3 Opportunities for Managing Costs at Long-Term Care Facilities

November 17, 2020

3 Opportunities for Managing Costs at LTC Facilities

Insights from Kelly Snowball and Eddie Bangerter of Rocky Mountain Care

We recently sat down with Kelly Snowball, COO, and Eddie Bangerter, COO at Rocky Mountain Care to talk about challenges they have experienced over the past six months and how SRX has helped them weather the pandemic. Like most operators in long-term care, Rocky Mountain has faced an uphill battle in working to keep patients safe and healthy amid a global pandemic. From securing enough personal protective equipment (PPE) to managing the many requirements and restrictions imposed by COVID-19, they have successfully balanced these challenges by managing costs and maintaining quality patient care. 

Cost management has become a key priority for operators. While costs for many supplies have risen amid the pandemic, identifying cost savings opportunities has become necessary for operators and facilities in remaining profitable. Many operators have had to re-evaluate their relationships with vendors and partners, either due to disruptions in their supply chains, or as a necessity in managing costs. 

One key area for operators to save money is on their pharmacy bills. Pharmacy drug spend represents the second largest cost center for most operators and amounts to tens of millions of dollars, depending on its size. One of the easiest ways to impact the bottom line for facilities is to make sure they are properly submitting manufacturer rebates. Due to the complexity involved in properly analyzing bills and identifying rebate opportunities, many of these dollars go unrealized. SRX technology is designed to simplify this process, identify all eligible rebates, and submit them to the manufacturers so that these rebate dollars are guaranteed to be put back into facilities where they belong. 

Snowball discussed the importance of the rebate dollars to their facilities: “It is very important to have the predictability that those rebate checks are coming. This pandemic has really affected the nursing home world, and the businesses we run. Having that predictability and knowing what’s coming, we can take that and apply that back into our operations and make sure that our patients and our employees always have the tools, equipment, and supplies they need to be safe. So we can keep caring for those that can’t care for themselves. At the end of the day, that’s the partnership we value the most.”

While it’s easy to focus on rebates, this is just one small piece of properly managing your pharmacy drug spend and maximizing cost savings related to drug spend. Real savings and opportunities lie in successfully managing costs—a virtually impossible feat without using technology and automation. The complexity involved in identifying opportunities for savings requires access to drug pricing databases, integration with electronic health records and pharmacy contracts—and then—the ability to analyze all the information to identify errors and credits as well as areas for improvement. 

In speaking with Bangerter, he expressed frustration with the challenges of managing pharmacy costs. “Pharmacy contracts have been something that have been confusing and hard to understand for the entire time I’ve been in this business and with SRX’s help and their assistance, we have a better handle, better understanding, and direction on where we’re going with pharmacy and pharmacy spend.” 

 

Key Pharmacy Cost Savings Opportunities

This insight into pharmacy spend is what SRX customers find most valuable. On average, our customers see an average savings of 11% on their pharmacy bills. Those numbers are significant, and represent critical dollars that can be spent caring for patients and improving outcomes. The following are some of the key cost savings opportunities realized through SRX automation and technology.

Drug Utilization Improvements

Many operators are unaware of the significant cost savings that can result from carefully considering their drug utilization. In a recent blog post about the benefits of facilities optimizing their drug utilization reviews, SRX explained, “An effective DUR begins with a thoughtfully-designed formulary that outlines the drugs that best meet the financial and clinical needs of your facility and your patient population. Once this formulary is in place, you can integrate additional rules to help contain costs and build accountability into your relationship with your pharmacy.” 

Proper drug utilization planning plays a key role in managing costs, as well as providing better therapeutic alternatives for patient conditions. This aspect of SRX’s services often provides surprising outcomes for facilities. As Bangerter explains, “SRX gives us a view into what we are buying. By helping us review our drug utilization, our formulary now includes lower-cost drug alternatives that have better outcomes for patients, allowing us to spend less, and help our patients have a better experience.” 

Adjudication

The sheer number of line items on a long-term care pharmacy bill speak to the heavy burden placed on administrators who are often charged with enforcing pharmacy contract terms and pricing. Some pharmacies can implement measures that prevent these rules from being broken in the first place. These “front end” adjudication options employ technology in identifying off-formulary drugs, or establishing quantity limits for example, and prevent pharmacies from filling orders that violate these rules. With the right technology, alerts can also be sent to facilities, notifying clinicians when they are prescribing outside of recommended parameters. 

While front-end adjudication is considered best practice—preventing unnecessary line items from ever appearing on a pharmacy bill—this option is not always available. In this event, having a robust tool that provides reports operators can use in recouping credits and holding pharmacies to account is the next best option. SRX reports analyze all drug claims, identify pricing discrepancies, and prevent waste related to drug utilization.

Identification of Credits / Errors

To put some context behind the type of savings facilities and operators can expect in switching to an automated solution, SRX recently completed a case study of a 21-facility, multiregional operator. In 2019, after switching to our solution, SRX technology was able to identify cost savings opportunities in the form of credits and cost savings opportunities that amounted to over 18% of their total pharmacy costs, or approximately $867k.  

Without accurate reporting, operators are left without the information needed to request credits that are rightfully theirs. The rate at which pricing fluctuates, combined with the room for error on every bill makes accountability and transparency a real challenge. Even when operators have good relationships with their pharmacy partners, there is a lot of room for error. Left unchecked, and without an automated solution analyzing every claim, those errors are likely to remain outstanding. 

 

Significant Cost-Saving Outcomes and Beneficial Relationships

Rebates are always an easy way to show the value of properly managing pharmacy costs, and are certainly an exciting opportunity for facilities to put money back in their pockets. However, the real, long-term opportunity lies in not spending dollars in the first place. If you look at 10% of your total spend, that number is likely significantly higher than your total eligible rebates. The difficulty lies in capturing those cost savings opportunities. It’s only feasible with technology. Those reclaimed savings can be used to offset other costs, a value not lost on our customers during the last six months. 

“You know,” Snowball said, “when we got into this partnership with SRX and the savings that they’ve been able to bring to us at Rocky Mountain … it couldn’t have been a better timing issue for us because COVID broke out shortly thereafter and we were able to take those savings and apply them to programs and equipment and things like PPE to keep our employees safe. We spent an immense amount of money every day doing that, to make sure that our residents are safe and our employees are safe. So we’re fortunate we’ve got in this relationship, and it’s really been a blessing to us as a company to have it.”

If you are a long-term care or skilled nursing facility that is looking for a partner to drive down your facility drug costs, reach out today to speak with one of our experts

SRX is a technology and advisory company that helps LTC operators realize the lowest net cost on pharmacy spend. We help our customers improve drug utilization, manage pharmacy relationships, reduce costs and waste, and maximize rebates. We are committed to transparency and accountability and guarantee our quarterly rebates are paid on time, every time. Contact us at 833 633 6833.

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