Driving Value in Recurring Pharmacy Revenue Enhancements

Client Issue/Challenge

A large 4-campus health system in the southern region recognized the need for external support to identify and implement sustainable solutions to increase & maximize revenues within pharmacy. Pathstone was initially engaged to conduct a full-scale business case to identify opportunities within the pharmacy space, of which, 3 specific areas of pharmacy revenue cycle were moved to implementation.

Initial opportunity was identified at over $3.0M in recurring annual value through focusing on the following workstreams:

Rx Strategic Pricing: Restructuring pharmacy pricing methodology to be more transparent, more easily maintained and make up lost revenue during the client’s transition to charge on administration.
NDC Cost Update: Optimizing NDC cost updates through an evaluation and mapping of the current drug update processes and current technology capabilities.
Rx Revenue Capture: Maximizing the revenue simultaneously improving on missed revenues

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pharmacist grabbing medication off the shelf

Approach

Pathstone formed a comprehensive team of stakeholders throughout the organization consisting of key leaders and operational owners within: Pharmacy, Revenue Cycle, Finance and Supply Chain. Recurring touchpoints with this team and other subcommittees generated the necessary momentum and buy-in to achieve maximum value and sustainable success.

Pathstone’s original business case gave excellent insight into the historical performance of this client, but ever-changing regulations and innovations made it necessary to garner new and refreshed data around billing & claims detail, charge master, drug database, revenue & usage, wholesaler catalog(s) and other policies and procedures.

Within each of the identified 3 workstreams the Pathstone pharmacy consulting team utilized a collaborative approach to tailor a solution that fit within the client’s department and organizational goals and objectives:

Rx Strategic Pricing:
- Meet net revenue goals by modifying markups and/or to include within annual increase in budgeted revenue
- Mitigate lost net revenue during transition to charge on admin
- Transition to charge on administration
- Create strategy to modify markups to meet net revenue goals
- Increase collaboration with Rx, care contract management and rev cycle
- Simplify charges with increased transparency and defensibility
NDC Cost Update:
- Sustainability and maintenance of drug cost database
- Streamline technology and database updates to optimize daily, weekly, monthly, quarterly and annual drug update processes
- Evaluate other opportunities to optimize technology related to the drug database and revenue cycle
Rx Revenue Capture:
- Identify and recoup missed revenue on specific drugs
- Complete full audit of pharmacy HCPCS code assignment, usage, correlating bills and collections

pharmacist putting medication away on shelf

Impact:

Key drivers of the significant value stream were concentrated on increasing the gross revenue by $195M, mitigating losses by transitioning to charge on administration, identification of over 165 ERX IDs without HCPCS codes.

Over a 9-month period of working with our client, Pathstone was able to drive $5.56M in recurring revenue enhancements.

Key Takeaways

Flexibility is Important. Regardless of an organization’s goals and objectives, value can be achieved through an adaptable strategy within pharmacy revenue cycle. Fully understanding the goals and objective across all functions will be key and Pathstone plays a crucial role within this process.

Storytelling with Data. Data is a critical, and often misinterpreted, element to identifying and implementing maximum value with pharmacy revenue cycle. Created a solid understanding of an organization’s current state can be just as important to the value that is generated post-implementation.

Gross Revenue vs. Net Revenue: Stating the obvious, these 2 types of revenue are not the same; within pharmacy revenue cycle simply increasing your gross revenue does not mean that your net revenue will increase at the same rate. Detailed modeling of where increases are occurring, charge detail and organizational goals will ultimately monitor the success of this category.