The newsletter provided was designed with the information and topics you need to know to stay current on hospital and Alternate Site Pharmacy affairs. It delivers easy-to-read insights into the key issues that are top of mind for healthcare leaders right now, and is intended to help you engage in discussion around these issues with potential conversation starters.

Please note that this document is intended for internal use by McKesson sales staff to assist in speaking to current affairs and should not be distributed to customers.

• Nationally, revenue growth for hospitals has slowed. How have your revenues fared? What is your organization working on to boost revenues?
• Operating margins at most hospitals are low and under pressure. How are your margins faring in the current environment? What initiatives is your organization undertaking to sustain/improve margins?
• More hospitals and health systems are considering M&A.How is your organization thinking about this?

• On October 31, President Obama signed an Executive Order to reduce shortages
• This order directs the FDA to prevent and reduce supply disruptions for life-saving drugs by:
• Requiring manufacturers to provide advance notice of potential supply disruptions
• Increasing FDA staffing to deal with drug shortages
• Expediting regulatory reviews
• Assessing if suppliers are stockpiling or price gouging
• The White House also endorses more comprehensive legislation
• The Executive Order along with further legislation was supported by the American Hospital Association and other hospital groups

• According to a November 1, 2011 HIMSS Report:
• Only 41% of hospitals are "ready" or "most likely ready" to meet meaningful use requirements
• 53% are not likely to become meaningful users at this time
• 6% have reported no progress

• At this time, more than 2,200 hospitals have registered for either Medicare or Medicaid EHR programs, but only 158 hospitals (7%) have attested to meaningful use and been paid under Medicare; more than 400 (18%) have been paid under Medicaid programs, which have less stringent first-year requirements.

• ACA mandated that the General Accounting Office (GAO) address questions related to the 340B program
• On September 23, the GAO released a study recommending strengthened oversight of hospitals and clinics covered by 340B. Oversight is to focus on program participation and compliance with requirements.

• What is your reaction to the Executive Order aimed to prevent drug shortages?
• Where is your organization in meeting the meaningful use requirements?
• For organizations participating in 340B, what is your reaction to GAO recommendations?

• A new study by Thomson Reuters found that hospitals with better records on patient safety and mortality spend significantly less on average on drugs
• Thompson Reuters Top 100 Hospitals—which make a profit and deliver high-quality care—spend 6% less on pharmaceuticals than other hospitals
• These Top 100 hospitals spend $987 per case on drugs versus $1051 per case for other hospitals
• Evidence shows "better care is also often cheaper"

• Starting October 2012, HCAHPS scores, based on patient surveys, will be among the measures used to make value-based Medicare payments
• The survey used (CAHPS) measures patients' perspectives on hospital care
• This survey was endorsed by the National Quality Forum (NQF) in 2005
• Three goals have shaped this survey. It is designed to:
• Produce comparable data that allows objective and meaningful hospital comparisons
• Create incentives for hospitals to improve their quality
• Enhance accountability by increasing the transparency of quality results
• A writer for Hospitals & Health Networks observed two strategies used by hospitals as they prepare for payments to be affected by HCAHPS scores:
• List approach. Hospitals are going through the list of items on the survey and taking action to address each item. This is a "problem solving" approach.
• Culture change approach. Hospitals are focusing on changing their culture, which includes hiring practices and training to deliver more patient-centric care.

• Growing evidence shows that pharmacists in the ED improve safety
• A recent study found that the medication error rates at a level 1 trauma center were 13 times lower when an on-site pharmacist reviewed the drug therapy
• One clinical pharmacist said, "Of all the areas where clinical pharmacists can make an impact, the ED is one of the places we should go first. Emergency rooms don't have the safety checks that are in place in other areas of the hospital."

• What is your organization's approach to improving your quality measures?
• What steps are you taking to prepare for HCAHPS?
• What role does pharmacy play in these measures?
• Has your organization staffed pharmacists in the ED? Do you have plans to do so?

