Revenue Optimization and New Pharmacy Business · PDF fileRevenue Optimization and New Pharmacy Business Models ... a Practice Model Change at an Academic Medical Center ... Revenue

Fifteenth Annual ASHP Conference for Leaders in Health-System Pharmacy

Revenue Optimization and New Pharmacy Business Models

ANTHONY ZAPPA, PHARM.D., M.B.A. STEVE ROUGH, M.S., B.S.PHARM.

SCOTT KNOER, PHARM.D., M.S.


Anthony Zappa, Pharm.D., M.B.A. CIO and Director, Specialty/Infusion Operations Fairview Pharmacy Services LLC Minneapolis, Minnesota

Anthony Zappa, Pharm.D., M.B.A., is currently CIO and Director of Specialty/Infusion Operations with Fairview Pharmacy Services, LLC ("FPS"). He has over twenty years experience in pharmacy benefit management (PBM) administration, hospital pharmacy, and retail pharmacy operations. He is responsible for all outpatient pharmacy systems and dispensing technologies as well as customer service and dispensing operations of FPS' mail order, specialty, home infusion and community infusion pharmacies. Dr. Zappa earned his Bachelor of Science and Doctor of Pharmacy degrees from the College of Pharmacy, University of Minnesota and Master of Business Administration from the University of St. Thomas in Minneapolis. Prior to joining FPS, Dr. Zappa spent five years with Chronimed/BioScrip as Executive Vice President of Operations overseeing 32 retail stores, a high-volume specialty pharmacy and clinical programs. His experience includes eight years in the PBM industry, with three years overseas where he was in charge of international business development and South African PBM operations for SmithKline Beecham. Dr. Zappa's clinical experience includes over five years of hospital pharmacy practice.

1


Steve Rough, M.S., B.S.Pharm. Director of Pharmacy University of Wisconsin Hospital and Clinics Clinical Assistant Professor University of Wisconsin-Madison School of Pharmacy Madison, Wisconsin Steve Rough, M.S., B.S.Pharm., is Director of Pharmacy at the University of Wisconsin Hospital and Clinics, and Clinical Assistant Professor at the UW-Madison School of Pharmacy. He is also Director of the two year Health-System Pharmacy Administration Residency Training and Masters Program at UW Hospital. Mr. Rough received his Bachelor of Science in Pharmacy and Master of Science in Health-System Pharmacy Administration from the School of Pharmacy at the University of Wisconsin, Madison, Wisconsin. He also completed the residency training program in Pharmacy Practice and Health-System Pharmacy Administration at the University of Wisconsin Hospital and Clinics. He has coordinated and implemented progressive pharmacy services in virtually all practice settings. He has contributed six textbook chapters and numerous other papers in the pharmacy literature related to pharmacy administration and leadership, medication safety, the application of automation and technology, operational benchmarking and a variety of other management-related topics. He has been an invited lecturer for local, state and national audiences. Mr. Rough recently completed a four-year elected term as Treasurer of the Pharmacy Society of Wisconsin, and he currently serves as a member of the UHC Pharmacy Council Executive Committee. He has served as Chair for the ASHP Section of Pharmacy Practice Managers in 2008, is a member of the ASHP House of Delegates, and has served as Chair for the ASHP Council on Pharmacy Management. In 2003, Mr. Rough received both the Wisconsin Pharmacist of the Year award and an ASHP Best Practices Award for the paper he submitted describing the impact of point-of-care bar code medication scanning technology on medication error reduction. In 2006, he accepted the inaugural ASHP Foundation Pharmacy Residency Program Excellence Award on behalf of the University of Wisconsin Hospital and Clinics administrative residency and masters program. Mr. Rough is also co-creator of the ASHP Managers’ Boot Camp Workshop and ASHP State Affiliate Student Leadership Development Workshop. In July of 2009, he was awarded the UW Hospital and Clinics Presidential Leadership Award provided annually to a department director for exceptional sustained leadership across the organization and in the community. His practice and research interests include pharmacy administrative practice, medication-use safety, work redesign, pharmacy technology, financial management, and implementation of progressive pharmacy services.

2


Scott J. Knoer, Pharm.D., M.S. Director of Pharmacy University of Minnesota Medical Center Minneapolis, Minnesota Scott J. Knoer, Pharm.D., M.S., is Director of Pharmacy at the University of Minnesota Medical Center (UMMC), in Minneapolis, Minnesota. He is responsible for planning, implementing, and managing pharmacy services at this three-hospital academic medical center. He is Program Director of the two year Health-System Pharmacy Administration Residency and Masters Program at UMMC. He precepts student clerkships in pharmacy leadership and administration. He is a Clinical Assistant Professor at the University of Minnesota College of Pharmacy and the Graduate Program in Social and Administrative Pharmacy where he teaches the Institutional Pharmacy and Hospital Pharmacy Classes, respectively. Dr. Knoer received his Bachelor of Arts in Psychology from Creighton University and his Doctor of Pharmacy from the University of Nebraska. He completed a two year administrative residency and received a Master of Science in Hospital Pharmacy from the University of Kansas. Dr. Knoer is the Chair of the American Society of Health-System Pharmacists (ASHP) Practice Managers Section where he previously served as Director-at-Large. He is a member of the ASHP House of Delegates, and he has served as Chair of the Section Advisory Group on Leadership Development and as a member of ASHP’s Commission on Affiliate Relations. He serves as Chair of the University Health-System Consortium (UHC) Process Improvement and Compliance Council. Dr. Knoer has also served in a variety of local and state affiliate roles in Minnesota and Texas. Dr. Knoer has published articles related to leadership development, pharmacy management, process improvement and benchmarking. His latest publication entitled, “Lessons Learned from a Practice Model Change at an Academic Medical Center,” is scheduled to appear in the November issue of the American Journal of Health-System Pharmacy. This article is a result of Dr. Knoer’s experience with organizational change management related to practice model innovation. Dr. Knoer frequently lectures on a various topics including pharmacy operations and automation, process improvement, leadership development, change management, and disaster preparedness. He is the co-creator of the ASHP Managers’ Boot Camp, a program designed to teach leadership and management skills to pharmacists.

3


ANTHONY ZAPPA, PHARM. D., M.B.A. STEVE ROUGH, M.S., B.S.PHARM. SCOTT KNOER, PHARM.D., M.S. Revenue Optimization and New Pharmacy Business Models ABSTRACT Pharmacy leaders will need to begin looking beyond the traditional business models for their organizations to remain successful. Having the skills to provide entrepreneurial solutions will help continually improve the value the pharmacy brings to an organization. In this workshop, you will develop new pharmacy business strategies for continued success in this changing health care environment. LEARNING OBJECTIVES After participating in this application-based educational activity, participants should be able to

Analyze general trends occurring in hospitals and health systems that impact revenue.

Inventory business opportunities that could be evaluated by your organization.

Determine the revenue cycles of services utilizing medications and/or requiring medication management services.

4

The Changing Landscape of Health Care:Cultivating Leadership in Health‐System Pharmacy


Revenue Optimization and New Pharmacy Business

Models

Tony Zappa, Pharm.D., M.B.A., Fairview Pharmacy Services

Steve Rough, M.S., B.S.Pharm, University of Wisconsin Hospitals and Clinics

Scott Knoer, Pharm.D., M.S., University of Minnesota Medical Center

Introductions

• Steve Rough and the University of Wisconsin

• Scott Knoer and the University of Minnesota

• Tony Zappa and Fairview Pharmacy Services, LLC

Agenda• Introductions

• Where can you add value to your system?

– Revenue opportunities and models

• Health care reform: How will accountable careHealth care reform: How will accountable care organizations (ACOs) and case payments change things?

• What do you need to make it happen?

– Infrastructure and processes

• Practical assignment and presentation

5

What systems are represented?

1. <100 beds

2. 101‐300 beds

3. >300 beds

1 2 3

0% 0%0%


1. For‐profit

2. Non‐profit

1 2

0%0%


1. Academic

2. Non‐academic

1 2

0%0%

6


1. Urban

2. Rural

1 2

0%0%

Do You Have Ambulatory Pharmacy Services?

