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Developing a Business Case for Advancing Pharmacy Services Presented by: Steve Rough, RPh, M.S. Scott Knoer, M.S., Pharm.D. Director of Pharmacy Director of Pharmacy University of Wisconsin Hospital and Clinics University of Minnesota Medical Center 1 Slide 2 About Our Speakers Steve Rough, M.S., R.Ph, is Director of Pharmacy, University of Wisconsin Hospital and Clinics, Madison, WI He is a Clinical Assistant Professor at the UW-Madison School of Pharmacy Scott J. Knoer, MS, Pharm.D. is the Director of Pharmacy at the University of Minnesota Medical Center (UMMC) He is a Clinical Assistant Professor at the University of Minnesota College of Pharmacy and the Graduate Program in Social and Administrative Pharmacy 2 Slide 3 Objectives Develop a successful business proposal to justify a new clinical program, service or personnel Describe the key elements of a good executive summary Discuss strategies for securing resources from senior administration Produce a good return on investment (ROI) analysis that sells 3 Slide 4 Developing a business case for new programs, services and personnel 4 Slide 5 Project/Business Plan Document outlining the external services you are trying to provide for a potential business partner (stakeholder) Provides vision, lists objectives and provides task lists aimed at the completion of the project Should be written to the level of the audience (administration vs. clinical) Includes appendices of the work that has been completed (ROI, charts, etc.) Remember this can be thought of as a marketing guide or your sales pitch (stress the positive aspects of plan, minimize negativity) 5 Slide 6 Project/Business Plan 1. Executive summary 2. Table of contents 3. Background 4. Proposal of services to be provided 5. Benefits of the proposal 6. Resource requirements and financial implications 7. Milestones, schedule and action plans 8. Summary 9. Supporting documentation/appendices Key Components of a Project/Business Plan 6 Slide 7 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Executive Summary High level overview, maximum of 1 page, lots of bullet points Proposal (1-2 sentences about your program) Background (succinctly make case for change) Benefits to the organization (link to organizational goals) Financial analysis Conclusions Dont include anything not in the rest of the material Think of this as your abstract May be all that is read by people at higher pay grades than you 7 Slide 8 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Background Key literature review Best practices Gap analysis versus desired state Current situation in the organization Regulatory Quality/safety Finances Why is this important anyway? Any data supporting the need for the project 8 Slide 9 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Proposal of Service to be Provied Succinct statement of what you want to do and why Strive to be very clear, succinct, believable Target patient population of unit Proposed activities, hours of service Interaction with other departments Commitment of resource May highlight alternative routes 9 Slide 10 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Example Proposal Statement What are you proposing (text)? To increase patient safety, meet Joint Commission requirements and decrease costs associated with adverse events, the Pharmacy and Therapeutics Committee proposes implementing a pharmacist- based anticoagulation monitoring program 10 Slide 11 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Benefits of the Proposal Sell based on organizational goals, look for win-wins Patient safety (reduced error) Patient satisfaction Provider satisfaction Operational efficiency Cost savings/avoidance Continuity of care Reduced readmission rates Revenue growth/capture Reimbursement Patient outcomes Regulatory compliance Quality indicators Education/research Improved throughput/MD efficiency 11 Slide 12 1.Executive summary 6. Resource requirements/financial implications 2.Table of contents 7. Milestones, schedule and action plans 3.Background 8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Resource Requirements/Financial Implications Labor expense (salary plus fringe) Pharmacists Technicians Others Supplies Travel Computer Office Return on Investment (ROI) analysis 12 Slide 13 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Milestones/Action Plans Be specific Use Gantt charts and tables to show organizational sequence Have clear actions and timeline (proposed schedule) Measures of success to build credibility What indicators will be used (process, outcomes)? Who is responsible for auditing, measuring and reporting? How often will it be collected and reported? How will the report be shared? 13 Slide 14 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Summary Conclusion Succinctly tell em what you told em Proposal Benefits Know the organizations strategic plan and link to it 14 Slide 15 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Example Summary Statement University of XXX Medical Center should implement a pharmacist-managed warfarin dosing service which will reduce costs by $$$$ / year, reduce adverse drug events, improve physician efficiency and satisfaction and meet Joint Commission requirements 15 Slide 16 1.Executive summary6. Resource requirements/financial implications 2.Table of contents7. Milestones, schedule and action plans 3.Background8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal Supporting Documentation/Appendices ROI analysis Organizational fit and linkages (Practice, IT, Quality) Literature review (detailed) and/or detailed gap analysis Flow charts Pilot data details Detailed project plan with specific deliverables and accountability Letter of support from key stakeholder; especially physicians Reference Acknowledgements 16 Slide 17 Where to Start? Start with an example business case that was approved in your organization Ask colleague elsewhere for a template Discuss with your boss BEFORE you share it with them Most bosses hate surprises How many pages is it expected to be? 17 Slide 18 Helpful Hints Get a first draft ready in plenty of time to run it by 3-5 people for feedback Develop FAQs/talking points for your boss Build in assumptions for growth After the anticoagulation clinic enrollment is >300 patients, will add 0.5 FTE of technical support Know your organizational strategic plan Know who has your back Get decision support involved early Give the credit away 18 Slide 19 Always Think About Who are your key stakeholders? Whats their WIIFM? What barriers might you face? How will you obtain buy-in? What are the one or two keys to your success? What will you measure to demonstrate value? 