David M. Garbarz, PharmD

Hospital acquisitions and mergers have become common in today’s health care environment. Reports indicate a significant increase in recent years, demonstrated by a growth from 50 in 2009 to more than 100 in 2013, with 2015 on course for the most to date.

 It is important to note that the expansion of large health systems is not new: organizations such as Hospital Corporation of America (HCA), operator of 463 hospitals in 1987, have been growing for decades.

 However, the rapid acceleration of health-system consolidation has brought this topic to the forefront. Pharmacy has the potential to be affected by these transactions.

It is evident that the increased rate of acquisitions and mergers is closely related to the significant changes in health care delivery. As health systems transition from a fee-for-service to a value-based care payment model, their size is pivotal to their success. In an environment where the expectation is to perform at higher levels of quality with fewer resources, economies of scale and purchasing power are essential to leverage cost savings.

 Consolidations allow health systems to share infrastructure, standardize clinical workflows, develop specialized services, and negotiate more competitive contracts—all while ultimately providing improved patient care.

With future payment models focusing on the management of populations, health systems need adequate resources to care for patients far beyond the walls of the acute care hospitals. It is here where pharmacy plays a role. Although significant focus has been placed on the acquisition of physician clinics by health systems, the growth of pharmacy services is arguably more crucial for monitoring patients across the continuum of care. Medications serve as a unifying aspect of the various domains of health care, and leveraging pharmacy management in each one of these domains allows continuous patient follow-up and monitoring.

The concept of health-system pharmacies operating in multiple domains across a system is nothing new. The term “pharmacy enterprise” has been used, since 2006, by the American Society of HealthSystem Pharmacists Section of Pharmacy Practice Managers executive committee and been discussed and defined multiple times in years since, most recently by Scott Knoer, PharmD, chief pharmacy officer of the Cleveland Clinic.

 In the inaugural article of the CPO Perspectives section of the 

American Journal of Health-System Pharmacy

, Knoer emphasizes that pharmacy is so much more than the term “pharmacy department” denotes, and he defines the pharmacy enterprise as “an integrated system of business units with accountability for clinical and financial outcomes related to medication use across the continuum of care in a health system.”

When exploring the concept of the pharmacy enterprise and an approach to pharmacy on a system level, 3 priorities emerge as constants: (1) improvement of patient care, (2) reduction of inevitable inpatient pharmacy costs, and (3) expansion and optimization of outpatient pharmacy revenue. A focus on each of these constants was central to the creation of Novant Health’s system pharmacy administration office.

Novant Health is no stranger to health care consolidation. Originating from a merger between Carolina Medicorp and Presbyterian Hospital in 1997, Novant Health now operates 13 medical centers, more than 400 physician clinics, 100 outpatient facilities, 9 retail pharmacies, 11 infusion centers, and 2 URAC-accredited specialty pharmacy locations in North Carolina, South Carolina, Virginia, and Georgia.

For much of Novant Health’s history, the organization has been on a journey to realize the potential of a truly integrated health system. Prior to a systemwide office known as “pharmacy administration,” a regional approach was in place, led by a regional leader. This leader had oversight of 3 hospitals, as well as clinical and medication safety. With the transition to systemwide structure, the regional leader moved into the newly created role of vice president of pharmacy. This individual represented a core principle of the pharmacy enterprise: a leader with a focused strategic plan encompassing quality of care and generation of revenue, the latter being practically unheard of in health-system pharmacy, where inpatient services have historically dominated.

The strategic plan for pharmacy administration consisted of 3 core principles: the standardization of acute care facility operations and clinical services, systemwide management of drug procurement, and the growth of Winston-Salem Health Care—Novant Health’s outpatient and mail order pharmacy. Together, these principles represent the 4 priorities of the pharmacy enterprise/integrated health-system approach around improving quality, reducing costs, maximizing earnings potential, and improving the patient experience.

To implement these core principles, pharmacy administration needed to grow. Initial additions of clinical and operational directors allowed an accelerated unification of inpatient pharmacy services throughout the system. The goal here was 2-fold: (1) standardize workflows to permit pharmacist staffing across the system and offsite coverage to serve facilities without 24/7 pharmacy support, and (2) create an identifiable pharmacy culture that provides the same level of expectations to patients, physicians, nurses, and all other health care professionals across the system.