1. Do not have ambulatory pharmacy services

2 Have ambulatory

1 2

0%0%

2. Have ambulatory pharmacy services

Health System Modelsand Ambulatory Servicesand Ambulatory Services

25 minutes

7

UW Health Integrated Pharmacy Care Network

Automation and robotic technologyClinical and translational research

Education and trainingElectronic health record/information technology systems

Entrepreneurial business expansionFinancial management (utilization, contracting)

Medication use policy programN l h i

Community (Retail) Pharmacy

Services Network

i h /

Management of CorporatePharmacy Network

Specialty Care/Mail Service

Pharmacy

Nuclear pharmacy serviceOperations and medication use systems management

Patient care services/practice advancementPersonnel management

Purchasing contract network (Novation/UHC)Quality and safety

Regulatory complianceRevenue cycle optimizationSupply chain management

UW Health Acute and Ambulatory Care Core Pharmacy Services

(UW Hospital, UWMF, DFM)

Unity Pharmacy Program/Prescription Benefit

Management Services

Rural Hospital Management/Purchasing Contracts

and Consulting Services

Home Health CarePharmacy Services

Hospice Care and Other Pharmacy

Service Agreements

UW Health Department of Pharmacy

1. Receives support from and interacts closely with the CCKM in establishment of evidence-based medication use policy initiatives2. Reports to Brad Ludwig for operational responsibilities; reports to Steve Rough for overall departmental integration

UWHC Pharmacy DepartmentInternal Activities

• Inpatient pharmacist services• Clinic pharmacist services and bleeding disorders

– 16 clinics including anticoagulation (4.5 FTE)• 13 ambulatory (retail) pharmacies (67 FTE)

– Specialty and mail service pharmacy program• Vendor Liaison Office (2 FTE)• Clinical and Translational Research Center (13 FTE)• Drug Policy Program (8 FTE)• Informatics team – Epic (10.5 FTE) and Enterprise (2 FTE)• Indigent medication assistance program (2 FTE)• Medication prior authorization program (2 FTE)• Discharge medication specialists (1 FTE)• Nuclear pharmacy service (3 FTE)• ED and infusion center pharmacy services (2.5 and 1 FTE)

8

UWHC Pharmacy DepartmentExternal Activities

• Unity Pharmacy Program (5 FTE)• Pharmacy management and consulting programs

– Divine Savior Healthcare (DSH)– HospiceCare Incorporated– Wisconsin Dialysis (WDI) and UW Health Kidney Clinic– Several rural hospital affiliate purchasing contractsp p g– Badger Prairie – After hours medication order review programs

• UW School of Pharmacy– 310 students on rotation within UW Health locations– Master in Health‐System Pharmacy Administration program– All pharmacists are clinical instructors– Extensive teaching involvement with school of pharmacy– Funds 7.7 FTE pharmacist salaries

Pharmacy Department FY11 Expense, Revenue & Statistics

All expenses are in $millions

Inpatient

Clinics + Bleeding Disorders Program Retail Oncology Other Total

Revenues $131.7 $63.8 $72.2 $57.9 $0 $325.6

Drug expense $22 0 $22 6 $40 9 $23 2 $0 $108 7

• 3,342 inpatient medication orders per day • 14,521 inpatient medication doses administered per day (1 dose every 6 seconds)• 99.9% unit dose dispensing• 1,853 retail prescriptions per day

Drug expense $22.0 $22.6 $40.9 $23.2 $0 $108.7

% of total drug expense 20.2% 20.8% 37.6% 21.3% 0%

Personnel expense $12.4 $2.2 $5.8 $1.2 $5.7 $27.3

Total expense $35.1 $25.3 $47.4 $24.4 $5.6 $137.8

Margin $96.6 $38.5 $24.8 $33.5 ‐$5.6 $187.8

FTEs 132.9 24.0 66.6 12.7 65.8 302.0

UW Health Pharmacy Department Challenges and Opportunities

• Shrinking retail pharmacy margins • Ambulatory (retail and clinic administered) medication

reimbursement complexities• Dramatically rising drug costs for small percent of our total

patient population – BMT Hemophilia TransplantBMT, Hemophilia, Transplant

• Pharmacist workforce cyclical hiring pattern and scheduling expectations

• Electronic Health Record (Epic)– All implementations heavily impact pharmacy– Staff and manager time commitment much greater than expected– Achieving theoretical return via improved decision support

• Rising number of pharmacy‐related external quality P4P measures

9

University of Minnesota: System Stats• University of Minnesota Medical Center and 6 community hospitals

• 22,000+ employees

• 2,500 aligned physicians

• 44 primary care clinics

• 55 specialty clinics

A ill b i i l di h h b i i• Ancillary businesses, including home care, rehab, senior services

2009 data

• $2.8 billion total revenue

• 4.4 million outpatient encounters

• 80,314 inpatients served

• $425.1 million community contributions

• Total assets of $2.4 billion

Fairview Pharmacy Services Business Model

HomeInfusion

CommunityInfusion

ClearScriptPBM

Consulting32 Retail

Pharmacies

FPS, LLC

SpecialtyPharmacy

Mail OrderPharmacyCompounding

PharmacyMTM

AdvancedTherapies

Clinic

30 Anticoag.Clinics

Fairview Pharmacy Services Revenue

HomeInfusion

CommunityInfusion

ClearScriptPBM

Consulting32 Retail

Pharmacies

$122 MM$40 MM

$24 MM

$1 MM

$55 MM

FPS, LLC$335 MM

SpecialtyPharmacy

Mail OrderPharmacyCompounding

PharmacyMTM

AdvancedTherapies

Clinic

30 Anticoag.Clinics

$70 MM

$16 MM

$5 MM$1 MM

$?

$?

10

FPS Organizational Structure

Retail Pharmacy

Mail Order & Specialty Pharmacy

Home Infusion

PBM

Inpatient Directors

FPS President

CIO

CFOHR

Sales and Marketing

Additional Positions:- Compliance- Clinical Services

Discussion: What OtherDiscussion: What Other Models are People Using?

10 minutes

Why Ambulatory Services?Why Ambulatory Services?System Objectives

20 minutes

11

Health Systems’ Objectives

Capture, Retain andGrow Revenue

Leverage AssetsGain Positive

Returns on CapitalInvestments

Access All Productsand Therapies

Optimize ClinicalPerformance

Threats and OpportunitiesThreats1. Insurers, PBMs, Specialty Pharmacies

carving out treatments2. Insurers shifting clinic meds to lower‐cost

options3. Low Rx capture rates4. Payors looking for part of the 340B pie

Capture, Retain andGrow Revenue

Opportunities1. Make pharmacy a revenue‐generating

business line2. Incent staff to drive business internally3. Institute policy against brown‐bagging4. Coordinate payor contracts (medical and

pharmacy)

Risks and Opportunities

Threats1. Focus on cost reductions usually leads to

staff cuts2. Hospitals and clinics operating near

capacity, limiting expansion

Leverage Assets

p y, g p

Opportunities1. Refocus cost controls to revenue growth2. Centralize and automate3. Put pharmacy staff closer to the care4. Consider niche offerings in high‐value

conditions

Gain PositiveReturns on Capital

Investments

12

Risks and Opportunities

Threats1. More specialty products defined “limited

distribution”• Small populations/markets• REMS (risk evaluation and mitigation

Access All Productsand Therapies

strategy)Opportunities1. Pharma: early and often2. Leverage clinical trials and research

programs3. Partner with local “competitors”

Risks and OpportunitiesThreats

1. ACO and case‐rate payment strategies will force focus on outcomes

2. Payors’ short‐term focusOptimize Clinical

Performance

Opportunities

1. ACO and case‐rate payment strategies will force focus on outcomes

2. Partner with other systems on best practices

3. Use ancillary professionals more upstream

4. Leverage the medical record

5. Start talking with health plan sponsors directly

Revenue Cycle Management

• Managing the cycle is crucial to financial performance

• Starts with contracting– Network access

– Reimbursement rates

The Revenue

Credentialing

RegistrationScheduling Check-in

Patient Encounter, Prescribing and Documentation

Coding /

Contracting

Reimbursement rates

– Prior authorization requirements

– Audit rights and take‐back provisions

– Documentation and retention requirements

Revenue Cycle

Coding / Charge Review

Charge Entry

Claim Production

Payment or Denial Posting (3rd party A/R) Insurance

Follow-up

Self-pay collection (patient A/R)

