Article Take-Aways:
  • Consolidation of health care systems and hospitals is occurring at a rapid pace in response to health care reform, new payment models, and the need to manage population health.
  • Consolidation without clinical, operational, and financial integration is unlikely to deliver enhanced performance or value.
  • The ongoing changes in health care delivery and structure offer the greatest opportunity, ever to reframe the professional practice of pharmacy as a valuable contributor to team-based care, focused on improving medication-related outcomes across the continuum of care.
  • The major barriers to integration of pharmacy services, in a consolidated health care delivery system, can be categorized into 4 broad categories: governance, technology, culture, and regulation.
  • Addressing the barriers and achieving the potential for pharmacy practice will require vision, commitment, and competent leadership at the local and regional levels.

Health-system consolidation, both vertical and horizontal, is occurring at an unprecedented pace, with no indication of slowing in the near future. A total of 71 hospital deals were scheduled through August of this year; therefore, 2015 is projected to be the busiest year since the upward trend started in 2009.1,2 Between 2009-2013, there was a 14% annual increase in health-system consolidations, and the size of these deals, in revenue dollars, also grew 5-fold during the period of 2007-2013. Deloitte has presented projections involving 3 different models converging on a prediction that just 50% of current health systems will remain by 2024 due to continued consolidation.2

Health care systems are combining to create the size and scale believed necessary to be competitive under health care reform, to improve cost management through reduction of duplicity and waste, to drive efficiency through integration, to achieve the care-quality goals of new incentivized payment models, and to have the geographic reach to make population health management effective. Health care provider system consolidation includes the transfer of assets through traditional mergers and acquisitions, as well as other arrangements, such as joint ventures, affiliations, collaborations, and management agreements. Vertical consolidation of hospitals with physician practices, and other related services, is desired to manage patient care across the continuum of health care environments (eg, ambulatory, acute, postacute, and long-term care). Access to the capital that comes with consolidation is needed to invest in the technology, infrastructure, and innovative delivery systems required to be competitive in a value-based care paradigm.1,2 Regulators and critics of health system consolidation are concerned that the current trends are also aimed at decreasing competition and increasing negotiation leverage with payers, which will lead to higher costs and a decrease in the quality of care.3,4 However, most of the data, on which these criticisms are based, reflect a predominantly fee-for-service (FFS) model and may not apply to value-based and risk-associated reimbursement models.

The consolidation of health care systems is having a significant impact on the practice of pharmacy within these systems. The consolidation trend will require pharmacy to also achieve horizontal and vertical consolidation of programs and services to meaningfully contribute to the broader goals of the health system. Since research has shown that integration is necessary to achieve improved performance4 it is imperative that pharmacy departments, within consolidated systems, have integrated clinical, operational, and financial practices. In addition, integrated pharmacy services need to be aligned with the incentives and goals of the system, as the shift from a predominantly volume-driven FFS model to an array of alternative payment models (eg, pay-for-performance, shared savings, bundles, and capitation) continues to evolve. Pharmacy leadership, within the system, must pursue each opportunity as it presents under evolving delivery and payment models to shift the institutional perspective of pharmacy from a cost center under FFS models (cost-minimization thinking) to one in which clinical pharmacists can significantly improve medication-related quality and outcomes in a risk-management environment (value-based thinking) through team-based care structures. The health-system pharmacy model must also shift from one primarily focused on acute care, to one focused on multiple environments of care, as the system takes on greater financial and care-quality risks across the continuum of health care. The pharmacy department must develop (or obtain through collaboration) expertise in informatics, data mining, and predictive analytics to best direct limited resources to those clinical and operational opportunities at the system, departmental, and individual patient levels that will achieve the greatest benefit for the system. As a result, a few pharmacy “sacred cows” will likely need to be slaughtered in the process,5 such as the need to verify all medication orders and directly supervise all technician activities, regardless of the relative values of these activities, and counseling all patients, although other approaches to patient education for routine needs may be a more efficient use of pharmacist resources.

