Walgreens Looks at Accountable Care Organizations

      The largest drugstore chain in the United States is looking at a completely new business model for community pharmacy.  Their new experiment into healthcare services may serve as a litmus test for community pharmacy.

      So what am I talking about exactly?  According to The Washington Post, Walgreens is experimenting with the idea of creating pharmacy-based Accountable Care Organizations (ACOs).  But whether or not this business model can work for the retail pharmacy giant has yet to be determined. 

      As part of the healthcare law, the government allows healthcare providers to organize into what are called Accountable Care Organizations (ACOs).  ACOs work like a Health Maintenance Organization (HMO) in that providers get paid a set amount of money for each patient treated. 

      The idea behind ACOs is for healthcare providers to band together in the hopes of providing more cost effective quality healthcare.  Hundreds of ACOs have been created since the implementation of the new healthcare law.  But up until now, pharmacies have not been part of these groups. 

       If an ACO can provide healthcare savings to the government, the organization will get a share of those savings.  Medicare will pay providers part of the determined cost savings.  But the cost savings payments are conditioned at least partially on proving that the care provided improves outcomes. 

        So how is Walgreens attempting to join in this ACO trend?  They’ve partnered with a few large medical practices in three states to form ACOs.  They hope to tackle problems like hospital re-admissions and non-compliance.   And if they do, it could mean big money for them. 

       The company hopes that they can use pharmacists to manage patients in a way that will lower the overall average healthcare costs to Medicare.  And a part of the savings will be split between Walgreens and the medical practices they have partnered with to form these ACOs. 

       It’s basically a push by the biggest retail pharmacy chain into a more clinical services business model.  I have no doubt that medication therapy management (MTM) services will be part of the package Walgreens will offer to patients enrolled as part of these ACOs. 

       What I do have doubts about are the logistical details of such an undertaking.  How will Walgreens pharmacists have the time to implement any of these plans?  Will there be any time for pharmacists to do these services?  

       It looks like Walgreens is starting slow with their ACO idea.  They are taking baby steps by only targeting larger medical practices in only a couple states.   But if the plan works, expect a massive expansion of their ACOs. 

       One can’t help but wonder about the details of the business agreement Walgreens signed with these medical practices.  How will any potential ACO revenue be divided between the medical practices and the retail pharmacy giant?  Those numbers were not disclosed but you can bet Walgreens has a big financial interest in this idea succeeding. 

       What is unclear is exactly what the plans will be for improving patient care while still controlling costs.  How does Walgreens expect to lower average patient care expenditures while still providing effective healthcare?

       This ACO reimbursement healthcare model is partially dependent on quality of care.  How those quality measures are calculated could impact the success of this experiment.  It won’t be enough that Walgreens can prove money is saved using their ACOs, they must also demonstrate quality of care. 

       A couple of things stick out in my mind as I read this article.  First, Walgreens thinks this idea is a winner.  They created the concept, recruited the medical practices to participate in the program, and worked to create the ACOs from scratch.  This wasn’t some existing program they joined after the fact. 

       Secondly, could this be the first admission by a large pharmacy chain that the traditional commodity-based distribution retail pharmacy business model is broken?  If Walgreens thought that dispensing prescriptions was their future, would they be going through this kind of effort to move away from traditional dispensing functions? 

        And finally, no great idea will work unless those that are tasked to actually implement the plan have the time to do so.  It doesn’t matter how great these ACOs could be if the pharmacists involved don’t have the means to execute this plan.  As overworked as so many of us are right now, how could this be possible? 

       I’ll be curious to see if a pharmacy-based ACO actually works.  Walgreens has plenty of money to throw at the idea.  But it will take more than money to make this work.  Will they succeed?

The Redheaded Pharmacist

3 Comments to “Walgreens Looks at Accountable Care Organizations”

  1. By Steve, January 15, 2013 @ 9:00 am

    Thanks for sharing this. ASHP make it clear in their policy statement about ACO development that PHARMACIST involvment is imperitive for appropriate development and implementation.
    To me, it is absolutely no surprise that Walgreen is jumping in with their own arrangement. What a better way to ensure that they have a corner on the prescription market than to develop these relationships with hospital conglomorates and then get in the door and evaluate the patients medication profiles. I am sure it is being done with the patient in mind; however, it is also a business model that is looking toward the future.

    I believe this is a call out to all of the small pharmacies out there that are near hospitals. Read the ASHP policy, get some MTM training, and create a relationship with the hospital administrators. This is how you are going to stay in business. The independant pharmacists need to be the ones visiting patients in the hospital, coordinating mediction transition of care issues and medication reconcilliation. We need to be the ones meeting with patients 7 days after discharge, assuring that their medication regimen is being followed appropriately, with little side effect, and appropriate outcome. This is how we will help keep readmssions down, while also securing a place for our pharmacy services in the future!

    As an independant pharmacist who works in an outpatient pharmacy for a community hospital, it would be frustrating to see a big chain pharmacy come in, develop a relationship with the hospital managment, and provide ACO services on a contractual basis.



  2. By Pharmaciststeve, January 16, 2013 @ 9:03 am

    IMO – these ACO’s are going to be a major financial minefield for all parties. Pharmacy as played with capitation since at least the 70’s and I am not aware of any community pharmacy chain/group that has stayed with after the initial contract expired.

    we need to get a handle on what is “quality care” or “quality of life” from the pt’s perspective.. There seems to be a overwhelming focus on “cost savings”.. and quality care is almost a after thought..

    I will give what could be a typical example from a area that I know the most about – pain management – quality of care – from the pt’s perspective …is probably the most critical here… because quality of care can dramatically affect quality of life..

    Presume that a chronic pain pt is stable on Oxycontin 20mg tidq8.. when Obamacare starts and the pt in put into a ACO… Oxycontin is expensive… Oxycodone IR 5mg is not.. the pt is taking 60 mg of Oxycodone a day… so the ACO can save money by switching the pt from the long acting to the IR.

    Now the pt has to take their medication up to 12 times a day instead of TID.. They now awake in pain every few hours during the night and is on a pain roller coaster 24/7… which probably makes the pt’s overall level of pain to increase.

    We have seen what the MBA’s have done to the chain pharmacy work environment… the above example will – on a spread sheet – look like the pt is on equal therapy.. AND .. SAVE MONEY… and anyone who believes that these ACO’s won’t be spreadsheet driven… needs to find another profession to work in…

    Do not be surprised if everyone in the ACO has their bonus predicated on the average $$/pt/yr expended. IMO.. we are going to see the healthcare professional personal financial interest in conflict with the pt’s perceived quality of care and/or quality of life.


  3. By Peon, January 21, 2013 @ 7:23 pm

    Walgreen’s initiative in this area sure does sound like a positive for pharmacists. I just think Walgreens likes to make money, and unlike the other chains, they don’t like doing things for free. And, by looking ahead, they are trying to get into an area where money can be made. It is quite possible that the current chain pharmacy model is headed for some tough times. If so, Walgreens will be far ahead of the game.


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