13

Revenue Cycle Management• Getting patient benefit plans correct is “linchpin”

– Benefit investigations

– Patient set‐up verification

• Charge masters must be i d l l

The Revenue

Credentialing



Coding /

Contracting

reviewed regularly– Too easy to underprice claims

• Claims denials and audits need to be proactively and aggressively managed– Fairview: had $3.2 million in

payback requests in 2009

– Paid back $42,000

Revenue Cycle


Charge Entry

Claim Production


Follow-up


Revenue Cycle Management• Patient A/R needs to be carefully managed

– Don’t do it unless absolutely necessary

– Keep statements to a bare minimum

The Revenue

Credentialing



Coding /

Contracting

minimum

– Be assertive on collections

• 340B programs require higher level of scrutiny– Medicaid exceptions

– Patient qualifications

– Clinic/Provider qualifications

– Drug inclusions

Revenue Cycle


Charge Entry

Claim Production


Follow-up


Revenue Cycle Management

• Several points in the cycle represent marketing opportunities

• Requirements:The Revenue

Credentialing



Coding / Ch

Contracting

– Good system access

– Clinic staff cooperation

– Marketing collateral

• Value messages

– Good follow‐through by pharmacy staff

Cycle Charge Review

Charge Entry

Claim Production


Follow-up


14

Discussion: What Are YourDiscussion: What Are Your Systems’ Objectives?

10 minutes

Health Care Reform:Health Care Reform:Barrier or Benefit?

20 minutes

Have Your Systems Discussed ACOs?

1. Yes

2. No

3. Don’t know

1 2 3

0% 0%0%

15

ACOs: Game‐changer?

• Accountable Care Organization (ACO) included in Section 3022 of Patient Protection and Affordable Care Act (“PPACA”)

– Shared Savings Program for Medicare enrollees

• ACOs meeting quality performance standards are eligible for payments (“shared savings”)

• Secretary of HHS must establish the program by 1/12/12

• Separate ACO demonstration project for pediatrics to be established by 1/1/12

Who Can Be in an ACO?

• “ACO Professionals” ‐ physicians, physician assistants (PAs), nurse practitioners (NPs), clinical nurse specialists in group practice settings

• Networks of individual ACO‐Ps

• Partnerships of joint ventures (JVs) between hospitals and ACO‐Ps

• Hospitals employing ACO‐Ps

• Others as the HHS Secretary determines is appropriateIn other words, just about everyone but allied professionals

ACO Requirements1. Accountable for cost, quality and overall care of Medicare FFS (fee

for service) beneficiaries assigned to it

2. Three‐year agreement

3. Legal structure to receive and distribute payments

4. Sufficient number of primary care ACO‐Ps

5. Sufficient number of necessary ACO‐Ps

6. Leadership and management structure including clinical and administrative systems

7. Defined processes to:– Promote evidence‐based care

– Report on cost and quality measures

– Coordinate care

8. Demonstrate it meets patient‐centeredness criteria

16

Financial Impact on ACOs

• Additional payments from Centers for Medicare & Medicaid Services (CMS) if average per‐capita expenditures are X% of a benchmark

– Will use three years of per‐beneficiary expenditures to set y p y pbenchmark

– In addition to standard Part A and Part B payments

• Potential abuse will be monitored (avoidance of high‐risk patients) and sanctions may be applied

• Preference given to ACOs participating in similar arrangements with other payors

ACOs: Threats and Opportunities• Threats

– Network exclusion if not included in an ACO?

– Lower payments if not in an ACO?

– Increasing quality and cost benchmarks?

– Savings potential erodes as performance improves?

– Spill‐over into the commercial market?

• Opportunities

– Focus on outcomes and total cost of care

– Preferential network inclusion when in an ACO

– Additional payments, at least in the short term

– Spill‐over into the commercial market

– Include clinical pharmacist on ambulatory primary care team

ACOs’ Impact on Outpatient Services

• While PPACA’s ACO language is focused on Medicare, commercial payors already exploring options

• While PPACA’s ACO language is only for hospital and clinic treatments (Parts A and B), commercial payors are talking about total cost of careabout total cost of careSince drugs are 20% of overall spend…

• Since specialty is 20% of outpatient prescriptions…

• Since home infusion acuity is increasing…

• Since long‐term care acuity is increasing…

• Since outcomes rely on good patient interactions…

17

Opportunity to Improve Access

• Residents in critical shortage areas are 1.7 times more likely to experience preventable hospitalization

• Pharmacists are a highly‐trained, readily g y , yavailable workforce capable of rapidly expanding patient access to health care

• Pharmacist involvement in primary care has resulted in high satisfaction ratings from patients and providers alike

Opportunity to Improve Quality

• Studies show that optimum medication use is demonstrated in only 4‐21% of patients8

• Quality benchmarks are nationally‐reported

• Greater pharmacist involvement leads to:Greater pharmacist involvement leads to:

– Fewer hospitalizations9

– Lower health care costs10

– Better adherence to evidence‐based consensus guidelines11

– Better outcomes9‐11,12

Opportunity to Improve Cost Savings and Reimbursement

• Pharmacists have demonstrated benefit‐cost ratios of 2.89:113

• Pay‐for‐performance and Accountable Care Organizations tie reimbursement toOrganizations tie reimbursement to achievement of recognized outcomes measures (higher quality = higher payout)

– Pharmacists have repeatedly demonstrated improved outcomes, thus improving reimbursement under these systems

18

Increasing Support for Pharmacist Involvement

• The Wall Street Journal notes that pharmacists are a useful and necessary resource in the primary care teams14

• The American Medical Association recognizes• The American Medical Association recognizes the important collaborative role pharmacists can fill15

Key Benefits of Pharmacist Involvement

• Maximize efficiency for primary care providers• UW Health will share in savings and receive bonus payments

from providing higher‐quality, lower‐cost care to Medicare beneficiariesImproved patient access to comprehensive primary care services

• Improved patient satisfaction with the quality and breadth of health services provided

• More effective management of complex, evidence‐based medication regimens for common chronic conditions

• Optimized quality and clinical process outcomes for high‐performance recognition and external quality reporting

• Cost‐effective treatment including lower utilization rates for ambulatory sensitive conditions

How To Involve Pharmacists

• Monitor medication‐related pay‐for‐performance measures and implement quality improvement initiatives

• Pharmacist‐led prescription renewal service

• Monitoring/dosing high‐risk and/or high‐cost medications

• Pharmacist‐led polypharmacy clinic to identify opportunitiesPharmacist led polypharmacy clinic to identify opportunities for more efficient use

• Optimize patient compliance to improve outcomes

• Manage procedures for conflict of interest

• Provide chronic disease state monitoring services

• Many more…

19

Possible Staffing Models

1. As an integral member of the decentral patient‐centered medical home team (microsystem)

2. As a provider of medication management services through a pharmacist‐run medication therapy management clinic

3. As a provider of centralized telehealth services

4. As a hybrid model incorporating aspects of the above three models.

Funding Opportunities for Pharmacist Involvement

• Maximize outcomes for pay‐for‐performance measures, enhancing reimbursement

• Incident‐to and facility fee billing

• Negotiate payment with managed care organizations

• Reduce total health care costs and resource utilization without compromising quality

• Improve throughput (efficiency) of primary care clinics

• Obtain grant funding for demonstration projects

ACO Pharmacist References

1. Office of Shortage Designation, Health Resources and Services Administration, U.S. Department of Health & Human Services. Shortage Designation. http://bhpr.hrsa.gov/shortage/index.htm. Accessed June 7, 2010.

2. Bodenheimer T, Pham HH. Primary care: current problems and proposed solutions. Health Aff (Milwood). 2010;29(5):799‐805.

