REVENUE GENERATING LEAN PROCESSES FOR THE PHARMACY

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REVENUE GENERATING LEAN PROCESSES FOR THE PHARMACY

• Kathryn Pflaum, CMRP
• St. Francis Health Center
• Topeka, KS

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• No disclosures for this presentation.

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OBJECTIVES

• Identify LEAN processes that apply to Pharmacy
• Identify LEAN projects that can be Pharmacy
  Buyer-managed
• Discuss the use of graphs and charts for specific
  LEAN projects

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HOW DO I BEGIN?

• LEAN thinking is a way of life for most buyers.
• Think about what you see everyday.
• What process improvements will you lead in the
  Pharmacy?
• How will you communicate your ideas effectively?

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IDEA

• This project started with a trend and a question.
• The trend was a large influx of price increases
  (this project also includes when prices decline).
• The question was if the buyer knows about these
  price changes and does not communicate them to
  other departments, how do the charges get changed
  to the patient to reflect the cost changes.

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FIRST THINGS FIRST

• Write a Project Charter

• Line up the stakeholders
• Finance
• Pharmacy
• C suite
• Champion for the project

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CHARTER

• Business Case - Medication costs change
  continuously occur through out the calendar year.
  Some medications on contract will receive
  advanced notification on price changes while
  notification on others is after the change. Lack
  of appropriate response to the cost changes at
  the time of the change puts net revenue in
  jeopardy. In the case of Cancer Medications,
  many of the medications do not have contracts,
  thus allowing for price changes at any time
  without notification.

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CHARTER

• AIM (Opportunity) STATEMENT
• Effective 5/1/2010, Pharmacy wants to start
  responding to cost changes with appropriate
  charge changes for Cancer Med.

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CHARTER

• PROJECT SCOPE
• Process Start Notification/discovery of a price
  change
• Process End St. Francis charge adjustment is
  made for the affected items.

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CHARTER

• MEASURABLE GOAL - Critical To Quality (CTQ) Net
  revenue is reflecting a picture of health per the
  financial guidelines set forth by this project.
  (2) A smooth flow of information concerning
  medication cost changes and a corresponding
  charge change. (3) Methodology and process that
  can be followed by all departments in the health
  center to maintain net profits.
• Performance Measure To have a corresponding cost
  to charge change mechanism process that reflects
  a positive net revenue for non-DRG revenue that
  is monitored and updated quarterly.

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TOOLS TO BEGIN

• Understanding the current process.
• There are no mechanisms or processes for
  communication of price changes in Pharmacy to the
  charge changing department.
• Does another department have a process?
• How do we change charges in the current
  environment?
• Who are the stakeholders in the current charge
  changing process?

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FISHBONE

• CAUSES OF NO CORRESPONDING CHARGE CHANGE TO COST
  CHANGES

COMMUNICATION
PROCESSES/AUTHORIZATIONS
Buyer has no authorization to change prices
No communication between Pharmacy Finance on
price changes
No tools to communicate to finance what changes
need to be made.
NO CHARGE CHANGES UPON COST INCREASE/DEREASE
Buyer has no access to Craneware
Metrics to understand improvement
Where information comes from and goes to
What is it that we do not know and should?
UNDERSTANDING OF CHARGES/REIMBURSEMENT
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FISHBONE

• CAUSES OF MISSED COST CHANGES

COMMUNICATION
TOOLS
What tools are available to identify cost changes
Not on GPO or local contract so no notification
from vendor
Wholesaler reports and understanding how to
locate these reports
NO CHARGE CHANGES UPON COST INCREASE/DEREASE
Missed communication from GPO
Not readily available to any reporting for
identification
Buyer must watch for every non-contract item
price change
OTHER REASONS
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Data Collection Plan
What Questions does your data need to answer?
1.) How much have we charged by billable unit for the affected Cancer Medications?
2.) When did the last cost increase occur?
3.) What does our reimbursement picture look like?
What data are you collecting? How are you measuring the data? Is the data Discrete or Variable?
Billable charges for the last 12 months for Cancer Medications. Cost information for the last 12 months. 80/20 report based on billable charges.
How will you ensure consistency? What is your plan for actual data collection? How will you display the data?
Use the same report each time. Run report from Finance to ascertain the 80/20 by billable unit. 80/20 report
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WHAT NOW?

