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Two methods for allocating pharmacy cost per patient case
G H Pink1, H B Bolley, R W Cockerill
1Department of Health Administration, Faculty of Medicine, University of Toronto (UT), Ontario, Canada.
American Journal of Hospital Pharmacy
|May 15, 1994
Summary
Comparing pharmacy cost allocation methods, the relative value unit (RVU) method yielded higher costs per case than the workload measurement system (WMS). This impacts hospital funding, with RVU potentially offering greater accuracy but demanding more data.
Area of Science:
- Health Economics
- Pharmacy Management
- Hospital Administration
Background:
- Accurate pharmacy cost allocation is crucial for hospital reimbursement and resource management.
- Two primary methods, Relative Value Unit (RVU) and Workload Measurement System (WMS), exist for allocating pharmacy costs per patient case.
- Previous studies have not fully elucidated the financial implications of these differing allocation methods in teaching hospitals.
Purpose of the Study:
- To compare the financial consequences of two pharmacy cost allocation methods: RVU and WMS.
- To assess the impact of these methods on hospital case-mix reimbursement.
- To evaluate the data collection burden associated with each method.
Main Methods:
- Utilized cost data from Sunnybrook Health Science Centre (SHSC), a 1205-bed teaching hospital.
- Examined cases from 1991-1992, focusing on the six Case Mix Groups (CMGs) with the highest total and per-case pharmacy costs.
- Calculated pharmacy costs per case using both the RVU and WMS methods and determined the differences.
Main Results:
- The RVU method consistently resulted in higher pharmacy costs per case for high-cost CMGs compared to the WMS method.
- Significant differences in pharmacy costs per case were observed between the RVU and WMS methods for the six CMGs studied.
- The RVU method, while potentially more accurate, imposes a greater data collection burden on pharmacy managers.
Conclusions:
- Case reimbursement based on WMS may lead to underfunding for hospitals with a high proportion of high-cost CMGs.
- Conversely, WMS may result in overfunding for hospitals with a high proportion of low-cost CMGs.
- The choice of pharmacy cost allocation method has significant financial implications for hospital reimbursement and requires careful consideration of accuracy versus data management demands.