Phil Melugin: Phoenix is considering entering the LTC business.
Carrie Tennis: LTC profit margins are shrinking.
In the pharmacy business, serving long-term care facilities is getting expensive and complex.
At least it is for Springfield-based Integrity Pharmacy LLC, while other pharmacies are seizing opportunities.
Integrity Pharmacy, a division of Integrity Home Care Inc., suddenly got out of the business segment a year ago because of what CEO Marcus Wilson said was divided interests between the company’s long-term care and in-home care businesses.
At the time of the decision in March 2016, Integrity Pharmacy’s long-term care business represented a third of annual revenue, which reached $20 million-$25 million the two years prior to shutting down the division. In 2014, Integrity Pharmacy topped Springfield Business Journal’s Dynamic Dozen list for fast growth.
In the long-term care pharmacy services model, pharmacies contract with assisted living facilities or skilled nursing care centers to deliver prescriptions to patients in-house. The pharmacy is then reimbursed for the cost from Medicare and Medicaid. The model that Integrity and others followed is known as “post-consumption billing.”
Business began to slow for Integrity Pharmacy, according to Wilson, because reimbursements shrank considerably following unspecified government changes.
“It was fairly significant,” he said.
But that wasn’t the only reason. Wilson said the additional burdens of running long-term care services with the same staff as their in-home business forced the company to choose between the two.
“We had an awesome opportunity in the home care world to make a significant impact for those patients and LTC pharmacy was requiring more time and effort than we were able to provide,” Wilson said. “We had to juggle both LTC and home care pharmacy with the same staff and were not able to devote 100 percent of our attention to either model like we wanted, to do it right.”
Not all area pharmacies agree long-term pharmacy service isn’t worth the effort.
Springfield-based Phoenix Home Care Inc. is considering entering the long-term care pharmacy business as part of a joint venture, said CEO Phil Melugin.
“We look to have a decision by this year,” he said. “To my knowledge, there has not been any law passed [affecting long-term care pharmacy services]. I have absolutely not heard anything that would preclude me from continuing to discuss a potential joint business venture with pharmacies around the state that have been approaching my company.”
Ozark-based Family Pharmacy Inc. has worked in the retail and long-term care pharmacy business for over 40 years, and officials say the company has added two new nursing facilities in Missouri within the last month.
“It is a very expensive market to get into,” Family Pharmacy Operations Director Carrie Tennis said. “But since we’ve been in it for 40 years, we’ve learned the efficiencies and the program. We’ve changed as the industry has changed.”
Acknowledging the long-term care business is more complex and expensive than other segments in pharmacy, Tennis couldn’t identify legislative or regulatory changes that would have made the services unprofitable.
“There have been legislation changes, but how you operate within those is what is important,” Tennis said.
“If you don’t have the expertise in that area, then it’s going to be really hard for you to do that.”
Tennis said the long-term care segment was a significant part of Family Pharmacy’s business, but she declined to disclose how much revenue it generated or by how much profits have decreased in this area.
“It’s definitely profitable, but not as profitable as it once was,” she said.
“And part of that reason is that it takes a lot of overhead to run a long-term care pharmacy.”
In retail pharmacy, she said a dollar in revenue covers just a handful of labor costs. But in the long-term care business, that same dollar must cover hundreds of tasks because there are many more steps and layers to filling prescriptions.
Still, she said the investment can pay off, especially with the increasing number of baby boomers entering long-term care.
At Integrity Pharmacy, Wilson said exiting the long-term care sub-niche of its business has proven wise.
The pharmacy operation serves prescription drugs to over 2,000 of its in-home clients, and that work, he said, made up for the losses in revenue and long-term care clients within 11 months.
“Our numbers have grown right back to where we were at this time last year. That’s a pretty significant growth pattern,” Wilson said, also pointing to a new strategic partnership with Bayada Home Health Care in Moorestown, New Jersey, and other home care providers throughout the country to offer pharmaceutical services to their clients.
“There’s only a handful of pharmacies that do what we do at this time,” Wilson said of Integrity’s in-home business model.
The model includes direct delivery of prescriptions to patient homes, a dedicated call center for assistance, monthly patient checkups and a registered nurse for the initial in-home visit and later as needed to assist with medication management.
Wilson also said Integrity officials currently are negotiating to work with a large insurance company he declined to name.
“Conservatively, we expect to gain over 1,000 patients between the end of March until Dec. 31,” Wilson said.
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