Clinical pharmacy integration will require many different strategies. Clinical programs (eg, antimicrobial stewardship) and drug-use standards (eg, practice guidelines) that may be well developed in larger institutions may need to be translated for the smaller community institutions that are the typical targets of acquisition or affiliation. This will often involve sharing clinical resources that are well established at the larger institutions by expanding their scope of responsibilities to establish training and competency assessment standards for pharmacists at the smaller institutions.6 Establishing common standards for credentialing and privileging pharmacists to provide direct patient care across the consolidated system should be a high priority.5
With vertical integration of the health care system, the pharmacist must assume greater responsibility and accountability for medication-related outcomes by implementing comprehensive medication management services during the postacute and maintenance phases of care. This will require effective identification of high-risk patients with modifiable medication-related risks, development of team-based care structures that integrate clinical pharmacists, responsibility for assuring medication access, promotion of greater patient engagement, and accountability for monitoring and modifying drug therapy, as indicated by patient response. The achievement of postacute and ambulatory care goals may require different strategies depending on a number of health care system, geographic, and financial factors. Some health systems may find it necessary to establish relationships with community partners to deliver nonacute pharmacy services; others will have the resources and administrative support to develop systems-based ambulatory pharmacy programs; and still others may use some combination of both. System-based services will likely be a combination of embedded and remote clinical pharmacy programs. The establishment of community partnerships will create pathways to greater direct patient-care opportunities for community pharmacists and will require creation of credentialing and privileging standards as an element of the agreement.

Examples of integration of operational and financial systems may include centralized materials management processes,7 procurement standards to maximize the system’s purchasing power, establishment of a common formulary, insourcing and centralization of sterile products compounding, standardization of drug distribution systems, conversion to common technology platforms, remote telepharmacy services,8 common budgeting and financial reporting standards, and establishment of common productivity measures with appropriate benchmarking standards. The opportunity to eliminate the duplication of processes and resources, optimize product cost, reduce waste in operations, better manage critical drug shortages, achieve consistent data collection and reporting, and improve the overall quality and cost of the drug-use process can be significant with successful integration. In addition, accountable care networks within a consolidated health care system that assume responsibility for patient outcomes and the costs of all care, are likely to want greater control of the drug use and distribution process across all care environments. This may result in tightly restricted networks of pharmacy providers in the community or a predominantly internal drug distribution/dispensing system that maximizes overall control of the process, leverages cost opportunities, and improves the ability to track and understand drug-use behaviors.