3. Patient Protection and Affordable Care Act. http://www.aafp.org/online/en/home/policy/ federal/hcrleg2010.html. 2010. Accessed June 7, 2010.

4. Hoven AD. Doctor‐pharmacist teamwork can apply to many settings. American Medical News. http://www.ama‐assn.org/amednews/2010/08/16/edca0816.htm. August 16, 2010. Accessed August 23, 2010.

5. Wisconsin Council on Medical Education and Workforce. Who will care for our patients? http://www.wha.org/pubArchive/special_reports/2008PhysicianReport.pdf. Accessed June 16, 2010.

6. Parchman ML and Culler SD. Preventable hospitalizations in primary care shortage areas. Arch Fam Med. 1999;8:487‐491.

7. Collins C, Kramer A, O’Day ME, Low MB. Evaluation of patient and provider satisfaction with a pharmacist‐managed lipid clinic in a Veterans Affairs medical center. Am J Health‐Syst Pharm. 2006;63:1723‐1727.

8. Garfield S, Barber N, Walley, P, Willson A, Eliasson L. Quality of medication use in primary care‐mapping the problem, working to a solution: a systematic review of the literature. BMC Med. 2009;7:50.

20

ACO Pharmacist References

9. Royal S, Smeaton L, Avery AJ, Hurwitz B, Sheikh A. Interventions in primary care to reduce medication related adverse events and hospital admissions: systematic review and meta‐analysis. Qual Saf Health Care. 2006;15:23‐31.

10. Yanchick JK. Implementation of a drug therapy monitoring clinic in a primary‐care setting. Am J Health‐Syst Pharm. 2000;57(S4):S30‐S34.

11. Altavela JL, Jones MK, Ritter M. A prospective trial of a clinical pharmacy intervention in a primary care practice in a capitated payment system. J Manag Care Pharm. 2008;14(9):831‐843.

12. Smith M, Bates DW, Bodenheimer T, Cleary PD. Why pharmacists belong in the medical home. Health12. Smith M, Bates DW, Bodenheimer T, Cleary PD. Why pharmacists belong in the medical home. Health Aff (Milwood). 2010;29(5):906‐913.

13. Perez A, Doloresco F, Hoffman JM, et al. Economic evaluations of clinical pharmacy services: 2001‐2005. Pharmacotherapy. 2008:28(11):285e‐323e.

14. Vanderveen RP. How to care for 30 million more patients. Wall Street Journal. July 19, 2010.

15. Hoven AD. Doctor‐pharmacist teamwork can apply to many settings. American Medical News. http://www.ama‐assn.org/amednews/2010/08/16/edca0816.htm. August 16, 2010. Accessed August 23, 2010.

Discussion: How are Your Systems Responding to Health Care Reform?Responding to Health Care Reform?

10 minutes

Break TimeBreak Time

20 minutes

21

Ambulatory Services:Success Factors and Evaluation Tools

10 minutes

What are the Real Revenue Opportunities?

• Retail Pharmacy

– Maximize on‐site Rx capture

– Maximize employee capture

• Specialty Pharmacy

• Home Infusion

• PBM

• Clinical Trialscapture

– Expand into community

• Mail Order

– Maximize patient capture

– Maximize employee capture

• Long‐term Care and Assisted Living

• Consulting Services

• Indigent Drug Program Management

Retail Pharmacy Goals

• Maximize patient care and safety

‐ Screening programs and immunizations

‐ Medication therapy management

‐ Compliance management

• Growth and revenue enhancement

• Outstanding customer service

• Branding

22

Retail Pharmacy

• Model: full‐service or professional?

• Factors affecting financial performance

– Rx/patient

– Revenue per RXp

– Capture rate from system

– Staffing levels

– Labor costs

– Systems and technology (Rx software, POS, IVR, robotics, etc)

– Opportunity/capacity for community expansion

Mail Order Pharmacy

• Model: Employee‐only or open‐access?


– Rx/patient

– Revenue per RX


– Staffing levels

– Labor costs

– Automation

Specialty Pharmacy


– Number of specialists in the system

– Payor mix

– Rx/patient

– Revenue per RX


– Staffing levels and labor costs

– Delivery logistics

23

Home Infusion


– Number of patient encounters

– Payor mix

– Revenue per patient


– Staffing levels and labor costs

– Delivery logistics

PBM (pharmacy benefit management)

• Big Question: Is your system self‐insured?

• Second Big Question: Are you getting the best deal from your existing PBM?

F t ff ti fi i l f• Factors affecting financial performance

– Plan size

– Build or buy?

– Ability to expand into the open market

– Pass‐through versus traditional model

Clinical Trials


– Level of research being done

– System and provider interest

P ti t l (i it t l )– Patient volume (i.e., recruitment volume)

– Relationships with Pharma

– Ability to manage distribution and data

24

Examples of Retail Optimization Strategies

• Employee Rx program (retail and mail order)

– Copay incentives to use a system pharmacy

– Low‐price generic program

• Centralized order processing

• Web‐based refill site– With selective product

marketing

• E‐Prescribing– OTC discounts

– Payroll deduction for convenience

– Own‐use opportunity?

• Indigent drug program (340B eligible?)

• Central fill (automation)

E Prescribing

• Enterprise‐wide software

• Marketing and capture programs in clinics

• Prior authorization coordinators focused on LCD documentation for Medicare

UW Health AmbulatoryAmbulatory

Pharmacy Reform

6 Strategies to Improve Ambulatory Pharmacy Financial Performance

1. Restructure operations and hold ourselves accountable to new operational efficiency performance parameters (15 Rx/RPh/hr) with recent technology investments

2. Reduce drug expense through better purchasing3. Improve reimbursement/collections (reduce bad

debt/charity care)• Medicare provider number issue will be resolved• Transfer charity care to a new account outside of retail pharmacies• More strict charging privilege guidelines• Accounts receivable system improvement to reduce bad debt• Daily monitoring of negative margin reports

4. Close 2 pharmacies 6/30/10 ‐ 70% retention5. Strengthen marketing efforts to increase volumes6. Evaluate performance on the “whole” to incentivize sites to

feed business to more efficient central mail/fill operations

25

$3.4 million margin improvement

Initiative Impact Comment

closing 2 pharmacies $211,000 These templates will be zeroed out when opened.

Personnel savings $889,326

•Restructure operations to new performance standards

• 5.65 pharmacist FTE reduction (8 FTE off schedule to create supervisor).

• 5.7 technician FTE reduction.

Drug expense savings 1,133,000 •Dedicated ambulatory pharmacy buyer

Transfer drug inventory $280,000 One‐time savings

Charity care reduction $101,852

• Requesting an account to charge Fiscal‐approved charges at CSC (mostly discharge prescriptions to facilitate inpatient discharge).

•Pharmacy management of AR instead of hospital billing staff.

Bad debt reduction $844,436 •Medicare provider number issue since 2002.

Total financial gain 3,459,614 Did not include volume increase

Operational Efficiency Improvement Initiatives

• Central Order Processing and Load Balancing

• Central Fill

• RAMP (autofill) – Refill Assistance Monitoring ( ) gProgram

Load Balancing

• All Rx’s must be put through reception at all sites

• No prescriptions should be left on the counter at the end of each day

26

Central Fill

• Generate reports for mail out, delivery etc and will work with each site to MOVE and have medications processed out of a central location and delivered to the originating site g g

• Shift staffing accordingly to ParataMax sites/Central fill locations

RAMP

• Have patients sign up for the RAMP program

• Rx’s should be sent to the central fill location

• Will need a mechanism to call and remind patients to pick up Rx’s in will callpatients to pick up Rx’s in will call

Drug Expense Savings

• Brand to generic migrations: $813,677– Prograf to tacrolimus: $298,150– Cellcept to mycophenolate: $291,427– Neoral to cyclosporine: $224,100

• Monitor the negative margin report on a daily basisMonitor the negative margin report on a daily basis• Run the slow movers report on a monthly basis• Assure compliance with best practice purchasing at all sites

