Despite ‘Disappointing’ Performance of Top Player Omnicare, LTC Pharmacies See Success Ahead

While some long-term care pharmacies are struggling to stay afloat, others are thriving despite headwinds such as reduced reimbursements and coding challenges in the skilled nursing sector.

For many long-term care pharmacy players, the way forward rests on new information systems and collaboration with nursing homes — which, if pulled off successfully, could lead to continued growth in this competitive and complex landscape.

The year kicked off with downbeat news for pharmacies specializing in serving nursing homes and other long-term care sites. CVS Health (NYSE: CVS) CEO Larry Merlo last month described the health care giant’s experience with subsidiary Omnicare as “disappointing” at the J.P. Morgan Healthcare Conference in San Francisco.

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CVS acquired Omnicare for $12.9 billion in 2015, and a few years later, the Woonsocket, R.I. based pharmacy heavyweight took a major hit with a $2.2 billion impairment charge related to its long-term health care business. In particular, CVS focused on bankruptcies and reimbursement pressures among Omnicare’s customer base in explaining the significant financial hit.

But other leaders in the industry say it’s not impossible to find success.

For instance, Dave Lewis, COO of Oregon-based Consonus Healthcare, warned that if a long-term care pharmacy is too prescriptive, with a focus on the cheapest drug prices, it’s going to miss the boat by failing to understand the opportunities in the nursing home sector.

“There’s a lot more going on in this industry,” Lewis said.

Consonus is a pharmacy, rehab, data analytics, and consulting company in the long-term care space, providing services in over 300 facilities nationwide. The firm, run by the Milwaukee, Ore.-based parent company Marquis Companies, partners with nursing homes, which amount to about 25% of their business. Like many pharmacies that remain focused on long-haul growth, management keeps skilled nursing as a piece of their pie, but not all of it — one current industry trend is to diversify care in several settings across the health care continuum. 

“Pharmacies that are 100% exclusive on skilled nursing are seeking to diversify into the senior living/assisted living segment, for sure,” Neil Marshall, president of Consonus, said.

Commodity vs. high-level

Commoditization is one strategy to pursue as a long-term care pharmacy, where services and relationships with nursing homes are scaled back in favor of a focus on inexpensive medications, Marshall said. The better alternative, in Marshall’s view, is the high-service path, “where you layer clinical and support services that actually impact their operation positively. And then that comes with pricing commensurate with that level of service.”

Medications range from 6% to 9% of overall provider cost structure, which is “not the right place to pinch pennies — because it’s also an area that has direct impact on all the measurables that they’re are held accountable to,” Marshall said.

For instance, medication errors may increase readmissions to the hospital, he warned.

Consonus provides a data analytics group that deeply monitors industry trends. When residents are brought in from a setting with a pharmacy with a lower level of service, “it’s a pretty heavy lift at the front end…[when] some of those medication strategies were left out unattended,” Marshall said.

A Consonus pharmacist performs a medication regimen, with a review of the scope of a patient’s current and historical medication plan, within 24 hours from the point of admission — including a full medication reconciliation and a record review in order to set an appropriate medication strategy.

Past pharmacy models involved checking medications only every 30 days, which led to lost opportunities to improve clinical care. Setting a strategy for appropriate medications for each patient is associated with “a lot of costs,” Marshall said.

“We operate about 20 hours a day of labor on that cycle, meaning from three in the morning until well into the evening,” he said.

The benefits of proper pharmacy management aren’t just clinical. Consonus offers skilled pharmacists that train nursing home partners on coding and reimbursement opportunities, and also facilitated updating services for a smooth transition to the new Patient-Driven Payment Model (PDPM).

The pharmacy captures $2 to $2.50 a day in additional revenue based on Nursing and Non-Therapy Ancillary (NTA) points, according to Consonus. In other words, if a length of stay is 20 days, the increased reimbursement for that patient will be a total of $40, Marshall pointed out.

“If you add that up over the patient population, it’ becomes a significant number,” Marshall said.

Discharge/admission challenges

Review of a patient’s medication regimen is slightly delayed upon admission, and can take 24 hours, even with today’s electronic records.

Ideally, this review process would happen earlier so that nursing leaders can develop a medication strategy before the patient arrives and the plan would be in place immediately, Marshall said.

“And the barrier to that today is technology, the quality of data, and the method in which is delivered from the acute setting to the skilled nursing setting,” Marshall said.

Data sent from the hospital to the nursing home after admission can be confusing and may come from varying platforms — and is “often in unstructured format,” Marshall said.

“So we’ve got to sift through pages and pages of documentation to find, for example, a missing medication that actually wasn’t added to the patient profile,” Marshall said.

Smaller may not be better

A certain amount of scale is needed to deliver a higher quality of care, but it doesn’t necessarily have to take the form of a large national dispensing group. Independent providers, for instance, are partnering up in order to provide a higher level of pharmacy services.

And with a push for shorter nursing home stays from Medicare Advantage and other new payment models, the quantity dispensed from long-term care pharmacies is becoming smaller and smaller — with some requests for a supply of only two or three days.

But the average medication timeline remains 14 days in a skilled nursing facility, and insurance companies pose some of the greatest challenges for players on both sides of the equation — as many of them have not made the shift to shorter dispense timelines.

“So when the patient changes settings, timing can be problematic for us to manage, though we have a whole staff of people that manage billing insurance companies,” Marshall said, adding that there’s an imbalance between how insurance companies operate versus the needs of a nursing home operator.