• We need some tools to start our project.
• The first tool we used was the 80/20 tool.

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WHAT NOW?

• The next tool we used was understanding any price
  increases in the last 6 month. We used our
  McKesson history to see if any of these items
  increased/decreased in cost. The answer was that
  7 items had cost changes.

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PURCHASE HISTORY
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VOICE OF THE CUSTOMER

• Who is the customer in this case? Finance is a
  customer, Pharmacy is a customer, the health
  center is a customer
• What does the customer want?
• What is a defect?

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THE 5 WHYS

• Why is there no communication?
• Why is there not a mechanism to trigger a charge
  change upon a cost change?
• Why do we only change charges one time per year?
• Why does it take a significant amount of steps to
  accomplish changing charges?
• Why has no one asked this question before?

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CRITICAL TO QUALITY
CTQs
NEED
DRIVER
Timely communication from the GPO
Contract changes from GPO
Respond to cost increases/decreases as they occur
to promote a healthy net revenue for the Pharmacy
Timely communication from Pharmacy to Finance
Lack of processes to Communicate change
Proper authorizations and access to Tools for
the Inventory Control Coordinator
Good Communication Tools
Cost changes that are non-contract items
Inventory Control Coordinator Identification of
items
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A FEW TERMS CLARIFICATIONS

• GROSS REVENUE What is actually charged on the
  initial bill.
• NET REVENUE What you actually are reimbursed
  (this is what keeps the lights on and the doors
  open).
• COST What you actually pay

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ELEVATOR SPEECH

• Know your audience.
• Key elements for the C suite audience
• ? Keep it to the point
• ? Know your numbers
• ? Be prepared to answer questions
• ? If you need something from them ASK

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ELEVATOR SPEECH

• We are not taking advantage of our charges to add
  additional net revenue to the bottom line of our
  health center.
• We can change this by taking full advantage of
  changing our charges when the cost changes occur.
  Not always will it be an increase, but based on
  the drug cost increases we are experiencing, we
  anticipate that having a process which adds
  profits to our bottom line.

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ELEVATOR SPEECH

• We know that in Cancer Med especially, it will
  also be dependant upon our patient population
  what additional net revenue we can achieve.
• Cancer Med also presents a difficult task because
  many of these medications are not on contract.

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STANDARD WORK

• Standard work involves having a process that
  everyone follows.
• We determined that standard work in this case
  comes from Pharmacy to Finance in the form of a
  spreadsheet that both parties agreed upon and has
  the appropriate information.

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TOOLS FOR STANDARD WORK

• Tools used for cost increases/decreases.
• ? GPO quarterly Contract Price
• Change impact report.
• ? Buyer awareness of increases for
• non-contract items or local
• contract items.
• ? Historical data from Wholesale online
• information.
• ? Wholesaler reporting system. McKesson
  Purchase
• Cost Variance Report

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TOOLS FOR STANDARD WORK

• Craneware
• ? This tools gives information to fill in the
• spreadsheet on the CDM , billable
• unit size, current charges and J code

• McKesson
• ? This tool provides cost information,
• historical cost data and units purchased.

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STANDARD WORK FOR THIS CASE

• The only standard work originally in this process
  was to have a charge increase one time per year
  based upon a variety of factors.
• Standard work must change.

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IDENTIFICATION OF PROCESS IN PLACE

• Where we started

January arrives and it is time for the annual
charge increase.
Pharmacy has a cost increase on item A middle of
the year.
January arrives and it is time for the annual
charge increase.
Loss of gross/net revenue is occurring.
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NEW PROCESS MAP

• Where we went next

Cost change occurs in Pharmacy and Inventory
Control Coordinator is notified or finds the
increase.
Spreadsheet is filled out with all information
forwarded to Finance
Finance changes charges on item's) immediately
Potential net revenue is gained for facility
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NEW PROCESS MAP

