Solutions Propofol IV Immune Globulin Aprotinin Nesiritide 1,500,000 1,266,000 1,035,000 750,000 600,000 485,000 450,000 225,000 Hospital Hospital Hospital Hospital Hospital Hospital Hospital Hospital Hospital All antineoplastic drugs Abciximab, alteplase, anti-thrombin III, argatroban, bivalirudin, enoxaparin, eptifibatide, heparin, lepirudin, reteplase, streptokinase, tirofiban, urokinase, warfarin Cyclosporine, mycophenolate, sirolimus, tacrolimus, basiliximab, daclizumab, muromonab-CD3, anti-thymocyte globulin, cytomegalovirus immune globulin, lymphocyte immune globulin Darbepotin, epoetin, filgrastim, pegfilgrastim, sargramostim, adalimumab, alafacept, aldesleukine, omalizumab, interferons (all variations) All large and small volume IV, nutrition, and irrigation solutions (includes products purchased by both Pharmacy and Material Service) Propofol (Diprivan) All brands of IVIG Aprotinin (Trasylol) Nesiritide (Natrecor) Albumin and Plasma Protein Fraction All Other Inpatient Drugs 180,000 4,699,000 Hospital Computed All strengths and sizes of albumin and plasma protein fraction All other drugs not included in above categories, nor excluded in categories below
Total Inpatient Drugs Included in Ratios 17,123,000 Hospital
Drug cost NOT to include in Inpatient Pharmacy Cost Ratios
The following categories of drug expense should be reported in the vendor's system, but should NOT be included in computation of cost ratios due to site-to-site variability in purchasing practices:
Drug Expense Categories Hemophilia Factors Drug Expense Source of Data 1,050,000 Hospital Factors VIIa, VIII, and IX Category Definition Radiology Contrast Media Volatile Anesthetic Gases
Total Inpatient Drugs Excluded from Ratios Total Inpatient Drugs Included in Ratios Grand Total Inpatient Drugs
1,115,000 400,000 Hospital All contrast media (Note: this value also is reported in Radiology Department Report) Hospital Volatile anesthetic gases (e.g., desflurane, halothane, isoflurane, sevoflurane) (Note: this value also is reported in Anesthesia Department Report)
2,565,000 Computed 17,123,000 Hospital 19,688,000 Computed
Sum of totals from two sections above
Ways to categories outpatient drug expenses in vendor benchmarking reports
The following categories of drug expense should be included in computation of cost ratios for the Outpatient Pharmacy
Department, and this should be reported separately from inpatient data:
Location Oncology Infusion Center Non-Oncology Infusion Center Ambulatory Dialysis Center Ambulatory Surgery Center Emergency Department Drug Expense 8,335,000 1,000,000 875,000 400,000 195,000 All Other Clinics / Outpatient Areas 4,265,000
Total Outpatient Drugs 15,070,000
Source of Data Hospital Hospital Hospital Hospital Hospital Computed
Hospital
Category Definition All drugs used in an Oncology Infusion Center All drugs used in a Non-Oncology Infusion Center All drugs used in an Ambulatory Dialysis Center All drugs used in an Ambulatory Surgery Center All drugs used in an Emergency Department All other drugs used in outpatient settings not included in the above categories
Other ways to categories outpatient drug expenses in vendor benchmarking reports
The following categories of drug expense should be included in computation of cost ratios for the Outpatient Pharmacy Department, and this should be reported separately from inpatient data:
Drug Drug Expense Source of Data Category Definition Oncology Drugs Blood and Immune System Modifiers IV Immune Globulin Infliximab Enzyme Deficiency Replacement Drugs Verteporfin 5,200,000 2,500,000 Hospital Hospital All oncology (antineoplastic) drugs Darbepotin, epoetin, filgrastim, pegfilgrastim, sargramostim, adalimumab, alafacept, aldesleukine, omalizumab, interferons (all variations) 1,300,000 Hospital All brands of IVIG 1,200,000 800,000 Hospital Hospital Infliximab (Remicade) Agalsidase beta (Fabrazyme), alglucerase (Ceredase) alpha1-proteinase inhibitor (Aralast, Prolastin) 500,000 Hospital Verteporfin (Visudyne) Botulinum Toxins Antiemetics Anticoagulants and Thrombolytic Drugs Omalizumab Nesiritide Vaccines All Other Clinic / Outpatient Drugs 500,000 Hospital Botulinum toxin type A and type B 200,000 200,000 Hospital Hospital Aprepitant, granisetron, meclizine, ondansetron, prochlorperazine, trimethobenzamide Abciximab, alteplase, anti-thrombin III, argatroban, bivalirudin, enoxaparin, eptifibatide, heparin, lepirudin, reteplase, streptokinase, tirofiban, urokinase, warfarin 80,000 Hospital Omalizumab (Xolair) 60,000 Hospital Nesiritide (Natrecor) 40,000 Hospital All vaccines and toxoids 2,490,000 Computed All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs 15,070,000 Hospital
External Benchmarking Software Systems
Limitation:
Pharmaceutical manufacture rebates and expired drug credits are not applied consistently across hospitals
Strategy to Overcome:
Ensure your rebate and expired drug credits are factored out of your cost ratios
External Benchmarking Software Systems
Limitation:
Disproportionate share (340-B) contract participation is not consistently flagged in vendor systems
Strategy to Overcome:
If you are not a 340-B hospital ensure you do not have 340-b hospitals in your peer group
Other Limitations of External Benchmarking Software Systems
Limitations:
Data reporting instructions are unclear, leading to inaccurate reporting for many hospitals
Lack of quality assurance for reported data
Clinical workload performance measures are ambiguous, unclear and lack meaning
Strategy to Overcome:
Ask lots of questions (?) to understand
Work closely with your hospitals data coordinator