• Regulatory compliance (73%)
• Supply chain costs (64%). Only 42% report success in supply chain cost management
• Product security (61%). This includes counterfeiting and theft
• Damage/spoilage (56%)

• Advocates joint value creation among supply chain participants to lead to a more cost-effective, quality-driven value chain.
• Sees commonality in the strategies of supply chain organizations from all segments of healthcare: supply chain and customer segmentation, working capital optimization, resiliency, talent management, standardization of data and processes, and collaboration.
• Has a value creation framework (shown below) that emphasizes collaboration and is built on foundational capabilities

• Offers the following recommendations for participants in healthcare supply chains:
• Build a supply chain vision and strategy that connects your current supply chain capabilities and your future aspirations
• Get all foundational supply chain capabilities in place
• Focus on patient outcomes
• Focus on collaborative opportunities with key trading partners. Seek out trading partners with the leadership capabilities and supply chain competencies to collaborate and reduce inefficiencies
• With trading partners, create bidirectional visibility to key information, such as inventory, demand, compliance, and outcomes
• Create agile, value-added supply chain responses tailored to multiple customer and channel segments
• Establish the execution discipline and governance to maintain momentum for change initiatives
• Collect and assess data on how your customers experience your supply chain

• Multiple articles describe how the healthcare supply chain lags behind other industries, like retail
• An example: one survey shows low use of bar codes and RFID in the healthcare supply chain
• Premier's COO said the healthcare supply chain still acts like a "cottage industry" in many ways
• He sees multiple silos in the healthcare supply chain and emphasis on "getting the best price"
• Other industries, like retail, have transformed their supply chains to focus on value
• Through collaboration the retail supply chain has:
• Eliminated costs that don't add value—like unnecessary packaging materials
• Adopted UPC (universal product codes), realizing hard savings of almost 3%

• What are the greatest concerns in your supply chain?
• What lessons do you think the healthcare supply chain can learn from other industries, like retail?
• What steps are you taking to address these concerns?

• On August 1, 2011, CMS announced a documentation and coding cut of -2%
• However, this cut was less than the -3.15% cut that had been expected

• Extra federal aid as part of the 2009 stimulus plan to help states pay for Medicaid ended on June 30
• With stimulus funding ended, 31 states have proposed cuts to Medicaid and other health programs in 2012
• These cuts are likely to impact Medicaid reimbursement to hospitals, which is already low

• As part of ACA, on August 23, CMS announced a new voluntary Bundled Payment Initiative
• Instead of paying for each aspect of care separately, CMS will provide one lump-sum payment to providers for an entire episode of care
• The objectives are to improve care coordination and quality, and reduce costs
• There are 4 bundled payment participation models:
1. Retrospective payment for acute hospital stay. This bundle is just for services provided by a hospital for a specific bundle (like cardiac surgery) during the hospital stay.
2. Retrospective payment for physician and hospital services during an acute stay, including post-acute services. This bundle includes services provided by hospitals, physicians, and post-acute providers. The episode begins at admission and continues for at least 30 days post-discharge. It includes Part B drugs.
3. Retrospective payment for post-acute services, not including the acute episode. This bundle only includes post-acute services. It lasts for at least 30 days after discharge from an acute facility. It also includes Part B drugs.
4. Prospective payment for physician and hospital services during the acute stay. In this model, CMS will make one payment to the hospital/contracting organization, which then determine how to pay others involved in the bundle.

• ICD-10 is a diagnostic coding system used in most of the world. It is scheduled to go into effect in the U.S. on Oct. 1, 2013
• Health system leaders believe ICD-10 will improve quality (72%) and use of evidence-based medicine (53%)
• But 46% believe ICD-10 will hurt short-term revenues
• Revenue will be lost for many reasons, including incomplete physician documentation or coding mistakes

• What reimbursement pressures are of most concern to your organization?
• What steps have your organization and your pharmacy identified to deal with declining reimbursement?
• Does your organization plan to participate in the CMS bundled payment initiative? How might this affect pharmacy?

• Beginning October 2012, CMS will levy penalties on hospitals for readmissions within 30 days of discharge
• This is a big deal, as 20% of Medicare beneficiaries are readmitted within 30 days
• As a result, hospitals are focused on improving their discharge processes
• Several articles describe initiatives to improve discharges and lower readmissions. Ideas mentioned:
• Focusing on transitions and hand-offs
• Involving health-system pharmacists in educating patients before discharge
• Calling patients when they get home to make sure prescriptions are filled and to answer questions
• Encouraging patients to call pharmacists post-discharge with medication questions

• Additional revenue
• Opportunity to save costs by filling employee prescriptions
• Extends continuum of care, which can improve the discharge process, increase medication compliance, decrease adverse drug events post discharge, and decrease readmissions
• One study showed that an ambulatory pharmacy prompted patients to fill discharge prescriptions at the hospital, which decreased the 7-day readmission rate 50%
• Creates a platform to serve patients in the community on an outpatient basis or possibly via mail order
• Click to see how a representative community hospital is thinking about ambulatory pharmacy
• Click for short summary of a (paid) report on ambulatory pharmacy "Outpatient Pharmacy Goes Retail: A Paradigm Shift for Providers"

