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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


1
  • Bringing It All Together The Senior Executives
    Role in Managing Rising Drug Expense
  • Tom Woller, RPh, FASHP, Regional Director,
    Pharmacy
  • Marie Golanowski, RN, Vice President and
  • Chief Nurse Executive
  • Aurora Health Care
  • Milwaukee, WI

2
Objectives
  • Define a role for executives in pharmacy cost
    reduction initiatives
  • Provide examples of successful cost reduction
    strategies
  • Describe the balance of personnel cost and supply
    expense in pharmacy
  • Discuss a model for evaluating pharmacy products
    and services

3
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

4
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
5
Aurora Health Care is an Integrated Health Care
System
  • Acute Care Hospitals (13)
  • Psychiatric Hospital (1)
  • Visiting Nurse Association (Home Care Agency)
  • Family Service of Milwaukee, (Social Service
    Agency)
  • Aurora Consolidated Laboratories
  • Aurora Medical Group
  • Aurora Retail Pharmacies
  • Aurora Rehabilitative Services
  • Aurora Sports Medicine Institutes
  • Aurora Womens Pavilion

6
Aurora Health Care Overview
  • Largest private employer in Wisconsin
  • 25,000 Employees
  • Not-for-profit with corporate offices in
    Milwaukee
  • 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

7
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

8
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

9
Senior Executive Role
  • Conveys a clear sense of the organizational
    strategic vision
  • Recognizes when its time to shift strategic
    direction
  • Challenges status quo thinking and assumptions
  • Understands the role and interrelationships of
    each organizational function
  • Learn about and understand the business of
    pharmaceuticals
  • 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

10
Senior Pharmacy Executive RoleThe Generalist
  • Promotes collaboration and removes obstacles to
    team work both departmental and
    interdepartmental
  • 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

11
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
    efficiently
  • Effective work and personal life balance

12
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
    performance
  • 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

13
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

14
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
I CEO
15
Be Careful with Industry Lingo
Atlanta Journal-Constitution, December 12, 2002
16
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

17
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)

18
Drug Use Management Savings
19
Budget Reductions 101
20
Metro Region Hospital Pharmacy Supply to Cost
Ratio
  • 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

21
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

22
Executive Role
  • Set expectations for pharmacy leaders
  • Finance
  • Budget, performance monitoring, revenue, cost,
    ROI
  • Operations
  • Productivity, staffing, talent accumulation
  • Drug policy
  • PT, substitution policies,
  • Make vs. buy
  • Injectables, orals, outsourcing decisions

23
Executive Role
  • Partner with pharmacy leaders and providers,
    especially for physician driven opportunities
  • PT committee
  • Utilization management
  • Preference items
  • Clinic vs. inpatient administration

24
Executive Role
  • Sensitize pharmacy leader to political issues,
    goals, priorities
  • When to stand, when to stand down
  • Running interference

25
Model for Evaluation of Pharmacy Products and
Services
  • 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

26
(No Transcript)
27
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

28
Reopro Financials
29
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

30
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

31
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

32
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

33
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

34
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

35
Buy vs. Make Decision
  • Pre-mixed vs. frozen vs. vials
  • Bar-code packaging
  • Pre-filled syringes
  • Bulk vs. unit dose

36
  • QUESTIONS?
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