Laying the foundation for a more profitable pharmacy practice

Drug Store News, Nov 3, 1997 by James Frederick

Step by step, Longs Drug Stores' pharmacy leaders and clinical specialists are staging a revolution in the way Longs cares for its prescription customers and deals with the managed care community. In the process, the chain is forging new links with third party payers, physician groups, HMOs and patients--and laying the groundwork for a more profitable pharmacy practice in the next century.

This revolution is being hatched in the offices of people such as Dale Bystrom, Longs' vice president of managed care services. As head of the company's 2-year-old prescription benefits management subsidiary, Integrated Health Concepts, Bystrom is working with senior vice president of pharmacy operations Dave Fong and a small team of clinical and managed care specialists at Longs to move beyond the current reimbursement morass at the prescription counter vis-a-vis managed care payers.

"When we formed IHC, we had two directions," said Bystrom, who rose through the pharmacy ranks at Longs. "One is ... the more typical PBM direction, which is sales and marketing of pharmacy benefit services, claims adjudication, production of cards, etc. And the other is the development of pharmacy patient care services or clinical programs."

In essence, that means nothing short of reinventing community pharmacy and restoring its role in personalized patient care. The objective is to spring Longs from the trap of shrinking prescription margins by broadening the revenue stream to include a full gamut of value-added pharmacy services. The key, Bystrom said, will be to integrate the therapeutic and compliance regimens, patient care services and reimbursement that will distinguish Longs from the competition.

"It's been our charge to demonstrate the value that community pharmacy brings to the delivery of health care," Bystrom said. "And we believe there's a tremendous value that pharmacy can deliver.

"We also believe that we need to be proactive to identify that to the healthcare system and to demonstrate it," Bystrom added. "And if we don't do that as a pharmacy provider, it'll be done elsewhere."

The drive by Longs to define pharmacy patient-care services--and to nail down specific payment protocols for those services with managed care payers--marks a sea change in the way the 344-store chain approaches its pharmacy business. As head of managed care services, Bystrom is leading the charge to establish a dollar value for the contributions Longs can make to larger efforts by managed care providers to meet quality of care standards and lower overall healthcare costs.

"We're taking a first step," Bystrom said. "We're going to HMOs and saying, `We've done some things that demonstrate we can bring value to you.' We think we're just positioning ourselves correctly for what the healthcare system is going to be moving into."

Bystrom said the search for new revenue streams is essential to the future of retail pharmacy. That means efforts by pharmacists to intervene on behalf of patients can't be done for nothing. "The position we've taken is that in the programs we develop, the pharmacists will be paid," he said firmly. "Pharmacy simply cannot give those things away."

Quietly and without fanfare, Longs has already made big strides in proving the value Longs pharmacists can add in terms of patient management and lower costs. For nearly two years, the company has been working with the University of the Pacific School of Pharmacy to document the cost-effectiveness of pharmacist intervention and drug switching programs in Sacramento, Calif., and other markets.

"After we put our PBM together, one of our first accounts was a northern California HMO that is participating in MediCal/Medicaid managed care programs," Bystrom said. "In one [county], we were selected as the PBM and took on the program as a risk/capita/ion plan, where we managed 23,000 lives. It was a very interesting first model because it involved Longs and an independent network in that area, Leader Pharmacy."

That initial effort involved pharmacists at Longs and other drug stores "actively intervening with members and physicians to better manage their health and healthcare costs" on a capitated basis with the HMO, Bystrom explained. In turn, the program paid Longs and other pharmacy participants a fee for documented pharmaceutical intervention.

The program, which was monitored by a research team from the University of the Pacific School of Pharmacy and spearheaded by Dr. Kathy Knapp, associate dean, provided concrete evidence that intervention by pharmacists led to healthier patients and significant cost savings.

"The University of the Pacific has provided an opportunity to categorize those submitted interventions and also provided the ability to assign a value to them ... in terms of both short-term savings to the payer with interventions like switching from Drug A to Drug B ... [and] in terms of long-term outcome savings that have to do with avoided medical costs," Bystrom said. "Because of effective management, the plan was saving money, and we shared that back with the pharmacy providers, and the payment to providers was based on their intervention."