• Where we are today

Spreadsheet is filled out with all information
and forwarded to Finance. Copies also go to the
Pharmacy Manager and Lead Technician
Finance changes charges on item's) immediately.
Once change is made an email is sent back to the
ICC.
Potential net revenue is gained for facility
Cost change occurs in Pharmacy and Inventory
Control Coordinator is notified or finds the
increase.
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STANDARD WORK FORM
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CONCLUSION
Metrics (This is the metric that measures the success of the project) Baseline 7 items had cost increases since our last blanket charge. By changing our charges concurrently with the cost changes there is additional revenue to be gained. Current All 7 items had charge increases on 5/1/2010
Financial Benefit YTD137,000 additional net revenue
Primary Root Causes No communication between Pharmacy and Finance on cost increases/decreases by item.
Key Learnings By changing our charges concurrently with the cost changes we gain net revenue. There are a significant amount of variables that contribute to gaining that net revenue including patient population, appropriate action on pharmacy and finances part, having proper authorization for the positions that have the leading information and all charging information.
Issues Pending/ Barriers
Plan for shared knowledge To be placed on line with findings for the entire SCLHS group to see.
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NEXT STEPS TO PROJECT

• We have implemented the process to take all cost
  changes to a charge change upon discovery of cost
  change.
• As we move toward our new computer system, there
  will be ways to automate this process
  significantly.

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• PHARMACY BUYERS
• LEAD THE
• WAY

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OTHER CASE STUDIES FOR BUYERS

• Dr. preference items.
• We had a Doctor preference item on a contrast for
  the Cath Lab. Our Doctors preferred Visipaque
  over the contracted Isovue. An opportunity arose
  to make it clinically easy to suggest a switch.
  We wrote up a charter and made the change.

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RESULTS THE BUYER TALKS ABOUT
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WHAT WE LEARNED

• First thing we learned was to make sure to have
  all the proper stakeholders. OOPS
• Make the case factual and about the clinical
  outcomes of the medication.
• Be prepared to have push back on the change and
  work gracefully through the push back.

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• CASE STUDY
• WORKING WITH
• RESPIRATORY THERAPY

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PHARMACY RESPIRATORY THERAPY

• 95 of the patients receiving Albuterol also
  receive Ipratropium as part of the treatment for
  breathing treatments. These 2 medications are
  currently being mixed and then given to the
  patient.

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PROJECT SCOPE

• Process Start Identify the combination
  medication available
• Process End Treating all patients that require
  this combination with a premixed medication.
• Exceptions Only if a different dose is required
  for one of the parts of the combination
  medication.

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PROCESS MAPS
CURRENT PROCESS
Albuterol removed from Omnicell by RT and mixed
together
Albuterol Ipratropium ordered for patient
Medications is given to patient
Documentation is done
NEW PROCESS
Medications removed from Omnicell and given to
patient
Albuterol Ipratropium ordered for patient
Documentation is done
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CRITICAL TO QUALITY

• Patients receive the proper medication dose.
• No mixing needed to insure proper dose.
• More efficient delivery to patient in breathing
  distress.

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HARD GREEN SOFT GREEN

• There are 2 types of savings for this project.
• ? Hard green dollars in the savings
• gained by buying the combined
• product.
• ? Soft green dollars from the time
• savings realized by the RT
• personnel not having to mix the 2
• products.

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RESULTS THE BUYER TALKS ABOUT
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EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

• MEDICATION WASTE
• ? Outdates
• ? Manufacturer outdates
• ? Pre-made outdates
• ? Informed decision making
• ? Is it less expensive to..
• ? Pills, should we have both sizes if
• the costs is the same for
  both
• sizes?

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EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

• MEDICATION WASTE
• ? Size of vials
• ? Multiple items of similar nature (i.e.
  Bupivacaine, Lidocaine and other caines)
• ? IV mixtures

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EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

• Inventory reductions
• ? Remicade
• Baclofen Refill Kits
• Orencia
• Reclast

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EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

• Inventory reductions
• ? Consignment programs
• ? PAR analysis rotation schedule

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EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

• Pharmaceutical Hazardous Waste
• ? Processes of collection of waste
• ? Processes of maintaining the hazardous waste
• listing.

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EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

• There are many opportunities with in the Pharmacy
  to practice LEAN thinking.
• There are many opportunities to work with other
  departments that Pharmacy touches too.
• Think outside the box!

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QUESTIONS ??
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THANK YOU