In the quest for higher margins and better care outcomes, some senior living operators are taking a greater role in organizing and providing pharmacy services.
While establishing a standalone business or entering into a new JV partnership to provide pharmacy services is operationally intensive, doing so can unlock a new revenue stream, not to mention give operators more control over various areas of care delivery and care coordination.
Senior living companies with pharmacy operations have said the service line also helps them coordinate care with residents and adjust care plans over coordinating with a third-party pharmacist or physician’s office. Operators make such programs work using scale across multiple communities.
While these services can take multiple years to generate a positive margin, senior living providers including Frontier Senior Living, Lifespark, Presbyterian Homes and Services, Trilogy Health Services and UPMC Senior Communities are forging ahead with pharmacy programs.
Controlling pharmacy interest ‘directly impacts’ operations, revenue
For some senior living operators, controlling pharmacy services is a means of ensuring a good quality of care.
Louisville, Kentucky-based Trilogy Health Services has owned and operated its own pharmacy services for over two decades, dispensing 1.2 million prescriptions monthly through Synchrony Pharmacy. Ownership of the company’s pharmacy program contributes cost savings and ancillary revenue to the company’s bottom line, according to Trilogy Health Services President and CFO David Davis.
“The primary reason Trilogy chose to establish its own pharmacy was to gain control over the evolving service needs of our residents,” Davis said. “We can walk in the same shoes as other operators, enabling us to tailor pharmacy services to meet and exceed expectations of our caregivers and residents.”
Service issues, from quality to care coordination, can be “addressed immediately” using that approach, rather than waiting on an outside third-party pharmacy partner to respond to an issue as they arise, Davis added. By having more control over the process, Trilogy care teams are able to coordinate “timely” home medication delivery following a resident’s discharge from a hospital to reduce the risk of rehospitalization or other adverse health outcomes, Davis said.
The company also is able to better manage logistics of delivery and packaging, while maintaining regulatory compliance and improving customer service, Davis said. Trilogy’s pharmacy business meaningfully contributes to the operator’s bottom line, including from direct profits and reduced patient-per-day costs.
“Bringing traditionally outsourced services in-house enables us to capture revenue and preserve margins that would otherwise go to third-party vendors,” Davis said. “Owning key services like pharmacy helps maintain high customer satisfaction, which directly impacts occupancy, demand and ultimately pricing.”
In 2022, Presbyterian Homes and Services partnered with Radius Living Rx, a geriatrics pharmacy. Today, the nonprofit senior living provider co-owns the pharmacy with a private business investor, according to PHS Senior Vice President Mike Bingham.
The shift toward greater control on pharmacy services came after the organization’s previous partner “felt more like a vendor relationship,” rather than a true partnership, Bingham said. The PHS journey on pharmacy is part of the organization’s launch of “family of care services” to improve service delivery and reduce care fragmentation across its communities.
PHS offers pharmacy services at its 52 communities in the Twin Cities, Minnesota metropolitan area and in the Milwaukee, Wisconsin, area.
“We have a fair amount of influence over things like service standards and strategic direction but we wanted a business partner as opposed to being 100% owner because pharmacy is so scale dependent,” Bingham said.
Having a controlling interest in a pharmacy partnership also allows operators to make sure they’re receiving the discounts, rebates and other benefits associated with the world of pharmaceuticals and medication management, Bingham noted. It also gives pharmacists more input in care conferences with PHS clinical teams, Bingham noted.
With its pharmacy partnership, PHS was able to break even on the balance sheet with the effort just 18 months after rolling the service out to 50 communities. In the future, PHS is planning its “next journey” in further scaling its pharmacy partnership, Bingham said.
While the margins are slim and require stout clinical operations, Bingham said small revenue gains each month result in “those numbers adding up” and realize savings and more revenue in various areas of the clinical balance sheet.
“This is a way for us to continue to invest in the big part of our ministry and we feel good about making it viable and bringing in ancillary services is part of the overall economic model that works for us,” Bingham said.