27

Financials – Strategic Marketing Initiatives

Providers and Staff:• Develop stronger relationships with clinic providers, promote the quality

difference our pharmacies offer• Cashless Convenience‐ payroll deduction for over the counter (OTCs) and

prescription co‐pays• Employee OTC discount, 20%

L i 30 d l f $9 99 d 90 d l f

70

• Low cost generic program ‐ 30 day supply for $9.99 and 90 day supply for $11.99 for identified drugs

Patients:• Low cost generic program ‐ 30 day supply for $9.99 and 90 day supply for

$11.99 for identified drugs• Interactive web response feature for online refills (future enhancement)• Pilot – Express discharge concept. Requires processing discharge Rx’s on the

nursing units, process TBD

Marketing BrochureAdmission Packets and Clinics

Marketing Brochure– Mail Order

28

Customer Satisfaction Measurement

Customer Service

Standards

Customer Service Standards

• 2 major things impacting the patient experience– People

• Get the right people on the bus

• Be quick to fire, slow to hire

– Processes• Efficient, streamlined systems

• Clear expectations (standards) you routinely measure yourself against

• Then let feedback/data drive your decisions/actions

29

Customer Service Standards

• 5 things customers (patients) want from people– Respect (do things with them, not for/to them)– Confidentiality– Listening– Kindness– Compassion

• Good things to measure– The above 5 things– Wait time– Telephone response time– Pharmacist availability– Communication

Specialty Pharmacy Clinic Pharmacist Strategy

• Improved annual revenues by $626,000 due to growth hormone prior authorization service in AFCH endocrine clinic ($82,000 margin)

• 0.2 FTE new pulmonary clinic pharmacist documents 3 avoided CF admissions per month ($320,000 savings per year to UWHC, additional business in specialty pharmacy)

• 90‐day retail contracts

Reducing Write‐offs

• Ambulatory medication cost‐avoidance and revenue optimization programs (3.6 FTE)

– Medication Assistance Program (MAP)• Started 2003• Serves underinsured and uninsured patient populations• 2 FTE pharmacy technicians

– Medication Prior Authorization Coordinators (MPAC)• Infusion Center started 3/09, 1 FTE• Oncology Clinic started 8/09, 1 FTE

– Pharmacy staffed without additional FTE

– FY10 total program cost savings/avoidance to UWHC = $4.6 million

30

Reducing Write‐offs

• MAP Program– Maximize patient participation in manufacturer‐sponsored

“take home” drug programs– Maximize hospital participation in manufacturer‐sponsored

“replacement drug” programs– Work closely with providers and clinic staff

• MPAC Program– Assure proper medical record documentation for Medicare

patients prescribed high‐cost clinic drug (with local and national coverage determination criteria) to maximize hospital reimbursement and avoid write‐offs

• Facilitate completion of Advance Beneficiary Notice (ABN) forms when therapy falls outside Medicare covered indication

– Pre‐certification of high‐cost clinic administered medications for patients with private insurance

– Enroll patients in medication co‐pay assistance programs

MAP Savings FY08 – FY10

754

585

436

400

500

600

700

800

pa

tie

nts

/mo

nth

$2.00

$2.50

$3.00

$3.50

lio

ns)

60%

28.9%

34.2%

$0.96

$1.85

$2.96

0

100

200

300

400

FY08 FY09 FY10F

Av

e #

of

MA

P

$0.00

$0.50

$1.00

$1.50

(mil

l

Total value to UWHC Ave # of MAP patients/month

92.7%

FY10 MPAC Estimated Annual Value

• Value determined based on detailed intervention documentation (8 patients per day)

• Salary plus fringe = $106,000 in FY10 • We are just at the tip of the iceberg as more private plans are

requiring prior‐authorization per guidelines similar to Medicare

FY10

Maximize hospital reimbursement and avoid write‐offs for high‐cost clinic medications for Medicare patients

$1,300,000

Pre‐certification of high‐cost clinic administered medications for private insurance patients

$230,000

Enroll patients in medication co‐pay assistance programs $133,000

Total Documented Savings in FY10 $1,663,000

31

Revenue Maximization Threats

• Revenue leakage due to missing or miscoded data in chargemaster

• Purchasing drugs that cost more than reimbursementreimbursement

• Procedural breakdowns that block reimbursement (coding, ABNs, etc)

• Keeping up with change to CMS regulations

• Labor intensive workflows

Discussion: Are Capital DollarsDiscussion: Are Capital Dollars Available in Your Systems?

10 minutes

Building the Business Case:gPro forma Models

20 minutes

32

Health‐system Ambulatory Pharmacy Business Case and ProForma Exercise

• Retail Proforma

• Specialty Proforma

• Home Infusion ProformaHome Infusion Proforma

Pro Forma: Major Sections

• Revenue: Gross and Net• Cost of Goods Sold

• Expenses– Labor

Gross Margin

– Labor– Supplies– Utilities and Infrastructure– Purchased Services and Allocations

• Interest and Taxes• Depreciations

Operating Income

Net Income

Small Group Exercise:pBuild and Present a Pro Forma

Build: 20 minutes

Present: 30 minutes

33

Case Study

• Retail Proforma

• Specialty Proforma

– Start with Prevalence model

Additional References

• Pharmacy reimbursement: A guide for the reluctant pharmacist. Jarrett A. ASHP website. http://www.ashp.org/s_ashp/docs/files/SPPM_Pharmacy_Reimbursement.pdf(access 24 Sept 2010).

• The ABCs of ACOs. Bass, Berry and Simms website: http://www.bassberry.com/files/Publication/f55dbab0‐b844‐4a1f‐bf0a‐0e34ebab8d7d/Presentation/PublicationAttachment/a98eb254‐ce4f‐48f3‐924b‐/ / /0e91896128f7/HealthReformImpact‐ABCs.pdf (accessed 29 April 2010).

• Susan Dentzer, Editor‐in‐Chief, Health Affairs. Presentation to ASHP 2010 Summer Meeting. http://www.ashp.org/DocLibrary/SM2010/SM10‐Dentzer‐Slides.aspx(accessed 24 Sept 2010).

• Zubiago S. A linchpin of health care reform: accountable health care organizations. Nixon Peobody website. http://web20.nixonpeabody.com/healthcare/sitepages/A%20linchpin%20of%20health%20care%20reform%20accountable%20health%20care%20organizations.aspx(accessed 24 Sept 2010).



Revenue Optimization and New Pharmacy Business

Models

CE Session Code for this workshop:

_________

34


SELF-ASSESSMENT QUESTIONS 1. Which of the following, while still important, is not a key high level health-system growth

objective listed in this presentation for developing a successful ambulatory pharmacy program? a. Capture and retain revenue. b. Leverage assets. c. Reduce overtime. d. Optimize clinical performance.

2. Which of the following is not a requirement for ACOs (accountable care organizations) as

defined in the Patient Protection and Affordable Care Act (PPACA)? a. Sufficient number of primary care providers. b. Level-1 trauma center. c. Defined process to promote evidence-based care. d. Patient-centeredness criteria.

3. Capture rate from clinics and hospitals is an important factor when considering an

ambulatory pharmacy start-up? a. True. b. False.

4. Specialty pharmacy limited distribution networks are a threat to the financial performance of

the specialty pharmacy business model. a. True. b. False.

ANSWERS:

1. c 2. b 3. a 4. a

35


REFERENCES 1. Bodenheimer T, Pham HH. Primary care: current problems and proposed solutions. Health

Aff (Milwood). 2010; 29(5):799-805.

2. Collins C, Kramer A, O’Day ME, Low MB. Evaluation of patient and provider satisfaction with a pharmacist-managed lipid clinic in a Veterans Affairs medical center. Am J Health-Syst Pharm. 2006; 63:1723-27.

3. Garfield S, Barber N, Walley et al. Quality of medication use in primary care-mapping the problem, working to a solution: a systematic review of the literature. BMC Med. 2009; 7:50.

4. Hoven AD. Doctor-pharmacist teamwork can apply to many settings. American Medical News. http://www.ama-assn.org/amednews/2010/08/16/edca0816.htm. (accessed 2010 Aug 23).

