Pharmacy & The C-Suite

Working with CFO/Accounting Dept. on Pharmacy Purchasing & Overall Facility

Costs

Presented By:

Nina Karl, CPhT Pharmacy Purchasing Coordinator

Providence St. Patrick HospitalMissoula, MT

Content used with the permission of ASHP (American Society of Health System Pharmacists)

As taken from presentation by the following speakers at a previous “Pharmacy Leadership Forum” Meeting by

ASHP

Philip E. Johnson, M.S., B.S.Pharm., FASHPPharmacy Advocacy DirectorMoffitt Cancer Center and Research InstituteTampa, Florida

James A. Jorgenson, M.S., B.S.Pharm., FASHPVice President and Chief Pharmacy OfficerClarian HealthIndianapolis Indiana

Learning Objectives

• List three reasons why it is important for pharmacy to communicate with the C-Suite.

• Summarize how to most effectively communicate your business plans to senior executives and other decision makers in your organization.

C-Suite Composition

CEO-Chief Executive OfficerCOO-Chief Operating OfficerCFO-Chief Financial OfficerCMO-Chief Medical OfficerCNO-Chief Nursing Officer

THE CORE

OTHER STAKEHOLDERS

CQOChief Quality Officer

CPO CSO

CIO

Chief Purchasing Officer Chief Safety Officer

Chief Information Officer

VP of Pharmacy

Data on file from CEO interviews and PCAB Surveys.

Safe Practice 18 Statement

Pharmacy leaders should have an active role on the administrative leadership team that reflects their authority and accountability for medication management systems performance across the organization.

Leadership & Culture of Safety

A structure should be established and maintained to ensure that pharmacy leaders engage in regular, direct communications with the administrative leaders and the board of directors about medication management systems performance.

How is Pharmacy seen by the C-Suite

• Ancillary support service• Drug cost focus• Clinical impact undervalued• Managed as a commodity• Isolated from strategic decision making• Unaware of the opportunities in pharmacy

Example of Pharmacy Cost Mix

Data on file. Clarian Health Partners.

Black Hole Mentality

• Little understanding of complex functions of a high performing pharmacy organization

• Need to aggressively educate C-Suite on “the business of pharmacy”

Pharmacy’s Typical Position

• Pharmacy is a departmental outlier:– Part clinical, part business– Critical player in the care delivery process but not typically

present at the C-suite table– Complex operational systems and exception processes that

do not “fit” the average departmental model – Issues surface AFTER critical medication incidents trigger

doubts regarding operational and financial controls

Pharmacy Challenges

• Medication safety challenges• Manpower challenges• Potential negative clinical outcomes when medications

are not managed appropriately• Increased risk management issues• Increased compliance liability• Reduced pharmacy margins threaten care infrastructure

for all patients

Communicating Pharmacy Issues to the C-Suite

• To establish the pharmacy as a positive contributor to the challenges

• To create the perception that the pharmacy is material to the organization’s efforts in terms of– Financial management– Patient safety– Clinical care– Regulatory compliance

You are the Most Qualified Personto Relay this Information

• Pharmacy as the lead in medication safety• Leverage expert stature/training• Valued and trusted member of

institution• Most knowledgeable about medication

expenses

Lacaria K, Balen RM, Frighetto L, Lau TTY, Naumann TL, Jewesson PJ. Perceptions of the Professional Pharmacy Services in a Major Canadian Hospital: A Comparison of Stakeholder Groups. Longwoods Review. 2004;2(1).

Nurses Shine, Bankers Slump in Ethics Rating, Press Release from the 2008 Gallup Honesty and Ethics Poll, Available at: http://www.gallup.com/poll/112264/Nurses-Shine-While-Bankers-Slump-Ethics-Ratings.aspx. Accessed on September 10, 2010.

Redefining C-Suite Expectations for Pharmacy

• Pharmacy accountability for distribution of products and information across all points of care

• Clear and defined role for pharmacy expertise to be available at the point of care

• Redefinition of the basic systems and services to meet the changing organizational model

• Creative and innovative solutions that align with organizational goals and direction

• “Balancing act” that requires collaboration and new skills

Match Needs Now Strategy

• Develop resources that are both valuable and scarce in your organization

• Match those resources to C-Suite needs to advance your brand and your strategic pharmacy initiatives

Six Key Questions of the C-Suite

1. Are we buying drugs at the best possible advantage?

2. Are sound business principles and practices being applied to all pharmacy operations? (i.e., Is the pharmacy business being approached as the large business enterprise it has become?)

