Group purchasing: vendor selection.

Ways that purchasing groups assess pharmaceutical vendors and products are discussed. The size of the purchasing group affects the process of screening vendors, with small groups tending to accommodate familiar vendors and large groups protecting themselves from an excessive number of prospective suppliers. Large groups usually have more resources to conduct in-depth screening. It may be necessary to organize subgroups to deal with the various aspects of the selection process; one subgroup might solicit and organize data relative to vendor selection. The sequencing of the selection process is critical: Product pricing should be considered after the vendor has cleared the quality and bioequivalence screens. Factors to consider when choosing a vendor are discussed. Because of the vast amount of information that is generated by the group's screening process, the group should develop tools to categorize and evaluate the data, including vendor quality profiles and bioequivalence screens. Some groups have established a probationary period before making a commitment to volume buying so that the group and the vendor can assess the other's value. A defined evaluation process informs the purchasing group's various publics--members, vendors, and competitors--of the group's quality assurance standards, thereby facilitating the vendor-selection process.

Monetary incentive for pharmacists to control drug costs.

An incentive program that paid hospital pharmacists at United Hospitals Incorporated (UHI) and Children's Hospital Incorporated (CHI) a percentage of the money saved by the pharmacy on drug and i.v. expenses in 1984 is described. Hospital administration, as part of a hospitalwide incentive program, approved the pharmacy department's proposal for a monetary incentive program. Pharmacy managers hoped that, by rewarding all pharmacists for their efforts to control costs, they could potentiate other cost-containment programs (stronger formulary control and improved purchasing and inventory control) and improve clinical services while maintaining quality of care. The incentive calculation was derived from the percentage of expenses saved on drugs and i.v. solutions and sets relative to budget. The payout, to be applied to 1984 salaries of pharmacists, could not exceed 10% of salary or more than 35% of the total savings to the hospital. A screening mechanism was established to protect the hospital from paying an incentive if the total pharmacy expenses exceeded budget. In fiscal 1984, drug and i.v. expenses per adjusted case decreased 1.55%, which led to each full-time pharmacist receiving an average payout of $500. This payout was less than had been anticipated because of a nursing strike at other hospitals, which resulted in an influx of intensive-care patients. The monetary incentive program for pharmacists is a useful tool for controlling drug and i.v. expenses and for rewarding pharmacists for successful cost-saving approaches.

Medical committee enforcement of policy limiting postsurgical antibiotic use.

A hospital policy enforced by medical staff committees limiting prophylactic antibiotic use is described. The pharmacy department is authorized to discontinue prophylactic antibiotic orders at 72 hours postoperatively for patients in whom there is no sign of infection. Decentralized pharmacists screen antibiotic orders for formulary status and appropriateness. Forty-eight hours postoperatively, pharmacists evaluate patients for infection and document in each patient's chart that the antibiotic will be discontinued within 24 hours unless renewed by the physician. Pharmacists document situations in which a physician renews the antibiotic and no infection is present. Audits of antibiotic use are performed, and the quality assurance, medical credentialing, and surgery committees deal with noncompliant physicians. For 153 prophylactic antibiotic orders audited in January 1981 before the program was implemented, approximately 50% were discontinued within 72 hours. During the same period in January 1984 when the 72-hour policy had been in effect one year, this percentage had increased to 85%. Two individual surgeons and one group of surgeons (urologists) who never complied with the policy were referred in 1983 to the surgery committee. After consultation, the two surgeons changed their standing orders to comply with the policy, and the urologists were granted an exception that was to be reviewed annually. The support of the medical staff in ensuring physician compliance has been the key element in the success of this policy.

Evaluating group purchasing through a prime vendor.