Oftentimes, the nursing home will rely on an advocate biller from a high- touch pharmacy, or they may have to eat the unnecessary 30-day cost.

“You need to be really good at it. It can be very difficult for small pharmacies,” Marshall said. “It’s another value-added service layer and a burden you’re taking … off the care staff in the community.”

Turning to tech

Some pharmacies have turned to technological solutions to the supply and demand problem.

Remedi SeniorCare recently opened its 12th pharmacy in Chicago this month, adding to their locations in Tampa, Florida, Detroit, and Houston. The Baltimore-based firm has seen 30% annual growth in the skilled nursing space, according to CEO Jeffrey Stamps, despite an industry-wide push to reduce the use of common medications such as antipsychotics and antibiotics.

Remedi’s strategy includes a focus on daily deliveries to residents with the help of robotics, allowing for a “significant reduction in waste, which ultimately reduces the cost,” Stamps said.

The pharmacy company positions these services as an advantage over other long-term care pharmacies, which have “in some cases spent millions of dollars on technology that only dispenses a 30-day supply. They can’t adapt…or if they do, it’s very difficult for them to do so operationally,” Stamps said.

Remedi was built to focus on medicine conservation. The traditional long-term care pharmacy marketplace was rooted in the 1960s, when pharmacies began providing services to nursing homes, and pills were converted from prescription bottles to punch or bubble cards — which still is today’s predominant system, Stamps explained. As the average length of stay declines, the insurance companies are still paying for a 30-day supply when those residents are discharged much earlier, and the medication is wasted.

Remedi’s model rests on only billing for medication used, not for what is dispensed by the pharmacy, and the company bills retrospectively to avoid waste.

“The amount of waste with traditional systems is increasing. And it’s something that’s paid for by the taxpayers,” Stamps said.

Remedi services about 90,000 beds between skilled nursing facilities and assisted living communities, with about the former accounting for about 65% — though the exact percentage can change based on the ongoing fluidity of the mergers-and-acquisitions market. Most partnerships consist of operators within a larger health continuum, not standalone facilities.

Because Remedi doesn’t do much business west of the Mississippi, the company isn’t seeing a lot of bankruptcies, Stamps said.

“But we’re dealing with only 5% of nursing homes nationally. We’re more of a niche business than an aggregator or somebody that’s looking to grow to be the size of some of the bigger organizations,” he said.

Nursing homes pay out differing pharmacy rates based on the complexity of the residents, a factor that has taken on greater importance amid the shift to PDPM. Residents with IVs might have different medications from those in need of cardiac rehabilitation or non-traditional therapies, for example.

Although costs vary, “most of our customers [nursing homes] feel PDPM has only added a modest tailwind and more of a positive than a negative…[increasing] the bottom line,” Stamps said.

PharMerica diversifies while boosting SNF scope

PharMerica, a long-term care pharmacy headquartered in Louisville, Ky., serves more than 3,100 skilled nursing facilities to capture about 18% of the long-term care business in the country; its five pharmacies in Hawaii help the firm claim 83% of the LTC market share in the Aloha State.

PharMerica is broadening its reach to partner with operators that serve people with intellectual and developmental disabilities, while also increasing concentration in the nursing home market 1% to 2% year-over-year.

You have to think about the seniors and that the US population of 75 years and older is going to go up by 50% from 2020 to 2030. So skilled nursing facilities are going to exist and need to exist, and they need to have a pharmacy that can take care of them, and that’s who we are,” T.J. Griffin, senior vice president of PharMerica’s LTC Pharmacy.

PDPM has sowed positive changes with certain kinds of therapy reimbursements, which has also had a healthy impact on PharMerica’s partnerships with nursing homes.

“You need a full-service pharmacy that can really partner with you…to help you through those challenges. regulatory changes, reimbursement changes, clinical changes, and PDPM,” Griffin said.

PharMerica has also consistently adds more education as the clinical turnover increases.

“We’ve put on upwards of 10 clinical symposiums across the country every year and this year, it’s going to be less focused on disease management than it is on on these different payment models, including the regulatory side and workforce [pressures],” Griffin said.

PharMerica predominantly serves average-sized nursing homes consisting of about 100 to 120 beds, although the pharmacy also works with a few smaller entities in rural areas that have passed on the business to generations of family members.

“Now there’s not a lot of folks that run just one at home; they usually have two or three,” Griffin said.

In preparation for PDPM, PharMerica expected more complex patients to be admitted to facilities across the country, and developed educational materials within their consulting group, such as policy and procedures around TPN, a form of a feeding tube.

“So we’ve changed and upped our game, from an education and consulting point of view to really help those facilities, including some of these smaller facilities that didn’t take those types of acute patients before,” Stephen Creasey, director of clinical services at PharMerica, said. “Now these rural pharmacies need the education and help to take those kind of patients because they’re a financially more favorable patient for them.”

The pharmacy experts are also seeing more facilities adding dialysis units, which require education and a more specialized pharmacy with unique medications to go along with new reimbursement rates. PharMerica is also working with facilities to help nursing homes develop plans for chronic kidney disease protocols.

“We are waiting for prescribers and providers to ask us, but we have all this information,” Creasey said.

Editor’s Note: An earlier version of this story incorrectly identified the parent company of Consonus; it is Marquis Companies, based in Milwaukie, Ore., and not the similarly named Marquis Health Services of New Jersey. SNN regrets the error.

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