19 Slide 20 Keys to a Winning Proposal Know your numbers Published literature and your own Make it personal with examples from your institution Highlight benefits to others in the system Use lots of figures, graphs, tables, large font Help your boss advocate for you Practice your elevator speech 20 Slide 21 Elevator Speech Quick 30-60 second overview of a service, project or proposal Perfect for communicating new initiatives to others outside of pharmacy Focuses on: What the project/service is Why it is important What the results will look like (WIIFM) What is needed from the receiver 21 Slide 22 Elevator Speech What the project/service is I want to let you know about a new pharmacy service starting next Monday. Pharmacists will automatically assess your patients meds and adjust doses daily for their renal function. Why it is important The Medical Executive Committee approved this project because many patients have rapidly changing renal function and it is often difficult for pharmacists to reach physicians to request dose changes when they are busy in the clinic or OR. 22 Slide 23 Elevator Speech What results will look like This service should optimize drug therapy and result in fewer phone call interruptions for you. What is needed from the receiver One thing we need from you is to let us know if you have intentionally dosed more or less aggressively than recommended so we do not modify those doses. 23 Slide 24 Return on Investment (ROI) Analysis 24 Slide 25 ROI Year 1-? Volume Costs (capital and operating) Assumptions (time per encounter, error avoided, etc) Payer sources and reimbursement Hard and soft dollar savings Time savings for staff Do NOT rely solely on number from the literature 1.Executive summary 6. Resource requirements/financial implications 2.Table of contents 7. Milestones, schedule and action plans 3.Background 8. Summary 4.Proposal of services to be provided 9. Supporting documentation/appendices 5.Benefits of the proposal 25 Slide 26 ROI Financial tool that measures the economic return of a project or investment ROI = Net benefits / costs X 100 1 http://www.bnet.com/2410-13240_23-66470.html?tag=content;col1 26 Slide 27 IRR IRR = Internal Rate of Return 2 The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. The higher a projects IRR, the more desirable it is to undertake the project. Allows comparison vs. other capital projects http://www.investopedia.com/terms/i/irr.asp 27 Slide 28 ROI Adhere to financial standards and partner with finance Enhances credibility Costs incurred or reduced/avoided Capital Labor Maintenance Operating Risk 28 Slide 29 ROI Case Rx Automation Current automation contract is expiring Review medication distribution system Safety and efficiency potential improvements Organizational imperative to minimize labor costs 29 Slide 30 Cost Elements to Consider in ROI Equipment Installation Labor for implementation Renovations 30 Slide 31 Savings Potential for ROI Labor Reduction vs. redeployment vs. avoidance Inventory One time reduction, wastage reduction Current costs of automation What you were spending already Safety/quality improvement savings Medication incident cost 31 Slide 32 Model ROI Format 32 Example Slide 33 AUTOMATED DISPENSING YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL Capital Equipment /Interface (1) $ (317,577) Additional Interfaces (2) $ (30,000) Remodel Cost (3) $ (50,000) Support Fees(31,128) $ (155,640) $ - Inventory Reduction (4) $ 284,078 Released FTE Savings (5) $ 93,600 $ 96,408 $ 99,300 $ 102,279 $ 105,348 $ 496,935 Carrying Cost (6)$17,045 $ 18,493 $ 20,065 $ 21,771 $ 77,375 Product Shrinkage (7) $ - Outdate Reduction (8)$15,000$15,750$16,537.50$17,364.38$18,232.59 $ 82,884 TOTAL INVESTMENT (with Inventory Reduction) $ (397,577) $ 361,550 $ 98,075 $ 103,203 $ 108,581 $ 114,223 $ 418,055 IRR 40% Payback (years) 2.0 Model ROI - Carousels 33 Example Slide 34 Financial Analysis Hard costs You can track these to the General Ledger FTEs (under Salaries and Benefits on GL) Must extend FTEs for Salary and Benefits (approx 15%) One shift 7 days a week is 1.4 FTEs Salary x FTEs x S&B multiplier $100,000 x 1.4 x 1.15 = $161,000 34 Slide 35 Financial Analysis Other hard costs Physical space Remodel workroom = $20,000 dollars Work with facilities here Rent Space has a cost. We rent space from the U for $18 / ft 2 1000 square foot room 1000 ft 2 x $18 / ft 2 / yr 12 months $1,500 / month Computers, refrigerators, supplies, etc 35 Slide 36 Hard and Soft Dollars Hard savings Revenue Real dollars that you can bill insurance Increased script volume by doing discharge medication reconciliation Decreased costs Increased inventory turns, decreased inventory volume Decreased waste in the IV room (real quantifiable waste) 36 Slide 37 Soft Dollars You cant track these to the GL ADE avoidance Literature says $2,000 / ADE avoidance 3 Calculate ADEs avoided (soft) Use the literature Are you willing to take $ out of your drug budget based upon this proposal? If not, they are soft dollars Arch Intern Med. 2005;165(4):424-429 37 Slide 38 Nursing Time Hard or Soft Savings? Potentially hard If you get rid of nursing Pharmacy generated MAR Decreases transcription time for nursing Are they actually going to get rid of nurses? If so, hard savings If not, soft savings Dont have to hire nurses to get other things done 38 Slide 39 Presentation Pearls 39 Slide 40 Presentation Pearls Every business case should be accompanied by a PowerPoint presentation Great student or resident project! Present facts and data uniquely A pictures worth a thousand words Examples: Big bag full of wasted meds Digital pictures of reality 40 Slide 41 41 Slide 42 Presentation Pearls Pick 3-5 key points and emphasize Explain how they support organizational goals and initiatives OR Rx example Increase charge capture and waste reduction offset labor costs Current situation is not safe We can do it in