Prepared for ASHP members by the Section of Pharmacy Practice Managers Advisory Group on Pharmacy Business Management External Benchmarking Provides a tangible means for hospital administrators to compare operational and financial data ID: 920250
Download Presentation The PPT/PDF document "External Benchmarking Challenges, Limit..." is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
External Benchmarking
Challenges, Limitations, and Strategies
Slide2Prepared for ASHP members by the Section of Pharmacy Practice Managers Advisory Group on Pharmacy Business Management
Slide3External 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
Slide4Why 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
Slide5Externally 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
Slide6Challenges 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
Slide7And Strategies to Overcome
EXTERNAL BENCHMARKING LIMITATIONS USING VENDORS SYSTEMS
Slide8Origin 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
Slide9Frequently 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
Slide10External 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
Slide11External 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
Slide12Productive 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 bedFTEs per adjusted patient day
A
Preferred metrics.
Slide13External 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
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)
Example
Slide14External 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
Compare your services to your peer group with respect to the implementation of best practices
Clinical Services
Practice Model
Distributive Services
Hours of Operation
How data elements
are reported
Slide15External 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
Slide16External 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
Slide17External 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
Slide18Categories 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
Hospital
All antineoplastic drugs
Anticoagulants and Thrombolytic Drugs
1,500,000
Hospital
Abciximab, alteplase, anti-thrombin III, argatroban, bivalirudin, enoxaparin, eptifibatide, heparin, lepirudin, reteplase, streptokinase, tirofiban, urokinase, warfarin
Transplant Drugs
1,266,000
Hospital
Cyclosporine, mycophenolate, sirolimus, tacrolimus, basiliximab, daclizumab, muromonab-CD3, anti-thymocyte globulin, cytomegalovirus immune globulin, lymphocyte immune globulin
Blood and Immune System Modifiers
1,035,000
Hospital
Darbepotin, epoetin, filgrastim, pegfilgrastim, sargramostim, adalimumab, alafacept, aldesleukine, omalizumab, interferons (all variations)
Large and Small Volume Solutions
750,000
Hospital
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 Inpatient Drugs
4,699,000
Computed
All other drugs not included in above categories, nor excluded in categories below
Total Inpatient Drugs Included in Ratios
17,123,000
Hospital
Slide19The 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)
Volatile Anesthetic Gases
400,000
Hospital
Volatile anesthetic gases (e.g., desflurane, halothane, isoflurane, sevoflurane) (Note: this value also is reported in Anesthesia Department Report)
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
Drug cost NOT to include in Inpatient Pharmacy Cost Ratios
Slide20T
he 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
4,265,000
Computed
All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs
15,070,000
Hospital
Ways to categories outpatient drug expenses in vendor benchmarking reports
Slide21Other 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
5,200,000
Hospital
All oncology (antineoplastic) drugs
Blood and Immune System Modifiers
2,500,000
Hospital
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
Infliximab (Remicade)
Enzyme Deficiency Replacement Drugs
800,000
Hospital
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
Aprepitant, granisetron, meclizine, ondansetron, prochlorperazine, trimethobenzamide
Anticoagulants and Thrombolytic Drugs
200,000
Hospital
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
All Other Clinic / Outpatient Drugs
2,490,000
Computed
All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs
15,070,000
Hospital
Slide22External 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
Slide23External 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
Slide24Other 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
Slide25External Benchmarking
Challenges, Limitations, and Strategies
Slide26Prepared 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/SAGonPharmacyBusinessManagement.aspx
Slide27External 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
Slide28Why 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
Slide29Externally 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
Slide30Challenges 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
Slide31And Strategies to Overcome
EXTERNAL BENCHMARKING LIMITATIONS USING VENDORS SYSTEMS
Slide32Origin 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
Slide33Frequently 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
Slide34External 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
Slide35External 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
Slide36Productive 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 bedFTEs per adjusted patient day
A
Preferred metrics.