With inpatient services on the right track, focus quickly shifted toward the outpatient market and the transformation of pharmacy from a cost center into a revenue generator. Leaders of outpatient and infusion pharmacy, along with support staff, were hired. The early goals of Winston-Salem Health Care generating revenue and the increased retail capture rate of Novant Health, team members were quickly realized. This early success bolstered senior leadership’s confidence in pharmacy administration and gave the green light for the development of Novant Health Specialty Pharmacy, which launched in 2013. This remarkable process of leadership and focused growth helped a struggling retail service evolve into a full-spectrum outpatient pharmacy service.

Following the outpatient successes, along with inpatient improvements, opportunities presented to expand beyond traditional areas of pharmacy. One area was within the system’s transitions of care and value-based care work. Pharmacy administration now monitors patients through the domains of health care. Instead of following patients along a linear path from the hospital to outpatient location, pharmacists now proactively partner with providers and patients, focusing on the ambulatory care setting of patient management. Our role is to meet patients where they are in their health care journey and help them leverage medication management to get better and stay healthy.

It is clear that innovative solutions and new models of care are critical to the success of our industry. As such, Novant Health has a responsibility to create its future and help train a new generation of pharmacists to meet this challenge. As such, pharmacy created a PGY2 in population health in 2014.

Today, Novant Health’s pharmacy administration oversees an entity consisting of far more than the sum of its parts. In addition to the physical pharmacy facilities, it manages a systemwide procurement team, regulatory affairs specialists, automation specialists, a residency and student education coordinator, and administrative support staff. These units combine to form an operative pharmacy enterprise that is successfully leveraging system integration and providing both innovative patient care and profitable results.

With a stable infrastructure now in place, it is essential to evaluate what advancements, if any, have been made possible by taking a system-integrated approach. Standardization of inpatient services has been seen as a success across the board. Standardized workflows ensure thorough pharmaceutical care at all facilities 24 hours a day, allowing pharmacists and technicians to move across the system where needed to optimize staffing and foster relationships with other members of the health care team. In addition, a systemwide pharmacy and therapeutics committee and formulary have standardized therapeutic options. This benefits the patient and significantly impacts procurement performance. Advancements in procurement—such as using a systemwide wholesaler and contracts, as well as a unified 340B management&mdash;along with operational streamlining will save an estimated $20 million in 2015 alone.

With the help of savings estimates in the millions of dollars, pharmacy administration was recently awarded 5 additional full-time equivalents for pharmacists trained in infectious disease (bringing the total to 7) to advance Novant Health’s antimicrobial stewardship program. It is through the platform of a centralized pharmacy leadership that clinical initiatives are launched and primed for future growth.

On the outpatient side, Novant Health is now operating at a completely different level than before the launch of the coordinated systemwide approach. Retail, specialty, and infusion centers provided an estimated $50 million contribution margin in 2015. Although infusion centers maintain a majority of this contribution, specialty is rapidly growing and has completed more than 50% of its 5-year business plan in just 2 years. With many successes already seen on the inpatient and outpatient sides, it is hard to imagine that only a small fraction of system initiatives have been fully enacted. Novant Health continues to pursue additional projects to help transform pharmacy services, including advanced procurement solutions (systemwide inventory management software, highspeed repackagers, and centralized distribution), clinical pharmacy initiatives (antimicrobial stewardship, transitions of care, and value-based care), and business intelligence (data use and clinical outcomes improvement projects).

The future of health care is bound to be uncertain and ever-changing. However, optimizing the benefit potential of a fully integrated health system may provide a means of stabilization and controlled growth. Novant Health has demonstrated this potential for success through its systemwide approach to pharmacy administration. This is translatable not only to other pharmacy leadership teams, but also to health systems as a whole.

David Garbarz, PharmD, is a PGY1 pharmacy resident with an administration focus at Novant Health Forsyth Medical Center in Winston-Salem, North Carolina, with plans to pursue a PGY2 in health-system administration at Novant Health.

Jeff Reichard, PharmD, MS, BCPS, is pharmacy manager at Novant Health Clemmons Medical Center, Novant Health Kernersville Medical Center, and Novant Health Medical Park Hospital. Dr. Reichard received his doctor of pharmacy degree from the University of North Carolina at Chapel Hill Eshelman School of Pharmacy. Upon graduation, he completed a combined residency and master of science degree in health-systems pharmacy administration at the University of North Carolina Hospitals.

Pharmacy Forecast: Strategic Planning Advice for Pharmacy Departments in Hospitals and Health Systems 2014-2018

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Articles

Hospital acquisitions and mergers have become common in today's health care environment.