Shrivers Pharmacy closes the door to open another one for new business

By Chris Linville

In the years since John Coler, RPh, graduated from Ohio

Northern University in 1995, his career has been on a steady

upward climb. In 1997, he went to work for Randy Shriver

at Shrivers Pharmacy in Zanesville, Ohio, and six years

later he bought that store. Over the next seven years Coler

expanded the business by acquiring four more locations in

south-central Ohio. The five pharmacies operate under the

Shrivers HealthMart banner.

“When I first started working for Randy, it was a small

store,” Coler says. “He told me that if I built it up and

made it a good business, that he would sell it to me. By

2003, my team and I had taken the store from doing about

100 prescriptions per day, up to about 250. It was just a

handshake deal, but he kept his word and he sold it to me.”

Coler manages an eight-person staff helping him

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www.americaspharmacist.net August 2012 | america’s Pharmacist 37

dabbling in long-term-care services at the Zanesville

Shrivers location, operating a combo shop. It picked up

a few accounts, including some assisted living facilities,

residential homes, and a couple of jails with about 200

inmates each. It’s a decent business, but Coler knew that if

Shrivers wanted a bigger piece of the pie, it would have to

make a more substantial commitment.

“We’re really a small outfit as far as long-term care,

and as a combo shop, we saw that we were missing out

on a lot of opportunities by not going closed door,” Coler

says. “We realized that to pick up more accounts, you really

had to go closed door. By going from a combo shop to

closed door, you can actually access better contracts, better

reimbursement, and better purchasing.”

Those were the factors in deciding to carve out space

run the businesses. The five combined pharmacies, with

locations ranging from 3,500–10,000 square feet, employ

some 100 people. Along with the traditional retail business

(and a healthy annual prescription count), Shrivers offers

items such as home medical equipment and oxygen, and

also has four 340B accounts.

“With the other stores, once they came up for sale, we

were in a good position, and had built up enough equity

and strength to be able to buy them,” he says, adding with

a laugh, “We’ve also gotten better at understanding what

the bank wants and needs in order to make the purchase

happen, which can be cumbersome.”

LTC PresenceAlong with the retail operations, Coler had also been

at the Brighton facility for a closed-door only section. Visits

to out of state long-term care pharmacies also helped Coler

develop a vision for his business. Starting modestly was a

key part of his plan.

“When I decided to do this, I went and took an NCPA

long-term care class,” he says. “What the class taught was

first, when you are starting out you don’t want to go and

pick up three 100-bed homes, because you might fail

because of the cash flow issue itself. We picked out a couple

of small residential, small assisted living homes, and as we

got better at that, then we went after bigger accounts, such

as some decent sized jails.”

Coler continues, “That fits into my theory about

growing slow. We think there is a lot of opportunity,

especially with an aging population. We’ve always

focused on service—and that’s what everybody says that

they do—but what we’ve found is that if you really give

good service, you seldom lose an account. If we can build

up to 1,500-2,000 beds, then we might consider moving

off site to our own separate facility. Right now it makes

more sense than going out and taking the larger risk of

buying a new building.”

Coler says that the process of converting space for

the closed door LTC facility took about six months.

Greg Paisley, RPh, his retail operations manager, was

given responsibility to run the closed-door operation

as a junior partner. In making the transition, the focus

was on doing things right the first time and building a

strong foundation.

“That’s probably longer than its takes most people,” he

says. “You could probably get it done in three months. But

we like to take our time and make sure we do things right.

My feeling is that you want to make sure that you deliver, so

we’ve taken some extra steps and extra precautions.”

Coler says there are several guidelines that need to be

followed to transition from a combo shop to a closed door

pharmacy. It must have its own entry (separate from the

retail side), its own door, its own address, and its own phone

line. It also has to obtain its own provider numbers on all

of its contracts. Coler says there are a number of highly

qualified organizations that can help with those items, and

he has been extremely pleased with the company Shrivers

chose to assist them.

“Anyone going combo shop to closed door is going

to want to use one of those entities,” he says. “I’ve been

through five acquisitions, and they made the process of this

really, really smooth. They have been extremely helpful.”