5. Office of Shortage Designation, Health Resources and Services Administration, U.S. Department of Health & Human Services. Shortage designation. http://bhpr.hrsa.gov/shortage/index.htm. (accessed 2010 Jun 7).

6. Parchman ML and Culler SD. Preventable hospitalizations in primary care shortage areas. Arch Fam Med. 1999; 8:487-91.

7. Patient Protection and Affordable Care Act. http://www.aafp.org/online/en/home/policy/ federal/hcrleg2010.html. 2010. (accessed 2010 Jun 7).

8. Wisconsin Council on Medical Education and Workforce. Who will care for our patients? http://www.wha.org/pubArchive/special_reports/2008PhysicianReport.pdf. (accessed 2010 Jun 16).

ADDITIONAL ONLINE RESOURCES 1. Pharmacy reimbursement: A guide for the reluctant pharmacist. Jarrett A. ASHP website.

http://www.ashp.org/s_ashp/docs/files/SPPM_Pharmacy_Reimbursement.pdf (accessed 2010 Sept 24).

2. The ABCs of ACOs. Bass, Berry and Simms website: http://www.bassberry.com/files/Publication/f55dbab0-b844-4a1f-bf0a-0e34ebab8d7d/Presentation/PublicationAttachment/a98eb254-ce4f-48f3-924b-0e91896128f7/HealthReformImpact-ABCs.pdf (accessed 2010 Apr 29).

3. Susan Dentzer, Editor-in-Chief, Health Affairs. Presentation to ASHP 2010 Summer Meeting. http://www.ashp.org/DocLibrary/SM2010/SM10-Dentzer-Slides.aspx (accessed 2010 Sept 24).

36


4. Zubiago S. A linchpin of health care reform: accountable health care organizations. Nixon

Peobody website. http://web20.nixonpeabody.com/healthcare/sitepages/A%20linchpin%20of%20health%20care%20reform%20accountable%20health%20care%20organizations.aspx (accessed 2010 Sept 24).

37

9/1

0/2

010

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

Sto

re s

ize (

sq

ft)

Ho

urs

Op

era

tin

g d

ays p

er

year

2011

Year

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Rev

en

ues

Pre

scribers

in c

linic

Patients

per

Day

per

Pre

scriber

Rx p

er

Patient

Clin

ic C

aptu

re R

ate

(%

)

Targ

et R

x p

er

day

Rx f

rom

clin

ic0

00

00

Additio

nal R

x n

eeded p

er

day

00

00

0

Rx U

nits

Num

ber

of

Clin

ic R

Xs

00

00

0

Com

munity

RX

s0

00

00

T

ota

l R

X U

nits

00

00

0

OT

C U

nits

OT

Cs p

er

Rx

Tota

l O

TC

s0

00

00

Charg

e p

er

Unit

%

Annual P

rice Incr.

Avera

ge R

x p

rice

$0.0

0$0.0

0$0.0

0$0.0

0

%

Annual P

rice Incr.

- O

TC

Avera

ge O

TC

price

$0.0

0$0.0

0$0.0

0$0.0

0

Gro

ss R

evenues

RX

s-

$

-$

-$

-$

-$

OT

C-

$

-$

-$

-$

-$

T

ota

l-

$

-$

-$

-$

-$

RX

Dis

counts

% o

f G

ross R

evenues

Dis

count A

mount

-$

-$

-$

-$

-$

Medic

ation T

hera

py M

anagem

ent

Inte

rventions p

er

Rx

Ret

ail P

rofo

rma

38

9/1

0/2

010

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

Sto

re s

ize (

sq

ft)

Ho

urs

Op

era

tin

g d

ays p

er

year

2011

Year

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Tota

l In

terv

entions

-

-

-

-

-

Charg

e p

er

Inte

rvention

Tota

l M

TM

Revenue

-$

-$

-$

-$

-$

Net

Rev

en

ue

-$

-$

-$

-$

-$

Co

sts

Sala

ries a

nd B

enefits

Pharm

acis

t M

anager

FT

E

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

Pharm

acis

t

FT

E

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

RP

h R

x/F

TE

/day

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Technic

ian

FT

E

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

Rx/F

TE

/day

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Cle

rk

FT

E

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

Rx/F

TE

/day

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Tota

l S

ala

ries

Manager

-$

-$

-$

-$

-$

Pharm

acis

t-

$

-$

-$

-$

-$

Technic

ian

-$

-$

-$

-$

-$

Cle

rk-

$

-$

-$

-$

-$

Ret

ail P

rofo

rma

39

9/1

0/2

010

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

Sto

re s

ize (

sq

ft)

Ho

urs

Op

era

tin

g d

ays p

er

year

2011

Year

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

T

ota

l-

$

-$

-$

-$

-$

Benefits

% o

f S

ala

ries

Tota

l B

enefits

-$

-$

-$

-$

-$

Offic

e S

upplie

s

% o

f N

et R

evenue

Tota

l O

ffic

e S

upplie

s-

$

-$

-$

-$

-$

Pharm

acutical S

upplie

s

% o

f R

X N

et R

evenue

Rx C

OG

S-

$

-$

-$

-$

-$

Gro

ss M

arg

in

Tota

l G

ross M

arg

in-

$

-$

-$

-$

-$

OT

C S

upplie

s

% o

f O

TC

Net R

evenue

OT

C C

OG

S-

$

-$

-$

-$

-$

Gro

ss M

arg

in

Tota

l G

ross M

arg

in-

$

-$

-$

-$

-$

Bld

g O

pera

ting E

xp

Square

Feet

00

00

0B

ase R

ent/sq f

t

Base R

ent

-$

-$

-$

-$

-$

Opera

ting E

xpense/s

q f

t

Opera

ting E

xpenses

-$

-$

-$

-$

-$

Tota

l R

ent (B

ase+

Expenses)

-$

-$

-$

-$

-$

Utilit

ies

Tele

phone

$0

$0

$0

$0

Annual In

cre

ase

Main

tenance

Cost/S

quare

Foot

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase

Ret

ail P

rofo

rma

40

9/1

0/2

010

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

Sto

re s

ize (

sq

ft)

Ho

urs

Op

era

tin

g d

ays p

er

year

2011

Year

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Tota

l M

ain

tenance

-$

-$

-$

-$

-$

Insura

nce

Cost

-$

-$

-$

-$

Annual In

cre

ase

Bad D

ebt

% o

f N

et R

evenue

Tota

l B

ad D

ebt

-$

-$

-$

-$

-$

Depre

cia

tion

Fix

ture

s (

Mill

work

, F

urn

)

Life (

month

s)

Month

ly D

epre

#D

IV/0

!

# m

ths 1

st yr

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Com

pute

r/P

OS

/Fax/P

hones

Life (

month

s)

Month

ly D

epre

#D

IV/0

!

# m

ths 1

st yr

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Auto

mation

Life (

month

s)

Month

ly D

epre

#D

IV/0

!

# m

ths 1

st yr

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Leasehold

Im

pro

vem

ents

Life (

month

s)

Month

ly D

epre

#D

IV/0

!

# m

ths 1

st yr

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Tota

l D

epre

cia

tion

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Ret

ail P

rofo

rma

41

Ne

wc

o P

ha

rma

cy,

Inc

.

Ne

w s

ite

#50

2011

Ye

ar

0Y

ear

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Re

ve

nu

es

RX

Re

ve

nu

e-

$

-

$

-

$

-

$

-

$

Dis

co

un

ts0

00

00

-$

-$

-$

-$

-$

MT

M R

eve

nu

e-

$

-

$

-

$

-

$

-

$

OT

C R

eve

nu

e0

00

00

To

tal

Ne

t R

eve

nu

e-

$

-

$

-

$

-

$

-

$

RX

Su

pp

lies

-$

-$

-$

-$

-$

OT

C S

upp

lies

-$

-$

-$

-$

-$

G

ros

s M

arg

in-

$

-

$

-

$

-

$

-

$

#D

IV/0

!#

DIV

/0!

#D

IV/0

!#

DIV

/0!

#D

IV/0

!

