Skip to main content

Physician Dispensing Can Improve a Medical Practice Bottom Line

June 27, 2017

In-House Pharmacy Improve a Medical PracticeWhen practice revenues are flat-lining or even shrinking under the health care reform changes, the logical steps include reining in expenses and looking for new revenue streams. For many practices that have already trimmed expenses to the bone, opening physician dispensing or in-house pharmacy may be a practical solution for generating new revenues—and providing a genuinely useful service for their patients. 

Recently, more medical practices are doing just that. Cullman Internal Medicine, a 12-physician practice in rural Alabama, added an in-house pharmacy this year and business is booming. The idea originally grew from a desire to simplify things for their large population of Medicare and Medicaid patients, many of whom relied on public transportation to get to the doctor. Now those patients can see their doctor and get their medications in the same visit, saving them the cost of another bus ticket—a definite plus for people on fixed incomes. 

Though they originally stocked a small formulary of the most commonly prescribed medications, the 800-foot pharmacy space now includes basic durable medical equipment like canes, boots, and braces, and they have added some over-the-counter medications, too. The pharmacy also does compounding, the process of adding drugs like steroids or lidocaine to creams that are used to relieve joint pain, for the group’s orthopedic and sports medicine physicians, which has saved the group money and opened up another revenue possibility. 

The case for an Physician Dispensing or In-house Pharmacy

The National Center for Health Statistics says that the average physician sees about 25 patients per day and writes 1.4 prescriptions per visit. If the pharmacy cleared $10 per prescription filled in house, that’s $350 in profit per physician per day. Of course, that’s a simplistic rendering—and pricing and costs will need to be carefully balanced, especially in states that tightly regulate in-house pharmacies like Pennsylvania, California, and New Jersey. But the potential for profit definitely exists. 

Patient safety is another area where in-house dispensaries make a real difference. Studies show that roughly a third of all new prescriptions are never filled—and a significant number of discontinued prescriptions were nevertheless refilled by pharmacies. The Byzantine paperwork and approval requirements needed in worker’s comp cases means that these patients sometimes wait up to a week or more to get the medications they need. A physician-based dispensary, given the close lines of communication between provider and pharmacist, organically solves many of these problems. 

Related Article: How to Improve Staff Performance in a Medical Practice

Finally, the convenience factor cannot be overlooked. When health care becomes a commodity, consumers exercise their free-market rights to choose the providers that give them the best service. In the competition for desirable private-pay patients, office-based pharmacies give your practice a leg up. 

Possible pitfalls for practice-based pharmacies

Government resistance and regulatory requirements pose a threat to some practice-based pharmacies. Although the AMA takes an accepting stance to doctors dispensing medications as long as it “primarily benefits the patients,” state legislatures are less enthusiastic, accusing some practices of a conflict-of-interest and chronic over-charging. Depending on where you live, there may be tighter regulations on physician dispensaries. 

Logistics is another issue, especially for practices where space is a premium. The start-up and ongoing overhead charges are also significant. However, a new industry has sprung up to step into the gap. There are now companies who sell pre-packaged mini-pharmacies, complete with a basic formulary, tracking software, storage facilities, and even customized prescription labels with the practice logo, eliminating a lot of the legwork that goes into opening an in-house pharmacy. 

Staffing and other overhead costs do take a toll on a practice-based pharmacy’s profits. One recent survey suggests that in-house pharmacies only make about 70% of what non-practiced based pharmacies make on their prescription drugs. 

If you’re looking for ways to generate new revenue for your practice, now might be the right time to consider an in-house pharmacy. If you’d like to find ways to maximize revenue with more effective billing practices, contact us today for a free consultation. 


Get the Latest RCM News Delivered

Receive practical tips on medical billing and breaking news on RCM in your inbox.

Get in Touch