Many hospitals and health systems approach spending in an uncoordinated manner. As a result, local departments often spend "their" money in low-value ways.
A better approach is to centralize decision-making authority, particularly in areas experiencing rapid cost growth. When University of Utah Health found that its pharmacy spending was growing out of control, it developed a formulary-management process that employs researchers to track real-time price fluctuations and monitor the availability of lower-cost drug equivalents.
Each month, these researchers make recommendations to a physician-led pharmacy and therapeutics committee. Where clinically appropriate, the committee communicates therapeutic interchanges to physicians and updates their EHR system to include "hard stops" on inappropriate prescriptions. Previously, when a physician encountered a hard stop, he or she had to appeal to the system CMO or service line director to request an exception. Now that the process has become hardwired in clinical workflows, pharmacy leaders often adjudicate the exception requests.
Using this strategy, Utah saves $2 million each year.
This approach isn't limited to pharmaceutical spending. To learn more about University of Utah Health’s approach and to see how Methodist Health System applied this strategy to rein in labor spending, see our report about creating sustainable expense growth.