The High Cost of Improper Cost Cutting: How Focusing on Pharmacy Can Add to a Hospital’s Bottom Line

For hospital systems across the country, the New Year hasn’t brought much new hope of escaping the financial fallout from the COVID-19 crisis. Nearly 3 years after the onset of the pandemic, the ripple effects continue.

According to the American Hospital Association, more than half of all hospitals in the United States likely lost money last year,¹ due in large part to a staggering increase in labor costs. It is projected that between 2021 and 2022, hospital staff salaries soared by $86 billion.¹

Perhaps instinctively, many hospitals are cutting staff positions to offset some of those losses, but when it comes to hospital pharmacies, that may be exactly the wrong thing to do.

Most of the costs in hospital pharmacies are not associated with labor, but rather with medications and their proper management. Failure to recognize this reality can lead to a series of compounding issues, all of which can drive up costs and increase hospital debt. Complicating the situation is an influx of patients in hospital systems across the country whose average length of stay has surged by nearly 10%.² During the pandemic, both hospitals and patients alike deferred non-urgent care that was unrelated to the SARS-CoV-2 virus.

Today, that deferred care is catching up to an already overtaxed system.

The number of patients seeking care that they avoided or delayed is rising, and so is their acuity. Patients are increasingly presenting with more severe diseases and conditions, which often require more intensive treatments, longer hospital stays, and more complex medicinal regimens. In hospitals where pharmacy staff has been cut as a cost-saving measure, pharmacists themselves are being asked to do more of the work with fewer resources—and in many cases, no raise in salary to match the market.

Michael D. Brown, Cardinal Health

The result is that most pharmacists are burnt out.

An systematic review of several studies involving more than 11,000 pharmacists in 8 different countries found that an average of 51%—up to 61% in some studies—have reported experiencing burnout.³ Most concerning is that those numbers may be low.

According to the researchers, burnout in the pharmacy profession is not as extensively studied as it is in other professions like medicine and education, particularly as it relates to the impacts COVID-19.³ Unfortunately, burnout can lead to decreases in productivity and increases in job turnover. Even worse, burnout can have a considerable impact on patients: Inefficient or improper medication management may lead to errors, decreased patient satisfaction and, in some cases, even fatalities due to mistakes.

The human and financial tolls these cuts can have on hospitals can be significant.

While it may seem counterintuitive to bolster the staff in certain to offset labor costs, hospital systems should seriously consider investing more in pharmacy programs—or at the very least, acknowledge the impact that cuts have on pharmacists themselves.

Pharmacists occupy a distinct place in the hospital continuum of care. If budget cuts call for a reduction in the number of nurses or therapists in certain areas, the work they provide to patients does not fall on surgeons or specialists. However, the same logic doesn’t always apply to pharmacists. Despite managing higher volumes of patients and more sophisticated medications, pharmacy technicians are often the first positions to be eliminated when budget cuts loom. When these skilled technicians are let go, work tends to migrate upwards to the pharmacists themselves. As pharmacists are increasingly asked to take on more day-to-day tasks and spend less time managing the pharmacy department, mistakes can crop up, leading to poor patient outcomes and ultimately impacting the hospital's bottom line in a negative manner.

Hospital administrators should consider giving their pharmacy executives a seat at the table when planning budgetary strategies and patient care priorities, particularly as so many hospitals navigate financial losses associated with COVID-19. A failure to do so may compromise patient care and end up costing hospitals more than they can recoup by trimming a few positions from their pharmacy staffs or not raising wages.

Michael D. Brown is the vice president of Managed Services at Cardinal Health.

References

1. Kaufman, Hall & Associates. The current state of hospital finances: Fall 2022 update. American Hospital Association. Published September 15, 2022. Accessed February 28, 2023. https://www.aha.org/guidesreports/2022-09-15-current-state-hospital-finances-fall-2022-update
2. Pandemic-driven deferred care has led to increased patient acuity in America’s hospitals. American Hospital Association. Published August 2022. Accessed February 28, 2023. https://www.aha.org/system/files/media/file/2022/08/pandemic-driven-deferred-care-has-led-to-increased-patient-acuity-in-americas-hospitals.pdf
3. Dee J, Dhuhaibawi N, Hayden JC. A systematic review and pooled prevalence of burnout in pharmacists. Int J Clin Pharm. 2022;1-10: doi:10.1007/s11096-022-01520-6