• To promote adherence to care processes recommended in CMS' core measures, one health system shifted responsibility for certain tasks from physicians to pharmacists and nurses
• Because many core measures relate to medication adherence, this health system created a new clinical pharmacist position to assist with care processes for patients with heart failure, heart attacks, and more
• This program led to an improvement on the core measures and above-average performance on adherence rates in 17 of 25 measures

• What is your organization doing to decrease readmissions? What role is pharmacy playing?
• How is your organization thinking about the role of ambulatory pharmacy?
• What changes are taking place in the role played by pharmacists in your organization?

• Effective October 1, 2011, CMS reimbursement for skilled nursing facilities was reduced 11.1%. This will reduce payments to the sector by $79 billion over next decade.
• Lower reimbursement is pressuring LTC to lower costs by:
• Reducing labor expenses. Since labor in LTC represents almost 70% of operating costs, facilities are decreasing staffing and/or reducing compensation or benefits.
• Improving efficiency. This includes implementing new technologies to streamline administration and operations.
• Automating. Automated medication management and dispensing can reduce labor expenses. At an LTC roundtable an industry executive said, we can't change that we're going to get a rate reduction— because everybody is getting cut—but we can change the system. For instance, automated medication management and dispensing could reduce labor by 50%.
• Some LTC facilities are putting pharmacy services out to bid, or expecting their LTC pharmacy to simply lower prices. It is important to remind LTC facilities that:
• Drugs represent a small fraction of their overall costs
• More important is the management of drugs. Management practices can have a significant impact on costs.

• CMS believes financial relationships between LTC consultant pharmacists and other entities, particularly manufacturers, could affect prescribing recommendations and patient safety.
• So, on October 1, 2011, CMS issued a proposed rule (Page 63038) that would require LTC consultant pharmacists to be independent.
• ASCP and various LTC organizations agree with CMS' goals of patient safety and independence in prescription decisions, but don't agree on the need for a rule to require independence. They argue that a rule would increase costs. They favor disclosure of financial relationships as a preferred solution and intend to provide CMS with data showing that prescription independence and safety are being achieved.
• They also favor alternatives to and delayed implementation of such a rule.

1. A Long Term Care Pharmacy Alliance (LTCPA) study found that:
• Shorter fill times could reduce the cost of unused Part D drugs in LTC by 2.9%
• But shorter cycles will result in higher Medicare costs because of more prescriptions and dispensing fees
• Increased costs/fees would outweigh potential cost savings
2. An article in ComputerTalk summarized a six-month study that examined costs from 12 LTC pharmacies, including material costs, labor costs, and waste from different packaging formats and dispensing cycles. The study found that:
• An average LTC patient takes 10 oral solid medications, averaging 468 pills per month
• As the cycle shortens, the number of packages increases, but the labor cost, pills dispensed, and waste all decrease
• "Shortening the dispensing cycle saves money" and "pharmacy owners and managers would do well to continually evaluate medication-packaging options that will give them a market advantage by lowering patient cost"

• 2 of CMS's 4 bundled payment models include bundling payments for post-acute care
• These models will put providers at financial risk for adverse events and readmissions, making medication adherence and medication management in LTC more important
• Research shows that 21% of readmissions result from adverse drug reactions and 57% are avoidable; 32% of adverse events resulting in rehospitalization were caused by medications

• Are your LTC facilities requesting discounts in light of reimbursement cuts? How are you handling these conversations?
• What are your thoughts on the proposed CMS ruling regarding consultant pharmacists?
• What is your pharmacy doing to get ready for shorter cycle dispensing?

CMS is focused on a "Triple Aim" of better health, better care, and lower costs. This Triple Aim is articulated in the context of:

• A fragmented, mistake prone delivery system
• An increase in the prevalence of chronic diseases
• A fee-for-service payment system that rewards volume instead of quality

"Accountable care" is a philosophy of making providers more accountable for the quality and cost of care that is delivered to their patient population.

"Accountable Care Organizations" are new healthcare delivery entities charged with delivering accountable care and achieving the goals of the Triple Aim. A working definition of an ACO from ASHP is: a group of providers who are jointly held accountable for achieving measured quality improvements and reductions in the rate of spending growth.