Slide37External 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
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)
Example
Slide38External 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
Compare your services to your peer group with respect to the implementation of best practices
Clinical Services
Practice Model
Distributive Services
Hours of Operation
How data elements
are reported
Slide39External 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
Slide40External 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
Slide41External 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
Slide42Categories 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
Hospital
All antineoplastic drugs
Anticoagulants and Thrombolytic Drugs
1,500,000
Hospital
Abciximab, alteplase, anti-thrombin III, argatroban, bivalirudin, enoxaparin, eptifibatide, heparin, lepirudin, reteplase, streptokinase, tirofiban, urokinase, warfarin
Transplant Drugs
1,266,000
Hospital
Cyclosporine, mycophenolate, sirolimus, tacrolimus, basiliximab, daclizumab, muromonab-CD3, anti-thymocyte globulin, cytomegalovirus immune globulin, lymphocyte immune globulin
Blood and Immune System Modifiers
1,035,000
Hospital
Darbepotin, epoetin, filgrastim, pegfilgrastim, sargramostim, adalimumab, alafacept, aldesleukine, omalizumab, interferons (all variations)
Large and Small Volume Solutions
750,000
Hospital
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 Inpatient Drugs
4,699,000
Computed
All other drugs not included in above categories, nor excluded in categories below
Total Inpatient Drugs Included in Ratios
17,123,000
Hospital
Slide43The 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)
Volatile Anesthetic Gases
400,000
Hospital
Volatile anesthetic gases (e.g., desflurane, halothane, isoflurane, sevoflurane) (Note: this value also is reported in Anesthesia Department Report)
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
Drug cost NOT to include in Inpatient Pharmacy Cost Ratios
Slide44T
he 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
4,265,000
Computed
All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs
15,070,000
Hospital
Ways to categories outpatient drug expenses in vendor benchmarking reports
Slide45Other 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
5,200,000
Hospital
All oncology (antineoplastic) drugs
Blood and Immune System Modifiers
2,500,000
Hospital
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
Infliximab (Remicade)
Enzyme Deficiency Replacement Drugs
800,000
Hospital
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
Aprepitant, granisetron, meclizine, ondansetron, prochlorperazine, trimethobenzamide
Anticoagulants and Thrombolytic Drugs
200,000
Hospital
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
All Other Clinic / Outpatient Drugs
2,490,000
Computed
All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs
15,070,000
Hospital
Slide46External 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
Slide47External 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
Slide48Other 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
Slide49External Benchmarking
Challenges, Limitations, and Strategies
Slide50Prepared 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/SAGonPharmacyBusinessManagement.aspx
Slide51External 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
Slide52Why 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
Slide53Externally 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
Slide54Challenges 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
Slide55And Strategies to Overcome
EXTERNAL BENCHMARKING LIMITATIONS USING VENDORS SYSTEMS
Slide56Origin 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
Slide57Frequently 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
Slide58External 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
Slide59External 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
Slide60Productive 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 bedFTEs per adjusted patient day
A
Preferred metrics.
Slide61External 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
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)
Example
Slide62External 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
Compare your services to your peer group with respect to the implementation of best practices
Clinical Services
Practice Model
Distributive Services
Hours of Operation
How data elements
are reported
Slide63External 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
Slide64External 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
Slide65External 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
Slide66Categories 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
Hospital
All antineoplastic drugs
Anticoagulants and Thrombolytic Drugs
1,500,000
Hospital
Abciximab, alteplase, anti-thrombin III, argatroban, bivalirudin, enoxaparin, eptifibatide, heparin, lepirudin, reteplase, streptokinase, tirofiban, urokinase, warfarin
Transplant Drugs
1,266,000
Hospital
Cyclosporine, mycophenolate, sirolimus, tacrolimus, basiliximab, daclizumab, muromonab-CD3, anti-thymocyte globulin, cytomegalovirus immune globulin, lymphocyte immune globulin
Blood and Immune System Modifiers
1,035,000
Hospital
Darbepotin, epoetin, filgrastim, pegfilgrastim, sargramostim, adalimumab, alafacept, aldesleukine, omalizumab, interferons (all variations)
Large and Small Volume Solutions
750,000
Hospital
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 Inpatient Drugs
4,699,000
Computed
All other drugs not included in above categories, nor excluded in categories below
