External Benchmarking

1. External Benchmarking Challenges, Limitations, and Strategies

2. Prepared 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

3. External 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

4. Why 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

5. Externally 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

6. Challenges 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

7. EXTERNAL BENCHMARKING LIMITATIONS USING VENDORS SYSTEMS And Strategies to Overcome

8. Origin 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

9. Frequently 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

10. External 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

11. External 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

12. Productive Ratios used to Evaluate Pharmacy Services A Preferred metrics.

13. External 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 Example

14. External 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

15. External 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

16. External 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

17. External 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

18. Categories for reporting Inpatient drug expenses in vendor benchmarking reports

19. Drug cost NOT to include in Inpatient Pharmacy Cost Ratios

20. Ways to categories outpatient drug expenses in vendor benchmarking reports

21. Other ways to categories outpatient drug expenses in vendor benchmarking reports

22. External 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

23. External 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

24. Other 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