Pharmacies must be financially solvent to remain open for business. This is the case with any pharmacy, regardless of setting, even for non-profits. In regard to hospitals, the pharmacy was previously regarded as a revenue generator for the organization prior to diagnostic-related-group (DRG) payment systems that allowed institutions to mark up the cost of drugs charged to payers. Now with prospective payment systems, the pharmacy and its composite drugs and services rendered are considered a cost center for hospitals/health systems, even with significant revenues mark-ups afforded them for certain types of drugs.    

O’Neal et al describe a systems approach to revenue management for the health systems pharmacy.¹ They describe managing cycles of revenues that are derived in part from clinical services but mostly from the dispensing of drugs. The pharmacy manager must have detailed knowledge of revenue cycles and potential revenue “leakage”. Financial counseling should take place prior to administration of high-cost outpatient drugs, which might include written notice to discharged patients about drugs used in the hospital that might come under restrictions for use in the outpatient setting through different cost-control mechanisms by insurance plans, such as prior authorization.

Community pharmacies are already quite involved in assisting patients navigate a difficult health care system. Still, there are lessons to be learned in all settings as they relate to good business practices and managing monies and other resources. Community pharmacies might experience cash flow problems given that they are paid not in real-time but periodically by pharmacy benefits managers (PBMs). Health system pharmacies could potentially lack the diligence needed to prevent going over budget and also fail to obtain the proper return on its assets, or in other words, end up using their resources (time, personnel, inventory) in a manner that is inefficient and wasteful.

Additional information about Financial Reports and on Third-Party Considerations can be found in Pharmacy Management: Essentials for All Practice Settings, 4e. If you or your institution subscribes to AccessPharmacy, use or create your MyAccess Profile to sign-in toPharmacy Management: Essentials for All Practice Settings, 4e. If your institution does not provide access, ask your medical librarian about subscribing.

¹CO’Neal BC, Friemel A, Glowczewski JE, et al. Optimizing the revenue cycle to promote growth of the pharmacy enterprise. Am J Health Syst Pharm. 2018; 75:853-855.