As many independent retail pharmacy owners struggle operationally with continually declining pharmacy reimbursement rates, alternatives are becoming more and more appealing. Between paying employee salaries, rent and utility costs, and stocking appropriate inventory, margins are becoming increasingly unforgiving.
Defining the Retail Pharmacy Business
Retail pharmacies operate like many retail businesses; they are open to the public with often extended and weekend hours, they rely on over-the-counter sales, and more and more offer such ancillary healthcare services, such as flu shots and other immunizations to add to the bottom line.
Key Factors Affecting the Retail Pharmacy Business Model
Competition and declining reimbursements have prompted many privately-owned or independent pharmacies to sell their businesses to large chain competitors. Independent or smaller pharmacies that remain must find new ways to provide patient care and increase income to stay profitable.
These pharmacies are often essential to the local population offering a variety of services not offered by the larger chains, such as delivery, personalized service, and compounding.
While costs have increased, reimbursements are steadily decreasing. Many retail owners need to find alternative ways to keep their doors open. One option is converting to a long term care (LTC) pharmacy. With this change, greater reimbursements and less operating costs lead to a more financially productive model.
What is a Long Term Care Pharmacy?
LTC pharmacies provide medications and other personal healthcare necessities, both prescription and over the counter, to skilled nursing homes, assisted living, and behavioral health facilities. They may also offer other services like flu shots and other vaccinations.
For a LTC pharmacy to be successful, they must incorporate an understanding of what the facility needs. STAT deliveries, after hours calls/questions, etc., must all be considered when setting up a relationship with an LTC facility.
Reimbursements for LTC pharmacies vary depending on the type of facility serviced. There are also buying groups that can assist with purchasing power for smaller LTC pharmacies. These companies also help with other aspects of LTC, such as:
- Monitoring unpaid claims
- Checking DAW codes
- Looking for outdated NDCs processed
- Assisting with verification of check payment received from insurance companies
Challenges in Switching from Retail to LTC Pharmacy Services
- Pharmacy owners face some challenges when switching from a retail to a long-term care pharmacy. Just some of these include:
- Financing a new pharmacy with separate inventory
- Having enough patients/facilities to fund the business
- New policies and procedures for things like complying with governmental regulations for Medicare and Medicaid
- Completion of licensing and state requirements
- Purchase of a pharmacy information system designed to accommodate the specialized needs of LTC pharmacies
- High delivery costs in LTC pharmacy
- Special packaging requires expensive machinery and automation
- Skilled nursing facilities require 24x7x365 operations
Retail pharmacy regulations are relatively straightforward and similar, no matter the site. Long-term care pharmacy regulations may vary depending on the type of facility. For example, a pharmacy may service an assisted living facility and have pre-pack guidelines or other offerings versus skilled nursing services patients that require a higher level of care.
LTC pharmacies have additional—and in some cases, expensive—equipment, setup, storage, and monitoring requirements relative to the care facilities they serve. Retail pharmacies considering the switch must research and may need to procure:
- Remote-controlled dispensing machines
- Medical carts, IV poles, pumps and other hardware
- Medications (including vaccines and OTCs)
- IV medications and feeding preps
- Expensive and low-use medications
- A variety of over the counter offerings that meet the needs of customers
The LTC pharmacy is responsible for the following processes and therefore needs a strong information system that can handle this wide variety of functions:
- Order entry and admissions, including daily census
- Triage orders and sort based on department and priority
- New and refill prescriptions for all residents/patients
- Pharmacy billing, including intake registration, insurance eligibility, prior authorization, census maintenance, payment posting, and Medicaid pending status checks
- End-of-month processing
Why Many Retail Pharmacy Owners Make the Switch
The reality of traditional retail pharmacy is that lower reimbursements are causing financial concerns for owners. Many pharmacies are moving to different models, such as offering additional clinical services or even considering moving to long-term care.
Pharmacy owners can choose to open a LTC pharmacy without any facilities and grow to get business, but most take existing pharmacy business and move current patients to their LTC pharmacy. Reimbursements in LTC pharmacy are higher, stronger, and provide more profit per prescription.
The LTC pharmacy model may take some research and initial investment, but it can be a much more profitable model than the traditional retail pharmacy model.
Contact us at Infinx to explore the operations support offered to LTC pharmacies through our advanced business services.