Decrease hospital readmissions, increase pharmacy revenue

pharmacist with senior man

How retail pharmacies can reduce hospital readmissions and the benefits of doing so

In brief:

  • Hospitals face significant penalties for high rates of readmission.
  • Butterfield’s Pharmacy sees an opportunity to better serve discharged patients and keep them from being readmitted.
  • In partnership with long-term care facilities, Butterfield’s has a program that is working.
  • As hospitals see value from reducing readmissions, Butterfield’s expects to boost its revenues.

Focusing on a big problem

David Wright, owner of Butterfield’s Pharmacy and Medical Supplies in Florida, saw a big problem — and a big opportunity.

The problem relates to reduced reimbursement for hospitals. Under Medicare’s Hospital Readmissions Reduction Program, hospitals face a financial penalty if their 30-day readmission rates are higher than expected. (For each hospital, the government calculated expected readmissions, given national rates and the health of each hospital’s patients.)1

In the current year, nearly 2,600 hospitals are expected to lose $528 million in revenue because of excessive readmissions.2 Hospitals are looking for ways to decrease their readmissions and avoid being subject to readmission penalties.

Common patient flow

Instead of going directly home after being discharged from a hospital, about 43% of Medicare patients go to a post-acute care or rehab facility.3 This includes many patients who have heart attacks, heart failure, pneumonia, chronic lung disease, hip and knee replacements, and coronary artery bypass graft surgery. Often after patients go to a post-acute care facility they have to be readmitted to the hospital.

The opportunity — with benefits for all

Wright and another pharmacist saw an opportunity for retail pharmacies to partner with post-acute care facilities to improve the discharge process from rehab facilities, resulting in fewer patients needing to be readmitted to the hospital.

This idea has benefits for all parties:

  • Patients: Patients will be more educated, adherent and healthier.
  • Hospitals: Interventions with targeted patients will reduce readmissions and prevent hospitals from incurring readmission penalties.
  • Post-acute care facilities: By delivering high-quality care and showing a positive impact on hospital readmission rates, facilities hope to remain part of narrow networks.
  • Retail pharmacies: By providing interventions that reduce hospital readmissions, pharmacies can boost revenues.

Butterfield’s partnership and intervention

Wright formed a partnership with a provider that manages rehabilitation facilities to create a closed-door retail pharmacy serving patients after they are discharged from these facilities. The closed-door pharmacy currently works with two long-term care facilities where patients typically stay 10 to 20 days. This pharmacy has one pharmacist and three technicians, and uses a delivery service.

The process follows these steps:

  1. Within three to five days of admission, the rehab facility provides Butterfield’s a list of candidates who have at least two disease states and five medications. These are the best candidates to focus on to prevent hospital readmissions.
  2. A technician visits the facility daily to meet with patients and explain what the pharmacy offers, which includes compliance packaging, drug delivery and follow-up calls at no charge to provide education, answer questions and check on patients’ status.
  3. The pharmacy:
    • Interviews patients pre-discharge from the rehab facility to discover any medication issues. The pharmacy also handles prior authorization for many drugs.
    • Provides medication for patients to take home at discharge.
    • Calls patients the day after discharge to ensure they understand how to use medications such as inhalers or how to open compliance packaging. The technician also asks whether the patient has scheduled a follow-up visit with a provider.
    • Contacts providers to coordinate appointments with refill dates.
    • Shares information with hospitals and physicians through patient workflow software. Physicians can see when patients’ prescriptions are filled and the pharmacy receives an alert if a patient returns to the hospital.
    • Calls at least twice in the first month to ensure the patient is on track.


Thus far Butterfield’s closed-door retail pharmacy has helped cut hospital readmission rates in the area of about 25% to 5%. Since each readmission costs payers about $15,000, preventing 10 per month would be a savings of $150,000 monthly, or over $1 million per year.

From Butterfield’s perspective, about half of the patients who began receiving services from Butterfield’s have been retained and continue to use the pharmacy after 90 days.

Longer term, Wright is optimistic that Butterfield’s will be paid for the value provided, either as a per-member per-month fee, or as some form of a bonus when meeting quality measures.


By focusing on solving big problems, retail pharmacies can demonstrate value, improve the healthcare system, and generate new customers and revenue streams.

This article is part of our series covering pharmacies driving performance and profits through innovative practices. Read our previous case studies “Create new revenue streams” and “Thrive with a new business model.”


1 “Medicare’s Readmission Penalties Hit New High,” Jordan Rau, Kaiser Health News, Aug. 2, 2016. LINK
2 Ibid.
3 “Acute Care and PAC: A Friendship Long Overdue,” Steve Carr and Jeff Jacomowitz, McKnight’s, May 17, 2017. LINK


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