The cost of drugs is skyrocketing, with a recent Blue Cross and Blue Shield survey finding that member drug costs rose 73% over the last seven years. News headlines capture the dramatic impact on consumers – the price of insulin tripled between 2002 and 2013, the price of an EpiPen rose 500% since 2007, and the cost of Daraprim, a drug used to treat parasitic infections, increased from $13.50 to $750 per tablet overnight.
Drug costs also impact hospitals’ bottom lines. An American Hospital Association study indicated that inpatient drug costs increased 23.4% annually between 2013 and 2015, and 90% of surveyed hospitals said rising drug prices had a moderate or severe impact on their ability to contain costs. For many hospitals, it seems like a losing battle. How can you not give patients necessary medications? You have to. However, analytics can help healthcare organizations keep drug budgets in check.
How Western Maryland Health System tackled the issue
Like many other hospitals, Western Maryland Health System has seen its drug costs creep up in recent years. The organization, like all hospitals and health systems in Maryland, receives fixed revenue each year for all inpatient and outpatient services provided in the hospital. That means it has to be especially cognizant about controlling costs.
Western Maryland decided to investigate what it could do to reduce its drug spending when the price of an IV form of acetaminophen rose by about 250% to $35 per vial. The hospital was paying nearly $250,000 for this common pain reliever in IV form. The hospital wanted to know: did the IV version of the drug actually produce better outcomes? Or would it suffice to give patients the less-expensive oral version?
Analysis led to nearly $200,000 in savings
The hospital turned to Diver to help. With the help of business intelligence analyst Colby Lutz, Western Maryland’s director of pharmacy services Surender Kanaparthi examined results from the hospital’s patient population to see if IV acetaminophen produced better outcomes. Using the data available in Diver, Surender and Colby examined various surgical procedures, patient lengths of stay, and number of opiates given. The end result: there was no significant difference in patient outcomes with IV acetaminophen.
As a result of this analysis, Western Maryland sharply decreased the amount of IV acetaminophen it purchased. The hospital reduced its spending on the drug by 78% over two years, from nearly $250,000 in FY15 to just over $55,000 in FY17.
This story offers a few lessons for healthcare organizations searching for areas where analytics can make an impact. First, Western Maryland’s impressive cost savings tangibly demonstrates the value of analytics. The results also highlight how an organization can effectively identify an area that needs improvements and tackle the issue in a targeted way.
In our discussion about this project, Colby and Surender told me their hospital is making a very concerted effort right now to identify disease states that have higher-than-expected lengths of stay. These are areas where improvements can make a big difference in clinical outcomes and/or spending. As with this pharmacy project, the organization is working on targeted ways to use analytics to make a difference.
To learn more about how Western Maryland accomplished this cost-savings, as well as its separate effort to understand drug efficacy, read the Western Maryland pharmacy case study on our website.