Improving a hospital pharmacy department's profitability

Measures taken by a pharmacy department to increase its contribution to meeting hospital operating expenses are described. A pharmacy department in a 1000-bed university hospital used management techniques to help contain costs, maintain quality care, and meet short-term cash flow and long-range financial objectives. Overtime and differential hours, primarily caused by turnover and sick leave, were reduced by offering technicians opportunities for advancement and better scheduling. Drug costs were reduced through use of therapeutic equivalent bidding, formulary drug-class reviews, and reductions in drug inventory. Equipment and computer expenses were analyzed, and future applications that would result in substantial labor savings and more efficient billing were planned. Measures were taken to reduce lost charges, and the number of patient charge items was increased. Charge reimbursement versus cost reimbursement was studied; a pharmacy billing mix in which more dollars are billed by charge reimbursement was sought. A new satellite in the surgical intensive-care area reduced lost charges and converted cost transfers to patient charges. Implementation of these programs increased pharmacy department contributions to meeting hospital expenses by 96% in fiscal year 1981-82.