While the above examples emphasize the importance and potential benefits of the integration of pharmacy services across the consolidated health care system, there are many barriers that must be overcome to achieve and maximize the benefits. These potential barriers are discussed under 4 categories: governance, information technology, cultural, and regulatory.
From a governance or structural perspective, consolidation can take many forms, but all of these forms come with barriers to integration. Anything short of full asset acquisition may create barriers to full integration, since work will be divided across multiple corporations and boards of directors who will be involved in decision-making processes. In addition, establishing a single leadership structure and accountability for pharmacy may be difficult with joint ventures, affiliated organizational structures, or collaborative relationships. The allocation of clinical and operational resources across multiple facilities within the health care system may be restricted by differences in human resource policies, salary disparities, variable representation through collective bargaining agreements, and different credentialing and privileging standards. Finally, the centralization of materials management, sterile compounding, contracting, and other operational and financial services may not be possible for legal and regulatory reasons. Identifying and managing these and other issues that may present because of governance structures may take years and considerable resources to resolve in the pursuit of effective integration.
Information Technology
Integrating the information technology aspects of pharmacy practice is another common challenge. At the time of consolidation, it is not uncommon for institutions to have different electronic medical record systems, pharmacy information systems (inpatient and outpatient), pharmacy technology platforms (robotics, automated dispensing cabinets, workflow management systems, and inventory management systems), drug dispensing models (centralized, decentralized, and hybrid), and other ancillary data mining and reporting systems. The process of moving all of the institutions to common systems is very expensive, time consuming, and disruptive to patient care and, therefore, often takes many years to occur, if ever. In addition, since information services within the institution are commonly segregated, considerable time is required to integrate these services. Until this integration occurs, pharmacy leadership must navigate several systems and information analysts to obtain data that may not be compatible. These barriers make it very challenging to achieve many data-dependent clinical, operational, and financial integration goals.
Cultural barriers to integration often exist because of the different environments and perspectives of large teaching institutions and the small community hospitals they acquire. The consolidation of multiple institutions with very different management, patient care, and interprofessional cultural norms can lead to delays in integration. Clinical programs that are effective in a large institution may fail in a small community hospital because of different incentives or the employment and governance structures for the medical staff. In addition, different communication and implementation strategies may be needed for the same programs at different institutions. Employees of recently acquired small institutions may have perceptions of being taken over and may initially resist change, while those at the larger institution may impose their beliefs and norms on smaller hospitals without an appreciation for what may or may not succeed in that setting. Scale can also be an important issue that slows integration. A single line item at a large hospital may exceed the entire pharmacy budget at a small community hospital. Pharmacy leaders, who have spent their careers in large institutions, may have a hard time scaling down their perspective and planning to match the much smaller scale of recently acquired community hospitals. Projects that can have a large relative impact on the small institution may be deemed as insignificant by the larger institution and may be thus overlooked. This may further reinforce the perception that the small community hospital is unimportant in the overall consolidated system. Finally, difficulty embracing a systems perspective across the newly consolidated pharmacy department may also impede integration. A decision that may be best for the system, but financially or operationally detrimental to a single institution, may be difficult to implement because of parochial single-institution perspectives. This may be a particularly challenging issue when consolidation is achieved through joint ventures, affiliations, or collaborative arrangements in which each institution remains responsible for its own profit–loss statement. Managing the cultural challenge of combining different institutions will take time, but is essential to achieving successful integration of pharmacy services.
The final barrier to integration is regulatory and may be beyond the immediate control of pharmacy leadership. For example, state board of pharmacy regulations may limit the ability of a system to centralize many pharmacy operational functions needed for patient-specific dispensing of products across multiple separately licensed institutions. When systems span more than one state, the regulatory limitations are more challenging. The ability to acquire, store, prepare, and dispense controlled substances for multiple institutions from a central facility may also be limited by US Drug Enforcement Administration regulations and documentation requirements, as well as by state-specific controlled substance licensing requirements. Centralization of sterile compounding with the goal of insourcing all sterile products may also require registration with the US Food and Drug Administration as a 503B outsourcing pharmacy, with many cost and operational implications. Finally, medication management standards of accreditation agencies (eg, the Joint Commission) may limit the ability to redeploy pharmacy resources to focus on high-value, patient-focused activities because of antiquated requirements for pharmacist review and oversight that fail to take into consideration advances in clinical informatics and technology that greatly diminish the relative value of those requirements. Pharmacy leaders need to work closely with regulatory and accreditation agencies to educate them about advances in pharmacy practice and advocate for the revision of regulations and standards that facilitate the evolution of the pharmacy profession in an environment focused on quality of care and drug-related outcomes.

The goals of health care reform and the need to manage risk and quality of care are driving consolidation of health systems, and this has the potential to have a profound effect on the professional practice of pharmacy. With effective local and regional leadership, pharmacists are positioned to be widely recognized as members of the interprofessional team and make important contributions to improving medication-related patient outcomes, reducing total costs of care, and making the health care system successful in a highly competitive environment. Effective integration of the pharmacy department will create operational efficiencies, safe medication use systems, and greater financial viability across all patient-care environments. A failure of the profession to achieve these goals within consolidated health care systems will represent a failure of pharmacy vision and leadership.

For more thoughts on consolidation in community pharmacies, please see Removing Silos from the Pharmacy Profession, available here.

Curtis E. Haas, PharmD, FCCP, is the director of pharmacy for the University of Rochester Medical Center. Dr. Haas received his BS from the Albany College of Pharmacy and completed his Doctor of Pharmacy at the University at Buffalo. In 2000, Dr. Haas joined the faculty at the School of Pharmacy and Pharmaceutical Sciences, University at Buffalo, and was eventually promoted to associate professor with tenure. In 2006, Dr. Haas accepted his current position at URMC. For 17 years, he specialized in critical care pharmacy practice and maintained an active teaching, practice, and research program with numerous publications and national presentations in critical care therapeutics. His many professional service activities include serving two 3-year terms as a board member for the American College of Clinical Pharmacy, appointment to the Pharmacotherapy Specialty Council of the Board of Pharmacy Specialties for 6 years, and serving as president of the American College of Clinical Pharmacy. Dr. Haas has been involved in the training and education of pharmacy students, residents, and fellows for more than 20 years.

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