LTC Versus RetailObviously there are distinctions between a traditional retail

pharmacy and an LTC business. Coler points out that in

LTC, pharmacists are mainly interacting with physicians and

other health care professionals, along with doing rounds

and checking charts at the various facilities.

“That’s a big difference from a pharmacy standpoint,

versus being in the retail setting and dealing directly with

more customers,” he says.

Coler says that LTC can be a solid revenue driver—but

it takes work and attention to detail.

“In long-term care, everybody knows that there is

more margin there, but at the same time, there is a lot more

responsibility, there’s more paperwork, more requirements

38 america’s Pharmacist | August 2012 www.americaspharmacist.net

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“It’s not like we have to go out and lease a new building

and start from scratch,” he says. “That can be pretty intense

and pretty scary.”

One area where Coler is laser focused is on cost to

dispense ratios. He says it needs to be measured closely.

“Pharmacists have always looked at margin, but margin

doesn’t mean as much anymore,” he says. “That’s because

when you start talking about us being at 80–85 percent

generic utilization, and all of these brands going to generic,

and with the erosion of MAC [maximum allowable cost],

you can’t pay your bill with margin. We’ve heard that a lot,

and it’s so true. You have to pay with dollars. I think both

retail and long-term care independent pharmacists have

to constantly pay attention to their cost to dispense, and

comparing that to their revenue and their gross margin.”

Coler adds, “If your cost to dispense is higher than

your return, and if you are not paying attention to that,

you can have an upside down model awfully quickly. We

are going to try everything from being efficient on our

deliveries, to constantly working on our purchasing and

our overall efficiency. But we are constantly looking at

cost to dispense to keep that under control to make sure

we are driving profit.”

that you have to meet, and the cost to dispense is higher,”

he says. “And that’s what we ran into in with the combo

shop. There, you’re just kind of doing it as an adjunct to

your business, something to help out, and you are really

not making the profits that you need, because you are on

those retail contracts, and you aren’t maximizing your

reimbursement for your purchasing. However your cost to

dispense goes up—because you have a blister packet, you

have the delivery piece, the chart review—all of those things

are added expenses.”

Going to a closed door facility helps remove some of

those obstacles. Even a few potential bumps wasn’t going to

dissuade Coler from what he sees as a worthwhile venture.

“I think another big difference with long-term care is

that it’s about going out there, creating relationships and

getting those contracts,” he says. “I think if you look at the

independent guys who have been successful, it’s because

they have been good at building relationships with the

clients that they serve, and coming through and providing

the service that they promise. There’s a lot of long-term care

facilities that are excited to do business with an independent

company that can provide good service.”

Additionally, Coler says a basic part of building and

maintaining relationships is to simply ask questions.

“When we get a new customer or client, we try

to ask how things are going and get a sense of how

things are for them,” he says. “That’s how we get our

contracts—we go in and find out what their ‘pain

points’ are, things that are making life difficult for them,

and see if we have the solution.

“I’m not saying life is perfect all the time, but usually

when you find a client that’s with an independent, they are

usually pretty happy. I think a big part on this side [LTC]

is not just focusing on the service, but focusing on the

relationship. You always stay in contact with them, know

if things are going smoothly, and know if there is an issue.

You want to have the type of relationship where they can

call and let you know if there are any problems, and you can

work to solve them.”

Measuring ROIColer, like anyone who is serious about running a successful

business, keeps his eye on the ball when it comes to return

on investment. He says that having a physical location

already in place, along with staff who have some LTC

background, has kept his overhead fairly low.

www.americaspharmacist.net August 2012 | america’s Pharmacist 39

Mentor ConneCtion Helps Aspiring ltC providers

Have you been approached by a potential custom-

er requesting new pharmacy services for a group

home, hospice, or other long-term care facility and

you didn’t know where to turn for information to get

started? Perhaps you offer some LTC services and

you’d like to expand but you’re not sure about next

steps. Sometimes all that is needed is a little guid-

ance to get moving in the right direction.

