The Future: A Hard Sell
“Why should I believe Sabrina Hannigan?” a hospital VP of Pharmacy asked at our introduction. True, outpatient pharmacy staffing is different from retail. But, then again, he was employing a retail pharmacy model I was familiar with.
“We are not a retail pharmacy” another hospital VP of Pharmacy cautioned me at our introduction. My thought was “Then why are you operating as one?” I assured him that I would not look at his pharmacies that way. Outpatient pharmacies cannot be viewed through a retail lens.
Amita Health dominates healthcare in my geographic area. They operate their own outpatient pharmacies. In cases, they replaced an on-site Walgreens. Even so, they continued using the same retail model and yielding the same under-performance. So, instead of hundreds of daily prescriptions at my hospital, they continue to struggle to reach ninety.
Outpatient pharmacy management realize what they are not, better than what they should be. The future has always been a hard sell for hospitals. And even as pharmacy retail giants redirect to make their healthcare assault, hospitals remain intransigent about the need to go on the offense against this emerging threat.
Deloitte US recently published an article that imagined a healthcare industry disruption in which “Retail pharmacies could become consolidated health destinations …”[1] This prognostication does not take too much imagination given the big chains investment in primary care. For now, chains are focusing on moving the prescription counter closer to the point of care.
Faced with the certainty of under-performance and a clear path to go on the offensive (or at least improve their competitiveness), why do hospitals choose not to transform their outpatient pharmacies? Why would they refuse to take even the simplest of steps like removing a glass wall separating a pharmacy from its market potential? Why would they refuse to replace a conference room with exterior visibility, at a gateway site, with their pharmacy?
Sometimes the answer is a Board of Directors undermining the efforts of the pharmacy team as was the case at a New Mexico hospital or another in North Carolina. An MD on the former’s board refused transformation because ‘pharmacists never made a nickel consulting a patient.’ A board member at the latter refused to allow a high visibility drive-thru because he did not want to interfere with the business of a local pharmacy several miles away.
Other times the answer to intransigence is more about metrics and the false hopes of consulting firms. A hospital in North Carolina could have transformed and become the dominant pharmacy in the markets they served. However, a consulting firm’s false promise of labor reduction and a successful retail pharmacy was more appealing than the necessary transformation.
Deloitte’s future of pharmacy vision is understandably consumer-centric with an expanded role for the pharmacist. This vision, however, is the antithesis of the retail drug model which has long repossessed consumer-centric spending. The profit model can ill-afford one pharmacist to verify prescriptions let alone expand the patient experience. Regardless the innateness or intuitiveness of consumer-centric pharmacies, this future vision is a hard sell for the retail industry.
Such should not be the case for transformational pharmacy models that are disruptive in nature, meaning they undermine the existing retail profit paradigm, one that has already proven to be ineffective for hospitals. Outpatient pharmacies need to envision and embrace a future where pharmacy is essential to their healthcare model, not a retail commodity.
Drug Chains Make the First Move
I warn clients that drug chains have no choice but to encroach on hospital markets and harvest low hanging fruit. Some had already tried moving their pharmacy counter closer to point-of-care with on-site pharmacies. The weak spots making hospitals ripe for disruption are clear to retailers and even owning hospitals are not out of the realm of possibility.
The recent announced $5.2 billion commitment by Walgreens to VillageMD ACO signals their commitment to build healthcare ownership of selected markets. This first salvo is significant considering the increasing challenges and inherent healthcare model risks facing ACOs. CVS assumed a low-risk high-return primary care model more in-tune with their strategic and tactical business model. This makes them a more significant threat to hospitals.
The internet is replete with arguments as to the availability of primary care physicians which drug chains need to drive their primary care models. VillageMD, for example, had posted openings for 105 NPs and 337 physicians as of this writing. This does not include the demand for medical assistants. In any case, this healthcare incursion is likely to drive up labor cost and healthcare cost in general. This would not bode well for retailers and ACOs.
Is It Too Late for Hospital Outpatient Pharmacy to Defend Hospital Markets?
Drug chains are as ripe for disruption as hospitals. It is a matter of which industry overcomes the other. The drug chain strategy depends on their ability to hire, retain, and continue to absorb increased healthcare professional cost. Hospitals might have easier access to pharmacists and technicians owing to overly lean retail pharmacy staffing models. At first blush, it would seem he who wins the labor war wins the day.
But the future is a hard sell in an industry where grand foyers speak to wasted real estate and floor layout with long hallways which consume much of a healthcare professional’s value. Where glass walls or conference rooms are more important than market access, and gift shops waste important gateway locations. Where the biggest salaries and perks are earned by reaping rather than sowing.
Still, retail commoditization of healthcare has challenges ahead which will make it more difficult to fully disrupt healthcare than for hospitals to disrupt the current prescription delivery system. How long that window stays open depends on how successfully the retail lobby can disassemble barriers currently safeguarding patients.
The window remains open but only for hospitals willing to disrupt the retail prescription delivery model. Therein lies the challenge for hospitals. Transformation requires hospitals to replace fill-on-demand models with delivery-on-demand operations. To re-imagine patient-centric services, to emphasize the importance of therapeutic outcome, leverage hospital-based pharmacists healthcare partners, and own prescription delivery in the markets they serve.
The future only promises room for those who envision it, all others take their chances. Envisioning how outpatient pharmacy looks in future healthcare is a hard sell for hospitals, especially those whose future horizon is the fiscal year-end.
- The Future of Pharmacy – Opportunities & Challenges | Deloitte US, 1/19/2022