Combatting a Triple Threat: 3 Ways Hospitals can Address the Labor Shortage, Staff Burnout and Rising Pharmacy Benefits Costs

Updated on February 17, 2022
Team of Surgeons Operating in the Hospital.

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By Thatcher Sloan, Vice President of Strategic Markets & Advisory Services, RxBenefits

As we enter year three of the COVID-19 pandemic, U.S. hospitals remain under intense pressure to not only care for patients, but also recoup billions of dollars in lost revenue and attract and retain increasingly burnt-out employees.

The talent shortage is arguably one of the biggest challenges the healthcare industry is facing currently. The rate of turnover among the average bedside RN has risen to an all-time high of 18.6%, jumping from only 2% in 2019 according to Advisory Board’s 2020 annual survey. The effects of the pandemic and employee burnout have further exacerbated the existing challenge of too few trained nurses to meet the growing demand for healthcare services and an aging population – making it nearly impossible for hospitals to fill positions as fast as nurses are quitting.

Highly skilled positions like nurses and physicians who are directly caring for patients aren’t the only roles hospitals are competing for. From clerical staff to custodians to security guards to food-service workers, positions at every level are in demand as hospitals compete for talent with other industries. But unlike hospitality or retail, most healthcare entities need to be staffed at every hour of every day of the year.

Hospitals can use rich benefits to attract and retain employees, however, as the costs of benefits are skyrocketing, this strategy is becoming unsustainable. One way to both attract employees and support the bottom line is to optimize pharmacy benefits plans.

Rising Pharmacy Benefits Costs for Hospitals 

Consider this: employee health insurance premiums account for one of hospitals’ biggest bills and are only getting bigger, as the average per-employee cost of employer-sponsored health insurance increased 6.3% in 2021. In addition, specialty drug utilization continues to rise, and many employers feel pressured to cover these despite spiking costs as 1 in 10 Americans would change jobs or involve their employer’s HR department to get coverage of specialty medications.

As both employers and providers of healthcare services, there is also a higher expectation for hospitals to ensure their staff is well protected compared to other industries. Hospital employees at all levels work long hours in an environment where they are more susceptible to becoming sick, and healthcare providers want to protect employee health as much as possible. 

With increased awareness about medical conditions and pharmaceuticals as well as convenient access to clinicians who can prescribe treatments, 70% of hospital plan members on average take prescriptions each year, which is 25% higher utilization than the typical commercial plan — further contributing to hospitals’ high costs.

However, hospitals that self-fund and carve out their pharmacy benefits have an opportunity to design more customized plans based on the unique needs of their members and organization while keeping costs in check. By working with a benefits consultant and independent third party who understands how to optimize their pharmacy benefits, hospitals can leverage data analytics to make more informed decisions — ultimately reducing costs while still protecting the health of their employees and providing a competitive benefit to support hiring and retention. 

Below are three ways hospitals can tackle rising benefits costs while meeting employee needs so they can continue to attract and retain talent.

Implement Clinical Utilization Management

Implementing a clinical utilization management strategy as part of a pharmacy benefits plan can help identify areas of waste and reduce unnecessary benefits plan costs, enhancing value and safety for members.

For example, a common way to reduce spending through clinical utilization is by replacing high-dollar prescription meds with lower-cost prescriptions or over-the-counter options that are both clinically sound and economic alternatives. Hospitals can also implement hyper-targeted strategies to help address any potential issues, such as dose errors — which can not only have negative impacts on the employer’s bottom line, but more importantly, can have negative impacts on a member’s health if left unchecked.

Designing a benefit that is tailored to meet the hospital’s goals and address the specific needs of the employee population begins with conducting a thorough analysis of utilization data. Not only are hospital employees different from those in other industries, but each hospital has specific goals, and its members have unique needs, which can be identified by analyzing claims data as well as employee demographics, health trends, and prescription patterns.

Once hospitals gain full visibility into its plan’s performance, utilization, and potential risks, an effective utilization management strategy includes reviewing the clinical appropriateness of prescriptions, optimizing the drug formulary and dosing, maintaining regular member touchpoints, and aligning rebates with appropriate utilization. 

Leverage the Hospital’s Owned Pharmacy

Taking advantage of hospital-specific resources, and in particular onsite pharmacies, is also critical to reducing costs while maintaining rich benefits.

In order to do this, hospitals need clear contract terms with the PBM that ensure its ability to drive utilization to the hospital’s on-site pharmacy, particularly ensuring high-cost specialty medications are filled on-site. This ensures the hospital has more oversight into the cost of goods and is able to keep valuable healthcare dollars in-house, as well as allows member communication and engagement  to come from their hospital system.

Most PBM contracts do not allow for this level of flexibility, putting the hospital system at a disadvantage. However, with a channel-agnostic pharmacy benefits contract that encourages members to utilize the on-site pharmacy, hospitals are able to optimize savings opportunities.

Optimize the 340B Drug Pricing Program

Created in 1992, the 340B Drug Pricing Program is designed to require drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices.

If eligible, leveraging this program can generally provide discounts that are much deeper than what hospitals typically procure, ranging from 20% to up to 45% in savings. In fact, a study of 340B reported that hospital savings are around $11.8 million per year, yet only 2,540 hospitals of the more than 6,000 hospitals in the U.S. participate in the program.

Successfully applying this strategy includes having access to the right data and a team of experts that regularly evaluates the hospital’s 340B program and ensures that all qualifications are met, and the organization and members are utilizing it as appropriate.

Despite the myriad of challenges facing hospitals, there are strategies that can help reduce spending while delivering the best value for members. And while changes can inevitably cause some disruption to members, maintaining the status quo can often do more harm than good.

By analyzing the member population and understanding where optimizing the plan can drive the most value for both employees and the hospital, healthcare organizations can make adjustments that  ultimately provide a competitive benefit and protect the health of their employees without breaking the bank.

About the Author
Thatcher Sloan, Vice President of Strategic Markets & Advisory Services, RxBenefits has worked with employers and health plans across multiple geographic regions and lines of business. This experience allows him to bring actionable solutions tailored to meet his client’s specific needs based on industry best practices. Thatcher’s expertise is at the cross-section of strategy and operations, enabling him to develop solutions that are operationally sound, align and work inside the clients’ entire healthcare program. His clients have included Fortune 500 corporations, commercial businesses, Medicaid plans, and large and small employers. In September 2020, Confidio joined forces with RxBenefits, the employee benefits industry’s first and only technology-enabled pharmacy benefits optimizer (PBO), fueling innovation within the pharmacy benefits industry.

The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.