developing a business case for advancing pharmacy services

Developing a Business Case for Advancing Pharmacy Services

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

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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

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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

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Developing a business case for new programs, services and personnel

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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)

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Clearly states the benefits

Not pharmacy-centric

Project/Business Plan

Executive summary

Table of contents

Background

Proposal of services to be provided

Benefits of the proposal

Resource requirements and financial implications

Milestones, schedule and action plans

Summary

Supporting documentation/appendices

Key Components of a Project/Business Plan

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Executive Summary 1 page!!!! =Likely all that will be read.

Proposal (1-2 sentences)

Background (Project Concept)

Briefly describe current situation making case for change

Financial analysis

Benefits

safety, accuracy, service, compliance, etc

Conclusion

Executive summary6. Resource requirements/financial implications

Table of contents7. Milestones, schedule and action plans

Background8. Summary

Proposal of services to be provided 9. Supporting documentation/appendices


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

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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

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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

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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

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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

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Warfarin Monitoring Service

Safety decreased ADEs

Cost decreased ADEs

Regulatory

Joint Commission

Efficiency / Service

Saves Physician time

Executive summary 6. Resource requirements/financial implications

Table of contents 7. Milestones, schedule and action plans

Background 8. Summary



Resource Requirements/Financial Implications

Labor expense (salary plus fringe)

Pharmacists

Technicians

Others

Supplies

Travel

Computer

Office

Return on Investment (ROI) analysis

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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?

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Summary

Conclusion

Succinctly tell em what you told em

Proposal

Benefits

Know the organizations strategic plan and link to it

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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

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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

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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?

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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

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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?

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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

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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

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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.

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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.

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Return on Investment (ROI) Analysis

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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

Executive summary 6. Resource requirements/financial implications

Table of contents 7. Milestones, schedule and action plans

Background 8. Summary



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ROI

Financial tool that measures the economic return of a project or investment

ROI = Net benefits / costs X 1001

http://www.bnet.com/2410-13240_23-66470.html?tag=content;col1

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IRR

IRR = Internal Rate of Return2

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

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ROI

Adhere to financial standards and partner with finance

Enhances credibility

Costs incurred or reduced/avoided

Capital

Labor

Maintenance

Operating

Risk

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ROI Case Rx Automation

Current automation contract is expiring

Review medication distribution system

Safety and efficiency potential improvements

Organizational imperative to minimize labor costs

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Cost Elements to Consider in ROI

Equipment

Installation

Labor for implementation

Renovations

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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

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Model ROI Format

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Example

AUTOMATED DISPENSINGYEAR 0YEAR 1YEAR 2YEAR 3YEAR 4YEAR 5TOTALCapital Equipment /Interface (1) $ (317,577) $ (317,577)Additional Interfaces (2) $ (30,000)Remodel Cost (3) $ (50,000) $ (50,000)Support Fees(31,128)(31,128) (31,128) (31,128) (31,128) $ (155,640) $ - Inventory Reduction (4) $ 284,078 $ 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

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Example

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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

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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 / ft2

1000 square foot room

1000 ft2 x $18 / ft2 / yr 12 months

$1,500 / month

Computers, refrigerators, supplies, etc

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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)

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Soft Dollars

You cant track these to the GL

ADE avoidance

Literature says $2,000 / ADE avoidance3

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

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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

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Presentation Pearls

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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

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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

developing a business case for advancing pharmacy services

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