The NCPA LTC Division has identified experts

in the field of LTC pharmacy services to mentor

pharmacists who are new to LTC and want to know

more about this profitable niche or those who cur-

rently offer LTC services and want to expand and

grow their business. The Mentor Connection is a

member benefit for NCPA LTC Division members.

Go to www.ncpaltc.org for more information and

sign up today.

40 america’s Pharmacist | August 2012 www.americaspharmacist.net

In other areas, Coler thinks he can keep costs in check.

He says the business can probably add 300–400 beds

without bumping up staff numbers significantly.

“It’s really only been a matter of physically changing

our building and getting the proper contracts and then

going after the business,” he says. “Now we can afford

growth in overhead as we grow the business.”

Knowledge Trumps FearColer is certainly familiar with the challenges facing

the profession, whether it be PBM antics, low and slow

reimbursements, cost to dispense, short cycle, mail order,

Medicaid and Medicare uncertainties, and a litany of

other issues. He doesn’t dispute that they pose threats.

But he insists that they aren’t going to deter him.

“I spent five or six years not going into oxygen or

the HME business out of fear because everybody kept

saying how horrible it was—you have this coming down

the pike, and that coming down the pike,” Coler says.

“I just don’t believe you can run a retail operation, a

long-term care operation, or an HME operation in fear

of what’s coming down the road. I think you have to be

knowledgeable and stay on top of things, and I believe

we will always find solutions to still provide care and

access to those patients.”

Coler says a bit of education can go a long way.

“I go to NCPA and other pharmacy events and attend

seminars and listen to the ideas that other people are

coming up with,” he says. “I don’t know all of the answers,

but we are going to be informed. I see too many operators

that don’t do certain things out of fear. When I bought my

first pharmacy in 2003, people said I was crazy. When I was

in college, they were saying the independent world wasn’t

even an option. The biggest thing we need to do is just stay

active within our profession, and network together to come

up with solutions.”

LTC TrendingIn Coler’s opinion, even though he thinks independent

retail pharmacies have done a good job of responding to

the challenges they face, he believes that many are going to

consider adding an LTC component to their practice. It can

provide a decent niche revenue stream, and also act as a

buffer against retail issues such as MAC.

“I think we are going to see a lot of independents across

the country develop that side of the business,” he says,

“and I think they are smart to do that. Especially with the

population aging, it’s going to diversify them and overall I’m

confident it’s going to help them in business. I believe NCPA

and its Long-Term Care Steering Committee sees this as a

real opportunity for pharmacists.”

Coler understands that there may be some pharmacists

interested in LTC who might be hesitant to take the plunge.

“I think there is a fear among retail pharmacists

not knowing if they can do it,” he says. “But what NCPA

wants to do is get the message out there that you can do

it. Not only can you do it, it’s just like retail; you can do

it better than the big guys. That’s the message that I hope

we get out there, that ‘hey, you can do this, and you can

do it better.’’’

Again, he says that education and networking are the

best ways to learn.

“Those are the keys to being successful,” Coler says. “It’s

not something where you need to re-invent the wheel. You

need to speak to people who have started where you are,

and have become successful. It’s been amazing how many

people out there have been helpful with us on this venture.

Find people who have done it, and done it well, and they are

usually very willing to help you out.”

Chris Linville is America’s Pharmacist managing editor.

ltC’s Cost-to-dispense study AnAlyzes Business Fee struCture

NCPA has launched a cost-to-dispense study for

independent, closed-door LTC pharmacies in an

effort to ensure fair and reasonable dispensing

fees. It is not evident that Medicare Part D plans or

state Medicaid programs have considered the new

technology or staffing burdens LTC pharmacies

must bear to meet not only the short-cycle dispens-

ing requirements, but also the current costs of the

Centers for Medicare & Medicaid Services LTC

performance guidelines. To help quantify reason-

able LTC dispensing fees, NCPA is pursuing a cost-

to-dispense study specific to long-term care and

will share the results with government and private

health care industry payers. Visit the LTC Division

website (www.ncpaltc.org) for more information.