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Bringing It All Together: The Senior Executives Role in Managing Rising Drug Expense


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Title: Bringing It All Together: The Senior Executives Role in Managing Rising Drug Expense

  • Bringing It All Together The Senior Executives
    Role in Managing Rising Drug Expense
  • Tom Woller, RPh, FASHP, Regional Director,
  • Marie Golanowski, RN, Vice President and
  • Chief Nurse Executive
  • Aurora Health Care
  • Milwaukee, WI

  • Define a role for executives in pharmacy cost
    reduction initiatives
  • Provide examples of successful cost reduction
  • Describe the balance of personnel cost and supply
    expense in pharmacy
  • Discuss a model for evaluating pharmacy products
    and services

Aurora Health Care
  • Integrated Health Care System
  • Serves Eastern Wisconsin
  • Northern Wisconsin Border to Southern Wisconsin
    Border (3 Million lives)
  • 5 Geographic Regions
  • Emphasis on Community Programs
  • Coordination Across Continuum
  • Eliminate Geographical Internal Competition
  • Maximize Capital Expenditures

Aurora Health Care is the leading integrated
health care system in Wisconsin, uniquely
qualified to promote health, prevent illness and
provide state-of-the-art diagnosis and treatment
at more than 250 locations in 69 communities.
North Region
Central Region
Kettle Moraine Region
Metro Region
South Region
Aurora Health Care is an Integrated Health Care
  • Acute Care Hospitals (13)
  • Psychiatric Hospital (1)
  • Visiting Nurse Association (Home Care Agency)
  • Family Service of Milwaukee, (Social Service
  • Aurora Consolidated Laboratories
  • Aurora Medical Group
  • Aurora Retail Pharmacies
  • Aurora Rehabilitative Services
  • Aurora Sports Medicine Institutes
  • Aurora Womens Pavilion

Aurora Health Care Overview
  • Largest private employer in Wisconsin
  • 25,000 Employees
  • Not-for-profit with corporate offices in
  • 14 hospitals, 120 clinics, 130 pharmacies, home
    care, extended care, rehab centers
  • 2.6 billion dollars in net services revenue
  • 69.7 million in charity care

Aurora Health Care Service Statistics
  • 426,442 Inpatient Days
  • Length of Stay (days) 4.34
  • 11,058 Births
  • 79,533 Surgical Procedures
  • 2,408,356 Ambulatory Care Visits
  • 228,128 Emergency Care Visits

Aurora Health Care Service Statistics
  • 1,071,387 Hospital Outpatient Visits
  • 306,272 Home Care Nursing Visits
  • 65,353 Family Service Visits
  • 60,990 Hospice Benefit Days
  • 404,580 Home-delivered Meals
  • 5,552,981 Retail Pharmacy Prescriptions

Senior Executive Role
  • Conveys a clear sense of the organizational
    strategic vision
  • Recognizes when its time to shift strategic
  • Challenges status quo thinking and assumptions
  • Understands the role and interrelationships of
    each organizational function
  • Learn about and understand the business of
  • Understand the meaning and implications of key
    pharmaceutical financial indicators
  • Hire a senior pharmacy executive that understands
    both the clinical business side, then give that
    person the latitude to run their areas

Senior Pharmacy Executive RoleThe Generalist
  • Promotes collaboration and removes obstacles to
    team work both departmental and
  • Negotiates to create the best possible outcome
  • Acts as coach and teacher, as appropriate
  • Plays a driving leadership role as appropriate
  • Seeks and accepts constructive feedback
  • Maintains a sense of humor

Senior Pharmacy Executive RoleThe Generalist
  • Relates well to colleagues and peers
  • Visible to employees at all levels
  • Inspires trust
  • Empowers others
  • Adapts leadership style to the needs of
    individuals and groups
  • Encourages innovation and thoughtful risk taking
  • Pursues life long learning
  • Effectively prioritizes and manages time
  • Effective work and personal life balance

Senior Pharmacy Executive Financial Abilities
  • Recognize profitability potential related to
    pharmaceutical opportunities
  • Uses financial analysis to create and evaluate
    business choices
  • Manages the departments overall financial
  • Communicates risks and opportunities regarding
    plans, forecasts and budgets
  • Assist the financial team to increase their
    knowledge of the pharmaceutical business
  • Drug expense/supply chain issues
  • Balance of drug expense to manpower
  • Technology enhancements to profitability
  • Impact of Pharmacy Therapeutics Committee

System Pharmacy ExecutiveVisionary Thinker
  • Contributes to, communicates and manages the
    strategic vision
  • Aligns the goals and direction of the department
    and employees with the vision
  • Sees problems and understands issues before
    others do
  • Challenges status quo thinking
  • Comes up with fresh, innovative ideas that create
    value in the organization and marketplace