Pharmacy growth ‘in startup mode’ as scale remains a barrier
In the last few years, many senior living operators have pivoted towards value-based care arrangements in an effort to see financial compensation for the value and health outcomes that they create through personalized care plans and lifestyle management.
In 2021, St. Louis Park, Minnesota-based Lifespark acquired senior living provider Tealwood Senior Living, which had a pharmacy program in place. This inspired Lifespark to look into a geriatric clinical pharmacy, according to Lifespark COO Matt Kinne. That led the senior living provider n 2023 to form a JV partnership with Consonus Healthcare, the pharmacy services arm of senior housing and care provider Marquis Companies.
Kinne noted that pharmacies require scale to function properly. Lifespark’s JV partnership was still in the financial red, but growing, generating around $15 million since its launch 18 months ago.
“We’re still in startup mode and have been growing fast,” Kinne said. “Long-term, I am really bullish on it and I think it’s going to be really important, and as much as it is about generating another ancillary revenue stream, it’s about the totality of the clinical model.”
But it takes time and scale to establish a margin within a pharmacy program, Bingham cautioned, noting that any well-functioning long-term care pharmacy “should turn a margin” between 5% and 10%.
“Most primary care docs still hunt and peck when they want to try new medicine,” Bingham said. “But where we’re heading, residents expect from us a level of sophistication and care.”
Kinne sees an opportunity ahead to standardize its geriatric clinical pharmacy consultations with new residents across the company’s senior living communities. Having access to a pharmacy practice is just “one part” in new ancillary revenue streams operators must have in their toolbox, Kinne said.
“If you drive better outcomes, you keep people out of the hospital, keep them safe at home, reduce falls and reduce adverse drug events,” Kinne said. “You improve quality of life, extend length of stay and increase occupancy. You also reduce days lost to service revenue because people aren’t in the hospital.”
In the time since launching its pharmacy effort, Lifespark has realized a five to seven percentage point increase in occupancy, which Kinne directly attributed to improved care.
Since 2001, Pittsburgh, Pennsylvania-based UPMC Senior Communities created Rx Partners, a wholly-owned long-term care pharmacy to serve the organization’s senior living communities across Pennsylvania. In the time the program was created, the effort has improved care delivery and helped more older adults age in place while generating a new revenue stream for the organization, according to UPMC Pharmacy Service Line Vice President Rebecca Taylor.
Today, the Rx Partners pharmacy allows UPMC to drive ancillary revenue and bring pharmacy programs to “traditionally underserved” rural markets, Taylor said, including medication management and adherence programs for independent living residents.
“Additional services or amenities like immunization programs, medication management and compliance services can offer a potential alternative,” Taylor said of how pharmacy programs can help increase ancillary revenue.
Pharmacy services ‘increasingly popular’
Organizations that spoke with SHN all agreed that the trend of senior living operators branching out with new pharmacy partnerships or wholly-owned programs will continue, due to the rising acuity demands of today’s senior living population and the need to beef up clinical models to better serve residents across the continuum.
“Clinical integration, cost control and reduced medication errors make this approach increasingly popular,” said Frontier Senior Living CEO Greg Roderick. “We expect this model to continue gaining momentum in the industry.”
Through the Frontier Advantage Network, Frontier has partnerships with Consonus Pharmacy, Infinity Pharmacy and Guardian Pharmacy. That has resulted in improved care for residents and efficiency in clinical teams while improving the bottom line, Roderick said.
In the future, Kinne said operators must adapt to a “more complex” environment in which senior living providers exist, aiming to provide traditional health care services, blended with wellness and lifestyle offerings.
“If the industry doesn’t focus on real clinical integration, driving real outcomes, I don’t think people are going to be in business long,” Kinne said. “We want to take care of the whole person and drive great health outcomes for people.”
As acuity dominates care, Bingham said operators must seek greater control of their models, which can start through pharmacy partnerships or ownership.
“We truly believe because of the scale at which pharmacy is now, it is a major driver of frail older adult chronic care delivery, why wouldn’t we want to have more control of that,” Bingham said.