Use of a prime vendor by a drug-purchasing group representing 17 community hospitals is described and evaluated for cost effectiveness. The group was formed in 1981 by 15 hospitals in Minnesota and one each in Wisconsin and Iowa. The group solicited bids to select one drug wholesaler (distribution center). Drug-product manufacturers submitted bids to the group, and contracts were awarded to low bidders who agreed to use the distribution center. All 17 hospitals were evaluated for differences in inventory value and inventory turnover before (1980) and after (1982) initiation of the prime-vendor system; hospitals in the group were paired with control hospitals to eliminate environmental bias. A detailed analysis of inventory and operating costs was conducted in one of the hospitals. The hospitals in the purchasing group reduced drug inventory value by 30.1%, increased inventory turns by 55.3%, and purchased 72.8% of all their pharmaceuticals (based on dollar value) through the distribution center. The group obtained a distribution center service fee reduction of 39.2%. Hospitals in this group showed greater decreases in inventory value and increases in inventory turnover than the controls. The detailed analysis at a single hospital showed that cost savings included direct savings on inventory investment and order handling and indirect savings from elimination of inventory carrying costs and costs of processing checks and purchase orders. Operating costs were reduced by group purchasing of drug products from a prime vendor. Inventory control and purchasing practices improved.

Evaluation of drug-procurement alternatives.

Methods of drug procurement used by hospital pharmacies are discussed. Pharmaceuticals may be purchased directly from the manufacturer or from one or more local wholesalers. Factors influencing the extent to which each of these procurement sources is used are described, and the advantages and disadvantages of group purchasing and the prime-vendor concept are discussed. Finally, factors to be considered when evaluating proposed modifications of a hospital purchasing program are discussed. Prime-vendor relationships and pharmaceutical purchasing groups offer some potential advantages to hospital pharmacists in terms of cost and efficiency. The applicability of these methods must be carefully analyzed in each individual hospital setting.

Economies of purchasing group size.

The relationship of drug price and purchasing group size was evaluated. Thirty drug line items were studied in 26 private hospital purchasing groups of various sizes. Prices were analyzed relative to purchasing group size, age, and location. Drug prices were negatively correlated to group size in a linear relationship. Prices were significantly lower in groups representing greater than 10,000 beds. No significant relationship was found between group age or location and drug prices. The theory that increasing purchasing group size will result in better contract prices was supported.

Adaptation of a workload measurement system.

An adaptation of a previously reported patient-care unit (PCU) system of workload measurement is described. A PCU is any distributive or clinical pharmacy activity related to patient care, and the PCU system of workload measurement relates the activity frequency and the usual time required to complete each activity. The key to the system is the weighting factor (usual time) for each PCU. The PCU system was modified by breaking each PCU into its various elements and determining the time required to complete each element. Several time units were available from references; other units specific for hospital pharmacy were measured. The modified PCU definitions, counting mechanisms, and weighting factors used at the study hospital are included in an appendix. The number of service hours, which is the product of the frequency of each activity and its weighting factor, is an indicator of personnel time devoted to each pharmacy activity. The cost per service hour can be computed and used to set fees for each pharmacy activity. Other practical applications of the PCU system include evaluation of staffing patterns, trend analysis, and documentation of clinical services. The modified PCU system provides a more precise measurement of weighting factors than previously described methods, and it can be adapted by other institutions.

Modernizing an ambulatory care pharmacy in a large multi-clinic institution.

The steps involved in modernizing an outdated outpatient pharmacy, including the functional planning process, development of a work-flow pattern which makes the patient an integral part of the system, budget considerations and evaluation of the new pharmacy, are described. Objectives of the modernization were to: (1) provide a facility conductive to efficient and high quality services to the ambulatory patient; (2) provide an attractive and comfortable area for patients and staff; (3) provide a work flow which keeps the patient in the system and allows the pharmacist time for instruction and patient education; and (4) establish a patient medication record system. After one year of operation, average overall prescription volume increased by 50%, while average waiting time declined by 74%. Facility and procedural changes allowed the pharmacist to substantially increase patient counseling activity. The application of functional planning and facility design to the renovation and restructuring of an outpatient pharmacy allowed pharmacists to provide efficient, patient-oriented service.

Motivation of the hospital pharmacist.

Some theories of how management can motivate employees to perform effectively, and the application of these theories to hospital pharmacy practice, are discussed. Types of extrinsic and intrinsic rewards and how they can best be allocated to encourage greater productivity are described. Management must be consistent and credible in its reward allocations in order to maintain the expectation of employees that increased effort will result in rewards. It is important also that management ascertains what employees interpret as desirable rewards.