Op

era

tin

g E

xp

en

ses

Sa

lari

es

-$

-$

-$

-$

-$

Be

ne

fits

-$

-$

-$

-$

-$

Lic

ense

s$0

$0

$0

$0

Re

fere

nce

Bo

oks

Su

pp

l/C

om

pute

r/P

ostg

-$

-$

-$

-$

-$

Re

nt

Ba

se

-$

-$

-$

-$

-$

Re

nt

Op

era

tin

g E

xp

-$

-$

-$

-$

-$

Te

leph

on

e

Se

curi

ty

Ma

inte

na

nce

-$

-$

-$

-$

-$

De

pre

cia

tio

n#

DIV

/0!

#D

IV/0

!#

DIV

/0!

#D

IV/0

!#

DIV

/0!

Ba

d D

ebt

-$

-$

-$

-$

-$

Ma

rke

tin

g

Oth

er

(in

cl in

s)

0.6

5%

-$

-$

-$

-$

-$

To

tal O

pera

tin

g E

xp

en

ses

#D

IV/0

!#

DIV

/0!

#D

IV/0

!#

DIV

/0!

#D

IV/0

!

N

et

Incom

e#

DIV

/0!

#D

IV/0

!#

DIV

/0!

#D

IV/0

!#

DIV

/0!

%

Ne

t R

eve

nu

e#

DIV

/0!

#D

IV/0

!#

DIV

/0!

#D

IV/0

!#

DIV

/0!

Ca

sh

Flo

w

Fix

ture

s-

$

Co

mp

ute

r/P

OS

/Fa

x/P

hon

es

-$

Eq

uip

(F

ilam

aste

r)&

Sig

n-

$

Co

mp

ute

r/P

OS

Lea

seh

old

Im

pro

ve

me

nts

Wo

rkin

g C

apita

l (I

nv &

AR

)-

$

Go

od

will

/oth

er

assets

va

lue

-$

-

$

PV

Lea

se C

om

mitm

ent

-$

0

00

00

Ne

t In

com

e/(

Loss)

#D

IV/0

!#

DIV

/0!

#D

IV/0

!#

DIV

/0!

#D

IV/0

!

Imp

rove

me

nt

-$

-

$

-

$

-

$

-

$

-

$

De

pre

cia

tio

n

-$

#

DIV

/0!

#D

IV/0

!#

DIV

/0!

#D

IV/0

!#

DIV

/0!

Ne

t C

ash F

low

-$

#

DIV

/0!

#D

IV/0

!#

DIV

/0!

#D

IV/0

!#

DIV

/0!

-$

Ne

t P

rese

nt

Va

lue

@ 1

9%

#D

IV/0

!

IRR

#V

AL

UE

!

To

tal

Bu

sin

ess

Va

lua

tio

n:

Y

ear

5 E

BIT

DA

#D

IV/0

!

P

/E M

ult

iple

#D

IV/0

!

Bu

sin

ess

Va

lue

-$

Pm

t A

llocatio

n:

Wo

rkin

g C

apita

l-

$

Go

od

will

/oth

er

assets

-$

($20

/RX

)

To

tal P

urc

hase

Pri

ce

-$

9/1

0/2

01

0re

tail

pro

form

a -

defa

ult b

lank 0

80

21

0.x

lsx

9/1

0/2

01

0

Ret

ail P

rofo

rma

42

Prev

alen

ce M

odel

Fair

vie

w S

pe

cial

ty P

har

mac

yD

ise

ase

Pre

vale

nce

an

d S

pe

cial

ty E

xpe

nse

Mo

de

lA

s o

f 8

/2/2

01

0

Clie

nt:

He

alth

Pla

n X

Po

pu

lati

on

:2

50

,00

0

Dis

eas

e S

tate

An

nu

al R

X

Spe

nt

Pe

r

Pat

ien

t

Ph

ysic

ian

Spe

cial

tyP

reva

len

ce o

f D

ise

ase

Dis

eas

e S

tate

Esti

mat

ed

Mar

ket

(Pat

ien

ts)

Tota

l Re

ven

ue

Pe

r D

ise

ase

Sta

teIm

mu

ne-

med

iate

d C

on

dit

ion

sC

roh

n's

Dis

ease

$1

5,0

00

Gas

tro

ente

rolo

gy0

.18

% o

f P

op

ula

tio

n4

50

28

0 p

eop

le p

er m

illio

n u

se b

iolo

gic

70

$1

,05

0,0

00

Pso

ria

sis

$1

5,0

00

Der

mat

olo

gy2

% o

f P

op

ula

tio

n5

,00

05

% a

re s

ever

e ca

ses

25

01

0%

of

seve

re u

se b

iolo

gic

25

$3

75

,00

0R

heu

ma

toid

Art

hri

tis

$1

5,0

00

Rh

eum

ato

logy

0.9

8%

of

po

pu

lati

on

2,4

50

25

% o

f af

fect

ed u

se b

iolo

gic

61

3$

9,1

87

,50

0To

tal

70

8$

10

,61

2,5

00

Mu

ltip

le S

cler

osi

s$

24

,77

5N

euro

logy

0.1

% o

f P

op

ula

tio

n2

50

$6

,19

3,7

50

Hem

op

hili

a$

14

1,1

80

Hem

ato

logy

0

.01

% o

f P

op

ula

tio

n2

5$

3,5

29

,50

0

On

colo

gy$

7,5

50

On

colo

gy0

.16

% o

f p

op

ula

tio

n w

ith

Ph

arm

acy

ben

efit

usa

ge

0.4

0%

of

po

pu

lati

on

wit

h M

edic

al b

enef

it u

sage

1,4

00

$1

0,5

70

,00

0

HIV

/AID

S$

20

,00

0In

fect

ion

Dis

ease

0.3

% o

f p

op

ula

tio

n a

re H

IV p

osi

tive

; 70

% a

re d

iagn

ose

d5

25

50

% o

f d

iagn

ose

d a

re t

reat

ed2

63

$5

,25

0,0

00

An

emia

/Neu

tro

pen

ia$

10

,00

0H

emat

olo

gy

On

colo

gy

Nep

hro

logy

1.1

% o

f p

op

ula

tio

n2

,75

0

4.5

% o

f af

fect

ed u

se b

iolo

gic

12

4$

1,2

37

,50

0G

row

th D

efic

ien

cy$

21

,00

0En

do

crin

olo

gy0

.02

% o

f P

op

ula

tio

n5

0$

1,0

50

,00

0In

fert

ility

$2

,40

0Fe

rtili

ty3

.6%

of

po

pu

lati

on

aff

ecte

d9

,00

02

0%

of

affe

cted

see

k tr

eatm

ent

1,8

00

25

% o

f th

ose

tre

ated

use

bio

logi

c4

50

$1

,08

0,0

00

Org

an T

ran

spla

nt

$1

2,0

00

Tran

spla

nt

14

0,0

00

livi

ng

reci

pie

nts

in U

S (0

.04

5%

pre

vale

nce

)1

13

$1

,35

0,0

00

Hep

atit

is C

$1

1,7

00

Infe

ctio

n D

isea

se1

.6%

of

Po

pu

lati

on

4,0

00

1.2

5%

of

affe

cted

are

tre

ated

50

$5

85

,00

0C

ysti

c Fi

bro

sis

$3

0,0

00

Pu

lmo

no

logy

30

,00

0 T

ota

l US

Po

pu

lati

on

(0

.00

98

% p

reva

len

ce)

25

$7

35

,00

0B

on

e M

arro

w T

ran

spla

nt

$1

0,0

00

Tran

spla

nt

13

,00

0 d

on

e p

er y

ear

(0.0

04

% in

cid

ence

)1

0$

10

0,0

00

TOTA

L3

,46

6$

42

,29

3,2

50

Fairv

iew

Con

fiden

tial

9/10

/201

0P

age

1

43

9/1

0/2

010

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

Facilit

y s

ize (

sq

ft)

2,0

00

Op

era

tin

g d

ays p

er

year

260

2011

Year

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Rev

en

ues

Tota

l popula

tion

Lik

ely

patients

(fr

om

model)

