Less is More: Top-Performing Hospitals Spend Less on Pharmacy and Supplies

Jane Sarasohn-Kahn

First posted 9/11/11 on Health Populi

The Top 100 performing hospitals in the U.S. spend 13% less on supply costs and 6% less on pharmacy costs, according to a research brief fromThomson Reuters, Associations Between Supply and Pharmacy Service Intensity, System Membership, and Hospital Performance.

Lower pharmacy intensity translated into lower inpatient and post-discharged mortality, and reduced complications, in the high-performing hospitals. Furthermore, these hospitals had better safety records, and shorter lengths-of-stay.

Lower supply intensity was related to lower inpatient mortality and lower rates of complications, better patient safety, and shorter patient stays as was the case with lower pharmacy utilization.

That’s the positive news about lower spending on Rx and supplies. However, one area was statistically related to greater spending on pharma and supplies: 30-day readmissions for acute myocardial infarction, heart failure, and pneumonia, which were lower with greater spending on Rx and supplies.

For this study, Thomson Reuters analyzed MedPAR and Thomson Reuters Projected Inpatient Database statistics from 3,607 hospitals in FY2008 and FY2009, looking at CMS Medicare Severity-Diagnosis Related Group-specific median hospital costs for pharmacy and supply services.

Health Populi’s Hot Points: In a related publication, 100 Top Hospitals CEO Insights: Keys to Success and Future Challenges, Thomson Reuters surveyed the leadership of the top hospitals. Several key themes emerged showing the top hospitals share some common approaches, including “unwavering” commitment to quality throughout the organizations; “great” relationships with physicians; and, keeping a very close eye on reimbursement cuts and health reform impacts. Among the top 100 hospital CEOs, the most important issues to deal with under the health reform umbrella will be quality measurement, physician alignment, cost reduction, information connectivity, patient engagement, and payment models.

Together, these 3 factors drive the top hospitals to focus on value-based health services, challenging the organizations to be more transparent (both internal to the hospital and then communicating to external stakeholders), measure their operations, and manage what they measure. Furthermore, in an environment of accountable care, the hospitals are migrating toward community- and population-based models.

On that front, hospitals – both top-performing and the ‘nonwinners’ — will need to laser-focus in on hospital readmissions, a challenge which even the Top 100 providers haven’t conquered. In that “less-is-more” paradigm, addressing readmissions to prevent getting financially punished by Medicare under the Affordable Care Act will require a fine-tuned recipe of right care at right time for right patient. Telehealth strategies to the home will be a cost that will be well-spent — and not strictly accounted for in the pharma and supply line items studied by Thomson Reuters.