Total Inpatient Drugs Included in Ratios
17,123,000
Hospital
Slide67The 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)
Volatile Anesthetic Gases
400,000
Hospital
Volatile anesthetic gases (e.g., desflurane, halothane, isoflurane, sevoflurane) (Note: this value also is reported in Anesthesia Department Report)
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
Drug cost NOT to include in Inpatient Pharmacy Cost Ratios
Slide68T
he 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
4,265,000
Computed
All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs
15,070,000
Hospital
Ways to categories outpatient drug expenses in vendor benchmarking reports
Slide69Other 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
5,200,000
Hospital
All oncology (antineoplastic) drugs
Blood and Immune System Modifiers
2,500,000
Hospital
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
Infliximab (Remicade)
Enzyme Deficiency Replacement Drugs
800,000
Hospital
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
Aprepitant, granisetron, meclizine, ondansetron, prochlorperazine, trimethobenzamide
Anticoagulants and Thrombolytic Drugs
200,000
Hospital
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
All Other Clinic / Outpatient Drugs
2,490,000
Computed
All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs
15,070,000
Hospital
Slide70External 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
Slide71External 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
Slide72Other 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
Slide73External Benchmarking
Challenges, Limitations, and Strategies
Slide74Prepared 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/SAGonPharmacyBusinessManagement.aspx
Slide75External 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
Slide76Why 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
Slide77Externally 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
Slide78Challenges 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
Slide79And Strategies to Overcome
EXTERNAL BENCHMARKING LIMITATIONS USING VENDORS SYSTEMS
Slide80Origin 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
Slide81Frequently 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
Slide82External 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
Slide83External 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
Slide84Productive 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 bedFTEs per adjusted patient day
A
Preferred metrics.
Slide85External 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
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)
Example
Slide86External 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
Compare your services to your peer group with respect to the implementation of best practices
Clinical Services
Practice Model
Distributive Services
Hours of Operation
How data elements
are reported
Slide87External 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
Slide88External 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
Slide89External 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
Slide90Categories 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
Hospital
All antineoplastic drugs
Anticoagulants and Thrombolytic Drugs
1,500,000
Hospital
Abciximab, alteplase, anti-thrombin III, argatroban, bivalirudin, enoxaparin, eptifibatide, heparin, lepirudin, reteplase, streptokinase, tirofiban, urokinase, warfarin
Transplant Drugs
1,266,000
Hospital
Cyclosporine, mycophenolate, sirolimus, tacrolimus, basiliximab, daclizumab, muromonab-CD3, anti-thymocyte globulin, cytomegalovirus immune globulin, lymphocyte immune globulin
Blood and Immune System Modifiers
1,035,000
Hospital
Darbepotin, epoetin, filgrastim, pegfilgrastim, sargramostim, adalimumab, alafacept, aldesleukine, omalizumab, interferons (all variations)
Large and Small Volume Solutions
750,000
Hospital
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 Inpatient Drugs
4,699,000
Computed
All other drugs not included in above categories, nor excluded in categories below
Total Inpatient Drugs Included in Ratios
17,123,000
Hospital
Slide91The 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)
Volatile Anesthetic Gases
400,000
Hospital
Volatile anesthetic gases (e.g., desflurane, halothane, isoflurane, sevoflurane) (Note: this value also is reported in Anesthesia Department Report)
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
Drug cost NOT to include in Inpatient Pharmacy Cost Ratios
Slide92T
he 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
4,265,000
Computed
All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs
15,070,000
Hospital
Ways to categories outpatient drug expenses in vendor benchmarking reports
Slide93Other 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
5,200,000
Hospital
All oncology (antineoplastic) drugs
Blood and Immune System Modifiers
2,500,000
Hospital
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
Infliximab (Remicade)
Enzyme Deficiency Replacement Drugs
800,000
Hospital
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
Aprepitant, granisetron, meclizine, ondansetron, prochlorperazine, trimethobenzamide
Anticoagulants and Thrombolytic Drugs
200,000
Hospital
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
All Other Clinic / Outpatient Drugs
2,490,000
Computed
All other drugs used in outpatient settings not included in the above categories
Total Outpatient Drugs
15,070,000
Hospital
Slide94External 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
Slide95External 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
Slide96Other 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