3. Are patient billing and revenue processes for pharmacy sound and routinely monitored?

4. Are pharmacy resources, including drugs, supplies and manpower, properly controlled and managed?

5. Are patient outcomes and medication safety concerns properly balanced with financial considerations in the pharmacy department?

6. Are all pharmacy entrepreneurial opportunities identified, explored, and pursued when appropriate?

Are we buying drugs at the best possible advantage?

• Rethink group purchase advantages

• Annual review and challenge of GPO and special pricing programs

• Negotiate best prime vendor value based upon capital required and payment terms

• Avoid shorts that require off-contract pricing through innovative inventory management methods

• Establish comprehensive invoice monitoring systems to validate accuracy of invoice pricing versus contract

Are sound business principles and practices being applied to all pharmacy operations?

• Develop a definitive business model, strategy, and tactics with policies and procedures for all phases of the pharmacy business including:

– Drugs and supplies purchasing, inventory, receiving, and invoicing processes

– Proactive pharmacy budgeting, tied to annual goals, projects, and strategies for the fiscal year

– Use of dashboards and customized pharmacy reports for drug usage, supplies, and manpower in the context of patient volume and pharmacy activity

Are patient billing and revenue processes sound and routinely monitored?

• Develop and maintain an updated drug billing system, including CDM, and outpatient billing and coding processes

– Increased potential for enhanced revenues – Reduced potential for billing discrepancies – Avoid inadvertent inappropriate billing fraud liability

• Develop pharmacy expertise and efficient billing processes for ambulatory drug billing

• Incorporate ongoing methodologies and processes that will assure clean, accurate billing, regular internal audits, and fiscal reviews of all pharmacy billing

• Detailed standard reporting of drug expenditures to quickly identify trends in drug spend

• Daily monitoring of specific high-cost drivers such as anti-infectives and other target drugs by a pharmacist-physician team to assure appropriate agent is selected based upon clinical and economic considerations

• Establish monitors and physical controls over all drug inventories, including controlled, non-controlled, and expensive agents to ensure fiscal control and avoid diversion or gray market issues

Are pharmacy resources, including drugs, supplies and manpower, properly

controlled and managed?

Are pharmacy resources, including drugs, supplies and manpower, properly

controlled and managed?• Detailed ongoing monitoring reports of pharmacy manpower

expenses– Technicians versus pharmacists hours and costs tracked against pharmacy and

hospital work units– Utilize established internal benchmarks for productivity monitoring and

management– If external benchmarks are expected by leadership, pharmacy leadership

proactively accounts for clinical programs, FTEs, hours and scope of services

• All clinical programs, special services, and any unique pharmacy programs are documented and accounted for regarding ROI

• Pharmacy director routinely communicates with the C-suite so that unique programs for pharmacy to address patient care demands are understood, cost justified and rationale for existence is supported

Are all pharmacy entrepreneurial opportunities identified and pursued when appropriate?

• Entrepreneurial opportunities to increase pharmacy revenues and expand the portfolio of profitable pharmacy business, for example:

– 340B qualifications and related unique services (transplant, employee specialty clinics, etc.)

– Retail pharmacy expansion– Employee prescription benefit plans – PBM management– Discharge Rx capture– Direct clinic programs– Supply chain

Always be Prepared

“In preparing for battle, I have always found that plans are useless, but

planning is essential.”Gen. Dwight D Eisenhower

“In practice we plan the work and in the game we work the plan”Vic Heyliger

Evaluating Pharmacy Supply Expense

• Comparison to other hospitals• Gauge if our program is “on track”• Set internal organizational goals• Provide key directional information for decision

making:– Service line strategies– GPO decisions– Supply chain partnerships

Utilize a Good Measurement System

1. Accurately measure current status of performance (where are we at now)

2. Measurement system provides the breakdown of opportunities (what do we need to do to hit target)

3. Able to explain variations (is the change due to volume, intensity LOS, price increase)

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Factors Contributing to Drug Cost

• Drug price inflation• Patient volumes• Patient mix• Expanded treatment

options• New drugs• Legislation

• Patent expirations• Generic entrants into the

market• Class of trade issues• 340B eligibility• Interruptions in product

availability

Conclusion

• Understand Corporate Suite (C-Suite) needs and expectations

• Create maximum pharmacy value

• Be able to effectively answer the 6 key questions