October 22, 2009 09:08 ET

VHA Regional Network Helps Mountain States Hospitals Tackle Drug Costs and Identify $18.7 Million in Additional Savings on Medications

IRVING, TX--(Marketwire - October 22, 2009) - Hospitals across the nation continue to struggle with rising economic stress, driven by falling reimbursements and expanding labor and technology costs. These pressures have led hospitals to attack supply costs with a vengeance.

One area of emphasis is the pharmacy arena. Approximately 75%-85% of a hospital pharmacy department's expenses are drug costs, so striving to reduce drug expenditures is a worthy, but complex goal. Working with VHA Inc., the national health care network, 34 hospitals in Colorado, Idaho, Montana, Nebraska, New Mexico, Washington and Wyoming combined resources to hire a consultant to coordinate their efforts to help them identify savings opportunities to cut pharmacy costs that won't compromise patient care. By focusing on the top drugs and drug classes that drive a majority of their annual drug expenditures, which exceed $400 million collectively, the hospitals were able to identify more than $18.7 million in savings opportunities from April 2008 through the end of September 2009.

In the spring of 2008, the VHA members in the Mountain States region launched a focused effort to drive savings and quality by using an evidence-based approach to establish clinical equivalency and gain commitment from members to standardize drug formularies.

"Initially we looked at reducing cost by ensuring the appropriate utilization of specific high-cost drugs," said Ed Kent, a registered pharmacist and the implementation manager for the VHA program. "Now we not only look at how these drugs are best utilized, but work to identify supply partners that are willing to provide extra discounts in exchange for additional purchase volumes or market-share commitments. This innovative initiative is driven by our members and their decision to share ideas through the VHA network. Each member has something they do best that others can learn from."

Thus far, Kent said each focused drug class initiative has yielded a 10% to 50% savings per member, but each member is working at its own pace to realize the savings that have been identified, targeting the opportunities that match their clinical priorities.

Kalispell Regional Medical Center, Kalispell, Mont., has identified nearly $327,000 in savings opportunities so far through this VHA initiative, and expects to save another $275,000 in year two of the regional pharmacy program. "Saving money is an obvious benefit, but another benefit for us is that it leads to better care coordination, since we share patients across the region. I know more now about the pharmacy protocols that other hospitals in the region follow, and I trust that we're better aligned thanks to our participation in the VHA program," said Mark Donaldson, R.Ph., Pharm.D., FASHP, director of pharmacy services at Kalispell Regional.

Another very tangible benefit for the small rural hospitals participating in this program is that they can easily duplicate the tools the group creates to more efficiently drive the adoption of best practices resulting in safe, quality care within their own organizations. Oftentimes, it's a challenge for small hospitals to develop these protocols and tools on their own.

As successful as the program has been already, Kent believes it's possible that the members will find additional savings as the program continues to evolve.

Key success factors for the program were:

--  Using a common pharmacy distribution partner
--  Using clinical decision support tools and evidence-based medicine to
    reach clinical consensus
--  Leveraging  analytics, and tracking, reporting and monitoring
--  Prioritizing around high cost and high volume items to create early
    wins to build momentum
--  Negotiating with suppliers as a single entity
--  Maximizing Novation contracts

About VHA

VHA Inc., based in Irving, Texas, is a national network of not-for-profit health care organizations that work together to drive maximum savings in the supply chain arena, set new levels of clinical performance, and identify and implement best practices to improve operational efficiency and clinical outcomes. Formed in 1977, through its 17 regional offices, VHA serves more than 1,400 hospitals and more than 24,000 non-acute care providers nationwide.


Six years ago, VHA member hospitals in the VHA Mountain States region standardized to the same pharmacy distributor, and this created a platform for them to begin discussions about broader levels of collaboration. The members recognized they could leverage their collective purchasing volume and thereby obtain additional wholesaler discounts off the cost of their medications. Their efforts to do this proceeded somewhat slowly for several years until the group decided to form the VHA Mountain States Formulary Standardization and Clinical Process Improvement Committee. This led to the subsequent 2008 hiring of Ed Kent by VHA as a member shared resource. The VHA members in the region share the cost associated with bringing Kent on board. He is a former director of pharmacy at one of the VHA member hospitals in the region, and now, as a seasoned member of the VHA pharmacy consulting team, serves as the catalyst in helping his former hospital colleagues direct the formulary standardization program.

The following health systems and hospitals participate in the VHA Mountain States Pharmacy Formulary Standardization and Performance Improvement Collaborative:

                                             CITY               STATE
Aspen Valley Hospital                        Aspen              Colo.
Benefis Health System                        Great Falls        Mont.
Billings Clinic                              Billings           Mont.
Bonner General Hospital                      Sandport           Idaho
Boulder Community Hospital                   Boulder            Colo.
Bozeman Deaconess Hospital                   Bozeman            Mont.
Campbell County Memorial Hospital            Gillette           Wyo.
Cheyenne Regional Medical Center             Cheyenne           Wyo.
Community Medical Center                     Lafayette          Colo.
Exempla Good Samaritan                       Lafayette          Colo.
Exempla Lutheran                             Wheat Ridge        Colo.
Exempla St. Joseph                           Denver             Colo.
Ivinson Memorial Hospital                    Laramie            Wyo.
Kalispell Regional Medical Center            Kalispell          Mont.
Kootenai Medical Center                      Couer d'Alene      Idaho
Longmont United Hospital                     Longmont           Colo.
Medical Center of the Rockies                Loveland           Colo.
Memorial Health System of Colorado Springs   Colorado Springs   Colo.
Northern Montana Hospital                    Havre              Mont.
Poudre Valley Hospital                       Fort Collins       Colo.
Regional West Medical Center                 Scottsbluff        Neb.
Rehoboth McKinley                            Gallup             N.M.
San Juan Regional Medical Center             Farmington         N.M.
Sheridan Memorial Hospital                   Sheridan           Wyo.
Sidney Health Center                         Sidney             Mont.
St Luke's Health System                      Boise              Idaho
St. Peter's Hospital                         Saint Peters       Mont.
Wyoming Medical Center                       Casper             Wyo.
Yakima Valley Memorial Hospital              Yakima             Wash.
Yampa Valley Medical Center                  Steamboat Springs  Colo.

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