Balancing Your Hospital’s Health Mission and the Taboo of Revenue

hospital health mission

A Chinese expression says, “money is not everything, but without it you can do nothing.” Often in healthcare talking about hospital revenue is taboo. But we believe, like any difficult subject, open and honest trumps avoidance. A care model vs. a revenue model is an important conversation to have and allows hospital administrators to provide more and better care, to more people, while having their core values remain the driving force for “success” – which is a healthy population.

For hospital administrators the revenue model is a significant consideration for starting a hospital-owned specialty pharmacy. The reason? Additional revenue helps supplement gaps in funding for the hospital’s most vulnerable patient populations, which can lead to gaps in care and poor health outcomes. On balance, a savvy physician can quickly see the health benefits of a hospital specialty pharmacy with its ability to integrate the hospital care model for patients, resulting in higher drug adherence rates, among other patient benefits, and therefore better health outcomes.

That said, there is a dark side to specialty pharmacy that often goes unspoken as well. Ryan Cooper’s article in The Week titled “The Secret Monopoly Behind America’s Outrageous Drug Prices”, states, “ExpressScripts, CVS Caremark, and OptumRx control a combined 75 to 80 percent of the specialty market” and ‘ExpressScripts’ adjusted profit per prescription has increased by 500 percent since 2003.” These aforementioned companies seem to be making quite the profitable business out of specialty pharmacy care and the pricy medications that come with it. To be clear, this is profit maximization at the expense of affordability and best patient outcomes. It does not align with a not-for-profit’s core values of being in the “caring business.”

At Shields we would argue that by integrating a specialty pharmacy in-house, not outsourcing to a contract pharmacy, a hospital has the capability to profile patient needs, run prior authorizations, test insurance claims, access financial assistance, and classify patient encounters properly, all while reducing cumbersome administrative work for clinical teams and allowing the hospital physicians to focus on superior patient care. This is the primary link between the care model offered by a hospital-based specialty pharmacy and the hospital’s business interests – improved population health – because the bottom line dollars link to improved drug adherence, reduction of financial difficulties, and declining patient readmissions.

A key factor hospitals must fully embrace when creating an in-house specialty pharmacy is the competitive market into which they are entering. Fortune 50 contract pharmacies control a large portion of the oral and self-injectable drugs in the outpatient pharmacy market, and a hospital system must be prepared to compete if they are to meet patient needs.

Not-for-profit hospitals face a unique dilemma in striking the right balance between the care model of a specialty pharmacy and the revenue benefits to patient care of a specialty pharmacy. Is it time we started talking about both without the double standard of who gets to talk about revenue – those delivering care and those owned by Wall Street?