The CMS rules for ACOs, as well as the numerous commercial payer ACO initiatives, afford significant flexibility in how accountable care is delivered. Still, ACOs will share important characteristics.

• Care for populations. ACOs will be responsible for managing the health of patient populations. The CMS regulations require an ACO to care for at least 5,000 patients.
• Care coordination. An expectation is that ACOs will change the delivery of care from being fragmented to coordinated. Care will be delivered in teams. Important elements of care coordination are patient-centered medical homes (PCMH), led by primary care providers, and a collaborative "medical neighborhood," which is the broader community of providers who will work together in managing the health of the patient population. The concept of a medical neighborhood can include specialists, hospitals, labs, other providers—and pharmacists.
• Quality reporting. Being a Medicare ACO requires reporting on 33 measures of quality organized in four domains: patient safety, care coordination, patient experience, and preventive health.
• Technology integration. Care coordination requires that providers be able to easily and securely access and share patient information from wherever an individual receives care. Most ACOs will adopt health information technology such as electronic health records (EHRs).
• Revised financial incentives. ACOs will have significant financial incentives to improve care coordination, meet quality standards, and lower the costs of care. This includes sharing in a portion of the savings to CMS. Many experts see this as the key to accountable care.

Pharmacists can play a key role in helping ACOs achieve their goals. With greater emphasis on improving quality and reducing costs, ACOs will be focused on reducing hospital readmissions, helping patients manage chronic diseases, and reducing adverse events. Pharmacists make a difference in each of these areas.

Pharmacists can make significant contributions at several junctures in the care process, which involves broadening the role of the pharmacist to be more deeply involved in care delivery. Pharmacists' expertise equips them well for this role.

• During hospitalization. As part of care teams, pharmacists can collaborate with physicians and other clinicians on patients' medication regimens. This includes medication selection, dose adjustments, laboratory monitoring, medication reconciliation, and drug interaction identification. These activities can improve outcomes and reduce medication-related adverse events.
• At discharge. Discharge and immediately post-discharge are critical times. Pharmacists can educate patients about their medications, follow up to make sure prescriptions are filled, and counsel patients. This can reduce readmissions, many of which are caused by lack of adherence. For these reasons and others, many hospitals are looking to open or enhance their ambulatory pharmacy.
• In outpatient settings. By coordinating with physicians, medical homes, and medical communities—particularly through ambulatory pharmacies—pharmacists can educate, monitor, and manage patients with chronic diseases, who account for a large portion of costs. There are also a broad range of MTM services that can be provided by pharmacists, including medication therapy reviews, pharmacotherapy consults, anticoagulation management, disease management, and more. Also, increasingly pharmacists may interact with patients through telehealth services, video chats, and other technologies.

• Get educated. Pharmacists must understand what ACOs are and how they will change healthcare delivery. Also, pharmacists should understand their organization's ACO strategy.
• Make a case. Pharmacists need to convince physicians and administrators that their involvement can improve an ACO's quality results and decrease costs. This can be supported with research and case studies from health systems that are leveraging pharmacists with successful results. A few examples from a recent ASHP Policy Analysis:
• Baylor Health Care System operates a medication assistance program for indigent patients who are at risk for readmission. Pharmacists help patients apply for free medications from manufacturers.
• Pharmacists are involved in Carilion's medical homes by focusing on specific chronic disease states and patients with complicated medical profiles. Pharmacists are the go-to healthcare provider for ongoing maintenance of difficult chronic patients who need intensive medication therapy management.
• In a Vermont ACO pilot program, services that pharmacists are likely to provide include MTM, medication reconciliation, acting as a medication resource for patients, and improving compliance with medication regimens.
• CIPA (a physician group practice in Western New York) has pharmacists work directly with 20 of the practice's 900 providers. All other providers have a virtual relationship with pharmacists.
• Get connected. For ACOs to work, technological integration, including the integration of pharmacy, is essential.
• Prove success. Demonstrating success by improving performance on quality measures, improving organizational productivity, and/or decreasing costs will strengthen pharmacy's case to be more deeply involved in ACO care processes.

• What are your organization's plans related to becoming an ACO?
• In what ways do you envision pharmacy being involved in delivering more accountable care?
• How do others in your organization think about pharmacy's role in accountable care?
• What changes does this mean for pharmacy?
• What specific programs and initiatives could this entail?