Tota

l pote

ntial re

venue

-$

-$

-$

-$

A

nnual in

cre

ase

Captu

re R

ate

(%

)

To

tal G

ross R

ev

en

ue

-$

-$

-$

-$

-$

Avera

ge p

rice p

er

Rx

-$

-$

-$

-$

A

nnual in

cre

ase

0%

0%

0%

0%

Tota

l R

xs

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

R

x/d

ay

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

RX

Dis

counts

% o

f G

ross R

evenues

Dis

count A

mount

-$

-$

-$

-$

-$

Medic

ation T

hera

py M

anagem

ent

Inte

rventions p

er

patient

Tota

l In

terv

entions

-

-

-

-

-

Charg

e p

er

Inte

rvention

Tota

l M

TM

Revenue

-$

-$

-$

-$

-$

Net

Rev

en

ue

-$

-$

-$

-$

-$

Co

st

of

Go

od

s S

old

Gro

ss m

arg

in %

Gro

ss M

arg

in-

$

-$

-$

-$

-$

Tota

l C

OG

S-

$

-$

-$

-$

-$

Exp

en

ses

Sala

ries a

nd B

enefits

Manager

FT

E

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %Spe

cial

ty P

rofo

rma

44

9/1

0/2

010

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

Facilit

y s

ize (

sq

ft)

2,0

00

Op

era

tin

g d

ays p

er

year

260

2011

Year

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Pharm

acis

tR

x/R

ph

Pro

jecte

d F

TE

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Real F

TE

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

Technic

ian

Rx/T

ech

Pro

jecte

d F

TE

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Real F

TE

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

Packer/

Ship

per

Rx/S

hip

per

Pro

jecte

d F

TE

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Real F

TE

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

Call

Cente

r R

epre

senta

tive

Calls

/Rx

Tota

l calls

/day

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Calls

/Rep

Pro

jecte

d F

TE

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Real F

TE

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

Oth

er

support

sta

ffR

x/P

ers

on

Pro

jecte

d F

TE

Real F

TE

Hourly R

ate

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase %

Tota

l S

ala

ries

Manager

-$

-$

-$

-$

-$

Pharm

acis

t-

$

-$

-$

-$

-$

Technic

ian

-$

-$

-$

-$

-$

Packer/

Ship

per

-$

-$

-$

-$

-$

Call

Cente

r R

epre

senta

tive

-$

-$

-$

-$

-$

Spe

cial

ty P

rofo

rma

45

9/1

0/2

010

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

Facilit

y s

ize (

sq

ft)

2,0

00

Op

era

tin

g d

ays p

er

year

260

2011

Year

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Oth

er

support

sta

ff-

$

-$

-$

-$

-$

T

ota

l-

$

-$

-$

-$

-$

Benefits

% o

f S

ala

ries

Tota

l B

enefits

-$

-$

-$

-$

-$

Offic

e S

upplie

s

% o

f N

et R

evenue

Tota

l O

ffic

e S

upplie

s-

$

-$

-$

-$

-$

Medic

al S

upplie

s

% o

f N

et R

evenue

Medic

al S

upplie

s C

OG

S-

$

-$

-$

-$

-$

Bld

g O

pera

ting E

xp

Square

Feet

2,0

00

2,0

00

2,0

00

2,0

00

2,0

00

Base R

ent/sq f

t-

$

-$

-$

-$

A

nnual in

cre

ase

Base R

ent

-$

-$

-$

-$

-$

Opera

ting E

xpense/s

q f

t-

$

-$

-$

-$

A

nnual In

cre

ase

Opera

ting E

xpenses

-$

-$

-$

-$

-$

Tota

l R

ent (B

ase+

Expenses)

-$

-$

-$

-$

-$

Utilit

ies

Tele

phone

$0

$0

$0

$0

Annual In

cre

ase

Main

tenance

Cost/S

quare

Foot

$0.0

0$0.0

0$0.0

0$0.0

0

Annual In

cre

ase

Tota

l M

ain

tenance

-$

-$

-$

-$

-$

Insura

nce

Cost

-$

-$

-$

-$

Annual In

cre

ase

Spe

cial

ty P

rofo

rma

46

9/1

0/2

010

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

Facilit

y s

ize (

sq

ft)

2,0

00

Op

era

tin

g d

ays p

er

year

260

2011

Year

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Bad D

ebt

% o

f N

et R

evenue

Tota

l B

ad D

ebt

-$

-$

-$

-$

-$

Depre

cia

tion

Fix

ture

s (

Mill

work

, F

urn

)

Life (

month

s)

Month

ly D

epre

#D

IV/0

!

# m

ths 1

st yr

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Com

pute

r/P

OS

/Fax/P

hones

Life (

month

s)

Month

ly D

epre

#D

IV/0

!

# m

ths 1

st yr

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Auto

mation

Life (

month

s)

Month

ly D

epre

#D

IV/0

!

# m

ths 1

st yr

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Leasehold

Im

pro

vem

ents

Life (

month

s)

Month

ly D

epre

#D

IV/0

!

# m

ths 1

st yr

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Tota

l D

epre

cia

tion

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Spe

cial

ty P

rofo

rma

47

New

co

Ph

arm

acy, In

c.

New

sit

e #

50

2011

Year

0Y

ear

1Y

ear

2Y

ear

3Y

ear

4Y

ear

5

Reven

ues

Gro

ss R

X R

evenue

-$

-$

-$

-$

-$

Dis

counts

00

00

0

MT

M R

evenue

00

00

0

To

tal N

et

Reven

ue

-$

-$

-$

-$

-$

RX

CO

GS

-$

-$

-$

-$

-$

G

ross M

arg

in-

$

-$

-$

-$

-$

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Opera

ting E

xpenses

Sala

ries

-$

-$

-$

-$

-$

Benefits

-$

-$

-$

-$

-$

Lic

enses

Refe

rence B

ooks

Offic

e S

upplie

s-

$

-$

-$

-$

-$

Medic

al S

upplie

s-

$

-$

-$

-$

-$

Rent B

ase

-$

-$

-$

-$

-$

Rent O

pera

ting E

xp

-$

-$

-$

-$

-$

Tele

phone

-$

-$

-$

-$

-$

Security

Main

tenance

-$

-$

-$

-$

-$

Depre

cia

tion

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Bad D

ebt

-$

-$

-$

-$

-$

Mark

eting

Oth

er

(incl in

s)

0.6

5%

-$

-$

-$

-$

-$

Tota

l O

pera

ting E

xpenses

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

N

et In

com

e#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

%

Net R

evenue

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Cash

Flo

w

Fix

ture

s-

$

Com

pute

r/P

OS

/Fax/P

hones

-$

Equip

(F

ilam

aste

r)&

Sig

n-

$

Com

pute

r/P

OS

Leasehold

Im

pro

vem

ents

Work

ing C

apital (I

nv &

AR

)-

$

Goodw

ill/o

ther

assets

valu

e-

$

#D

IV/0

!

PV

Lease C

om

mitm

ent

-$

00

00

0

Net In

com

e/(

Loss)

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Impro

vem

ent

-$

-$

-$

-$

-$

-$

Depre

cia

tion

-$

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Net C

ash F

low

-$

#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!#D

IV/0

!

Net

Pre

sen

t V

alu

e @

19%

#D

IV/0

!

IRR

#V

AL

UE

!

To

tal B

usin

ess V

alu

ati

on

:

Y

ear

5 E

BIT

DA

#D

IV/0

!

P

/E M

ult

iple

#D

IV/0

!

Bu

sin

ess V

alu

e#D

IV/0

!

Pm

t A

llocation:

Work

ing C

apital

-$

Goodw

ill/o

ther

assets

#D

IV/0

!($

200/R

x)

Tota

l P

urc

hase P

rice

#D

IV/0

!9/1

0/2

010specia

lty

pro

form

a -

defa

ult b

lank 0

80210.x

lsx

9/1

0/2

010

Spe

cial

ty P

rofo

rma

48

Documents

Revenue Optimization and New Pharmacy Business · PDF fileRevenue Optimization and New Pharmacy Business Models ... a Practice Model Change at an Academic Medical Center ... Revenue