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
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)
Drug cost per adjusted patient day
Hours worked per adjusted discharge
Labor cost per adjusted patient day
Hours worked (paid) per 100 orders processed
Total pharmacy cost per adjusted patient day
Hours worked per 100 admissions
Drug cost per adjusted discharge A
Hours paid per adjusted patient day
Labor cost per adjusted discharge
Hours paid per adjusted discharge
Total pharmacy cost per adjusted discharge A
Hours worked per patient day
Drug cost per 100 orders processed
FTEs per dose billed
Labor cost per 100 orders processed
FTEs per order processed
Total pharmacy cost per 100 orders processed
FTEs per occupied bed
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
CMI
Pharmacy Intensity Score
Hip Replacement
3.2 (17% of highest DRG)
7.8 (8% of the highest DRG)
Kidney Transplant
3.2 (17% of 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
• Hours of Operation
• How data elements
are reported
• Distributive Services
– 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
Source of
Data
Anti-Infective Drugs
3,918,000
Hospital
All anti-infective drugs
Oncology Drugs
2,015,000
Hospital
Anticoagulants and Thrombolytic Drugs
1,500,000
Hospital
Transplant Drugs
1,266,000
Hospital
Blood and Immune System Modifiers
1,035,000
Hospital
Large and Small Volume Solutions
750,000
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
600,000
Hospital
Propofol (Diprivan)
IV Immune Globulin
485,000
Hospital
All brands of IVIG
Aprotinin
450,000
Hospital
Aprotinin (Trasylol)
Nesiritide
225,000
Hospital
Nesiritide (Natrecor)
Albumin and Plasma Protein Fraction
180,000
Hospital
All strengths and sizes of albumin and plasma protein fraction
All other drugs not included in above categories, nor excluded in categories
below
Drug Expense Categories
All Other Inpatient Drugs
Total Inpatient Drugs Included in Ratios
4,699,000
Computed
17,123,000
Hospital
Category Definition
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
Drug Expense Source of Data
Category Definition
Hemophilia Factors
1,050,000
Hospital
Factors VIIa, VIII, and IX
Radiology Contrast Media
1,115,000
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)
Volatile Anesthetic Gases
400,000
Total Inpatient Drugs Excluded from Ratios
2,565,000
Computed
Total Inpatient Drugs Included in Ratios
17,123,000
Hospital
Grand Total Inpatient Drugs
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
Drug Expense
Source of Data
Category Definition
Oncology Infusion Center
8,335,000
Hospital
All drugs used in an Oncology
Infusion Center
Non-Oncology Infusion Center
1,000,000
Hospital
All drugs used in a Non-Oncology
Infusion Center
Ambulatory Dialysis Center
875,000
Hospital
All drugs used in an Ambulatory
Dialysis Center
Ambulatory Surgery Center
400,000
Hospital
All drugs used in an Ambulatory
Surgery Center
Emergency Department
195,000
Hospital
All drugs used in an Emergency
Department
All Other Clinics / Outpatient Areas
Total Outpatient Drugs
4,265,000
Computed
15,070,000
Hospital
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
Expense
Source of
Data
Oncology Drugs
5,200,000
Hospital
Blood and Immune System Modifiers
2,500,000
Hospital
All oncology (antineoplastic) drugs
Darbepotin, epoetin, filgrastim, pegfilgrastim, sargramostim, adalimumab, alafacept,
aldesleukine, omalizumab, interferons (all variations)
IV Immune Globulin
1,300,000
Hospital
All brands of IVIG
Infliximab
1,200,000
Hospital
Enzyme Deficiency Replacement Drugs
800,000
Hospital
Infliximab (Remicade)
Agalsidase beta (Fabrazyme), alglucerase (Ceredase) alpha1-proteinase inhibitor
(Aralast, Prolastin)
Verteporfin
500,000
Hospital
Verteporfin (Visudyne)
Botulinum Toxins
500,000
Hospital
Botulinum toxin type A and type B
Antiemetics
200,000
Hospital
Anticoagulants and Thrombolytic Drugs
200,000
Hospital
Aprepitant, granisetron, meclizine, ondansetron, prochlorperazine, trimethobenzamide
Abciximab, alteplase, anti-thrombin III, argatroban, bivalirudin, enoxaparin, eptifibatide,
heparin, lepirudin, reteplase, streptokinase, tirofiban, urokinase, warfarin
Omalizumab
80,000
Hospital
Omalizumab (Xolair)
Nesiritide
60,000
Hospital
Nesiritide (Natrecor)
Vaccines
40,000
Hospital
All vaccines and toxoids
Drug
All Other Clinic / Outpatient Drugs
Total Outpatient Drugs
2,490,000
Category Definition
Computed All other drugs used in outpatient settings not included in the above categories
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