In the face of modern challenges, expanding outpatient retail pharmacy services and exploring nontraditional partnerships present a growing opportunity for health systems to better patient outcomes, generate much-needed revenue, and safeguard themselves from added financial risk.
Amid rising costs, a growing and complex patient population, and an evolving payer and regulatory landscape, health systems may benefit by shifting their focus – at least in part – toward nontraditional strategies for cutting costs, improving patient care and access, and developing new services lines that safeguard their financial viability. Two promising places to start are the outpatient retail pharmacy and its strategic partnerships.
While historically seen primarily as a cost center, it’s a widely (albeit recently) accepted reality in health systems that the outpatient retail pharmacy is largely underutilized and may actually offer a timely solution for some of today’s most pressing clinical and financial challenges – many of which go hand in hand. And with more extensive, multifaceted partnerships that go beyond distribution and other traditional service models alone, health system retail pharmacies can achieve even more.
Improving clinical outcomes with outpatient pharmacy services
Keeping the continuum of care intact is known to improve clinical outcomes, and as the final point on that continuum, the hospital outpatient pharmacy has the potential to make a significant impact on a patient’s case by increasing medication adherence post-discharge and allowing for more thorough medication reconciliation and better medication therapy management throughout the course of care. With improved medication adherence also comes reduced readmission rates, which can save the health system valuable dollars that may otherwise go toward 30-day readmission penalties and the increased cost of more complex, inpatient care often associated with readmissions.1,2,3 One study found that patients with low and moderate medication adherence rates were more than 2.5 times more likely to be readmitted within 30 days.1
Catering to new models of care delivery and reimbursement
As the delivery of health care and prescription regimens continue to change, the outpatient retail pharmacy can respond by developing or supporting ambulatory service lines and solutions that cater to modern preferences and needs. With the growing use of oral and injectable oncology agents, for example, having medically integrated dispensing (MID) capabilities allows the outpatient pharmacy to drive improved medication adherence and better outcomes. Specialty, infusion, integrated transition of care (TOC), and others are also important areas of focus. For the benefit of both the health system’s bottom line and the patient’s overall experience and well-being, health systems should consider their outpatient pharmacy’s ambulatory capabilities.
In terms of reimbursement, the continued adoption of value-based care puts an added layer of financial consideration onto patient outcomes and satisfaction scores, both of which a mature, fully integrated outpatient retail pharmacy can positively influence.
“Hospitals with robust, fully integrated retail pharmacy services are better able to take on more labor-intensive clinical functions, and this can also contribute to improved patient outcomes and higher patient satisfaction scores.” — Ram Arumugam RPh. MBA, McKesson Health Systems
Expanding Alongside a Growing Specialty Market
Currently accounting for about half of total drug spend nationwide with exponential growth projected to continue4, the specialty drug market is perhaps the most promising opportunity for the health system outpatient pharmacy to strengthen their financial integrity while positively impacting patient care, access, and outcomes. By some estimates, specialty pharmacy can generate as much as 10% of the health system pharmacy’s total revenue5 – a number that can’t be ignored in today’s delicate financial climate. And with significant 340B discounts on specialty medications specifically, hospitals can further stretch their resources and reinvest those savings into critical patient care services.
Mitigating Financial Risk with Ambulatory Pharmacy Services
A well-known source of lost revenue and increased costs for the health system pharmacy are manufacturer-imposed restrictions on 340B drug discounts obtained through contract pharmacies. Another financial risk that can siphon away critical revenue from the health system are payer mandates – like site of care, white bagging, and others. By establishing a fully capable outpatient pharmacy with access to specialty medications along with supporting and developing new, ambulatory service lines, the health system can keep vital revenue in house to support continued operations and patient care.
Room For Growth
A recent survey of pharmacy leaders published by McKinsey & Company supports the suggestion that health system pharmacies may be missing out on these outpatient pharmacy revenue- and care-boosting opportunities – as well as the added benefit of protection from certain financial risks – due to their focus on more imminent challenges, including inflation, understaffing, and drug shortages. Between 2021 and 2023 surveys, for example, 30% more respondents had concerns about inflation rates of ≥10%, while the needle remained fairly stagnant when it came to expanding into new streams of ambulatory revenue, like retail, mail order, and home infusion services. In December 2021, 10% of respondents had no retail/mail order program, 34% considered their program to be “established,” and 11% classified theirs as “top of industry.” In April 2023, however, 16% reported no program, established programs dropped to 33%, and there was no change in respondents with top-of-industry programs – still at 11%. Interestingly, the same was found with home infusion, with 11% of respondents operating a top-of-industry program in 2023 – unchanged since the 2021 survey.6
Exploring Strategic Partnerships
Navigating the complexities of the 340B program, access to limited distribution drugs (LDDs), the distribution, storage, and handling of specialty medications, and other aspects of operating a fully integrated outpatient retail pharmacy can be a lofty undertaking even for a mature and financially stable health system – a task that may stretch already understaffed and financially compromised health systems to their limits. Through strategic collaboration with a partner like McKesson that involves more than a conventional distribution model, health systems can align themselves with experts that can help guide them through the process of establishing or expanding a comprehensive outpatient pharmacy program and achieving more for their business of pharmacy.
Another metric evaluated by McKinsey & Co.’s pharmacy leader survey is the engagement in strategic partnerships outside of traditional contracts, and the findings support the idea that expanded collaborations could benefit the system, the patient, and the industry alike:
“Broader strategic partnerships could unlock innovative, diversified pharmacy strategies—for example, developing new service lines or expanding to new geographies—that could improve patient care and experience, advance clinical innovation by expanding the role and reach of pharmacists, and help insulate organizations from downstream financial risk.”6
At McKesson, a partnership means more than distribution. Our experts take a holistic view of your unique organization and apply advanced analytics to reveal insights and opportunities to boost your clinical and financial performance. We connect the dots, between your drug utilization and tangible solutions from across our enterprise and partners, that move the dial on operations. And as your health system innovates to stay competitive, we help you seamlessly extend operations to outpatient oncology and specialty clinics, long-term care, and retail settings for an end-to-end solution that increases your return.
To learn more about how McKesson Health Systems can help you achieve more for your business of pharmacy through an improved outpatient retail strategy, visit our page or contact one of our experts today.
- Rosen OZ, Fridman R, Rosen BT, Shane R, Pevnick JM. Medication adherence as a predictor of 30-day hospital readmissions. Patient Prefer Adherence. 2017 Apr 20;11:801-810. doi: 10.2147/PPA.S125672. PMID: 28461742; PMCID: PMC5404806.
- Weiss, A, Jiang, HJ. Overview of Clinical Conditions With Frequent and Costly Hospital Readmissions by Payer, 2018. Agency for Healthcare Research and Quality. Statistical Brief #278. July 2021.
- Beauvais B, Whitaker Z, Kim F, Anderson B. Is the Hospital Value-Based Purchasing Program Associated with Reduced Hospital Readmissions? J Multidiscip Healthc. 2022 May 12;15:1089-1099. doi: 10.2147/JMDH.S358733. PMID: 35592815; PMCID: PMC9113654.
- “IQVIA Report: Specialty Drugs Stayed Strong in 2022,” by Gina Shaw and Kate Baggaley. Specialty Pharmacy Continuum. November 12, 2022.
- Murphy, Brooke. “6 ways health systems can drive revenue and reduce costs through strong supplier partnerships.” Becker’s Health Review. April 25, 2018.
- Untapped opportunities for health system pharmacies. McKinsey & Company. November 7, 2023.