Any competent manager can direct men and women
who are already motivated to achieve. A great
leader can do the same for those who are tired,
discouraged and fearful. Alan Axelrod, Elizabeth
Be Careful with Industry Lingo
Atlanta Journal-Constitution, December 12, 2002
Understanding Pharmacy Opportunities
  • Improvements in purchasing (15)
  • Contract compliance, contract accuracy, market
    share optimization, 340B, distributor agreements
  • Improvements in utilization (55)
  • Strength of PT, therapeutic substitution,
    clinical pharmacist involvement, target drug
    programs, pre-printed order sets, education, IV
    to PO, Renal dosage adjustment, clinical
    pharmacist review, rounds

Understanding Pharmacy Opportunities
  • Technology-robots, unit based cabinets (5)
  • Distribution-centralized production, batching,
    waste reduction, buy vs. make decisions (10)
  • Revenue enhancement-Outpatient vs. Inpatient (15)

Drug Use Management Savings
Budget Reductions 101
Metro Region Hospital Pharmacy Supply to Cost
  • Total expenses 76,423,000
  • Total salary expense 17,933,000 (23)
  • Fringe benefit expense 6,479,000 (8)
  • Total supply expense 51,282,000 (67)
  • Improving the expense base requires action on the
    supply expense

Executive Role
  • Understand the financial landscape of pharmacy
  • IP vs. OP
  • 340B vs. not-for-profit pricing
  • personnel vs. supply
  • Inflation vs. utilization
  • Tools used by pharmacists

Executive Role
  • Set expectations for pharmacy leaders
  • Finance
  • Budget, performance monitoring, revenue, cost,
  • Operations
  • Productivity, staffing, talent accumulation
  • Drug policy
  • PT, substitution policies,
  • Make vs. buy
  • Injectables, orals, outsourcing decisions

Executive Role
  • Partner with pharmacy leaders and providers,
    especially for physician driven opportunities
  • PT committee
  • Utilization management
  • Preference items
  • Clinic vs. inpatient administration

Executive Role
  • Sensitize pharmacy leader to political issues,
    goals, priorities
  • When to stand, when to stand down
  • Running interference

Model for Evaluation of Pharmacy Products and
  • Products-drugs
  • Safety, effectiveness, costIn that order
  • Marginally more effective products
  • Marginally safer products
  • Impact of product detailing/counter detailing
  • Products-technology
  • Some technology solutions can be supported with
    purely a financial ROI
  • For others consider safety, environment,
    regulatory agencies, liability,
  • Pharmacy services
  • Default is ROI
  • Factor in physician relationships
  • Must be hard savings
  • Require documentation of savings realization

(No Transcript)
Waste Reduction-example
  • Annual Cath Lab stats
  • 9,000 caths, 3,400 PCIs
  • Reopro
  • Expensive drug used in angioplasty
  • Supplied in vials of 10mg
  • Dose is typically 1 ½ vials
  • Existing practice-RN prep
  • Turnaround time, waste, billing, shrinkage
  • Proposed practice-Pharmacy prep
  • Less waste, FTEs, concern over turnaround time

Reopro Financials
System Formulary Management
  • Single PT Committee with teeth
  • Market share vs. volume
  • Outliers cause loss of tiers
  • Strength of PT Committee
  • Credibility of administration/pharmacists
  • Therapeutic substitution

Therapeutic Substitution
  • Generic vs. therapeutic substitution
  • Driving market share compliance
  • Hospital vs. system
  • Nominal pricing
  • 340B pricing
  • Requires removing access to popular drugs
  • Decreases lines in inventory
  • Consider physician ties to Drug Companies
  • Automate substitution and notification

Market Share Contract Management
  • No two contract structures are alike
  • Nominal pricing opportunities
  • Tactics vary based on
  • Money involved
  • Difficulty of switch
  • System vs. site contract
  • Utilization breadth

Medication Assistance Program- example
  • Drug company sponsored programs
  • Paperwork is tedious and complicated
  • Tracking and distribution of supplies
  • 2.0 FTEs (89,000)
  • 385,000 in drug cost savings (avoidance)
  • Evaluate inpatient vs. outpatient savings

Medical Group Purchases-exampleWhos Watching
What the Clinics are Buying?
  • Contract vs. Non-contract Items
  • Generic vs. Branded
  • Contract Optimization
  • Rebate Tracking
  • Contract Pricing Audits
  • More than 1,000,000 in net savings projected for
    1st year

Reimbursement in the Outpatient Setting
  • Pharmacy Finance must partner
  • Lowest cost sometimes means a net loss
  • Moving target
  • Consider in the budgeting process
  • Use caution when setting budget goals

Buy vs. Make Decision
  • Pre-mixed vs. frozen vs. vials
  • Bar-code packaging
  • Pre-filled syringes
  • Bulk vs. unit dose