Fifteenth Annual ASHP Conference
for Leaders in Health-System Pharmacy
Revenue Optimization and
New Pharmacy Business Models
ANTHONY ZAPPA, PHARM.D., M.B.A.
STEVE ROUGH, M.S., B.S.PHARM.
SCOTT KNOER, PHARM.D., M.S.
Fifteenth Annual ASHP Conference
for Leaders in Health-System Pharmacy
Anthony Zappa, Pharm.D., M.B.A.
CIO and Director, Specialty/Infusion Operations
Fairview Pharmacy Services LLC
Minneapolis, Minnesota
Anthony Zappa, Pharm.D., M.B.A., is currently CIO and Director of Specialty/Infusion
Operations with Fairview Pharmacy Services, LLC ("FPS"). He has over twenty years
experience in pharmacy benefit management (PBM) administration, hospital pharmacy, and
retail pharmacy operations. He is responsible for all outpatient pharmacy systems and
dispensing technologies as well as customer service and dispensing operations of FPS' mail
order, specialty, home infusion and community infusion pharmacies.
Dr. Zappa earned his Bachelor of Science and Doctor of Pharmacy degrees from the College of
Pharmacy, University of Minnesota and Master of Business Administration from the University of
St. Thomas in Minneapolis.
Prior to joining FPS, Dr. Zappa spent five years with Chronimed/BioScrip as Executive Vice
President of Operations overseeing 32 retail stores, a high-volume specialty pharmacy and
clinical programs. His experience includes eight years in the PBM industry, with three years
overseas where he was in charge of international business development and South African
PBM operations for SmithKline Beecham. Dr. Zappa's clinical experience includes over five
years of hospital pharmacy practice.
1
Fifteenth Annual ASHP Conference
for Leaders in Health-System Pharmacy
Steve Rough, M.S., B.S.Pharm.
Director of Pharmacy
University of Wisconsin Hospital and Clinics
Clinical Assistant Professor
University of Wisconsin-Madison School of Pharmacy
Madison, Wisconsin
Steve Rough, M.S., B.S.Pharm., is Director of Pharmacy at the University of Wisconsin Hospital
and Clinics, and Clinical Assistant Professor at the UW-Madison School of Pharmacy. He is
also Director of the two year Health-System Pharmacy Administration Residency Training and
Masters Program at UW Hospital.
Mr. Rough received his Bachelor of Science in Pharmacy and Master of Science in HealthSystem Pharmacy Administration from the School of Pharmacy at the University of Wisconsin,
Madison, Wisconsin. He also completed the residency training program in Pharmacy Practice
and Health-System Pharmacy Administration at the University of Wisconsin Hospital and
Clinics.
He has coordinated and implemented progressive pharmacy services in virtually all practice
settings. He has contributed six textbook chapters and numerous other papers in the pharmacy
literature related to pharmacy administration and leadership, medication safety, the application
of automation and technology, operational benchmarking and a variety of other managementrelated topics. He has been an invited lecturer for local, state and national audiences.
Mr. Rough recently completed a four-year elected term as Treasurer of the Pharmacy Society of
Wisconsin, and he currently serves as a member of the UHC Pharmacy Council Executive
Committee. He has served as Chair for the ASHP Section of Pharmacy Practice Managers in
2008, is a member of the ASHP House of Delegates, and has served as Chair for the ASHP
Council on Pharmacy Management. In 2003, Mr. Rough received both the Wisconsin
Pharmacist of the Year award and an ASHP Best Practices Award for the paper he submitted
describing the impact of point-of-care bar code medication scanning technology on medication
error reduction. In 2006, he accepted the inaugural ASHP Foundation Pharmacy Residency
Program Excellence Award on behalf of the University of Wisconsin Hospital and Clinics
administrative residency and masters program. Mr. Rough is also co-creator of the ASHP
Managers’ Boot Camp Workshop and ASHP State Affiliate Student Leadership Development
Workshop. In July of 2009, he was awarded the UW Hospital and Clinics Presidential
Leadership Award provided annually to a department director for exceptional sustained
leadership across the organization and in the community. His practice and research interests
include pharmacy administrative practice, medication-use safety, work redesign, pharmacy
technology, financial management, and implementation of progressive pharmacy services.
2
Fifteenth Annual ASHP Conference
for Leaders in Health-System Pharmacy
Scott J. Knoer, Pharm.D., M.S.
Director of Pharmacy
University of Minnesota Medical Center
Minneapolis, Minnesota
Scott J. Knoer, Pharm.D., M.S., is Director of Pharmacy at the University of Minnesota Medical
Center (UMMC), in Minneapolis, Minnesota. He is responsible for planning, implementing, and
managing pharmacy services at this three-hospital academic medical center. He is Program
Director of the two year Health-System Pharmacy Administration Residency and Masters
Program at UMMC. He precepts student clerkships in pharmacy leadership and administration.
He is a Clinical Assistant Professor at the University of Minnesota College of Pharmacy and the
Graduate Program in Social and Administrative Pharmacy where he teaches the Institutional
Pharmacy and Hospital Pharmacy Classes, respectively.
Dr. Knoer received his Bachelor of Arts in Psychology from Creighton University and his Doctor
of Pharmacy from the University of Nebraska. He completed a two year administrative residency
and received a Master of Science in Hospital Pharmacy from the University of Kansas.
Dr. Knoer is the Chair of the American Society of Health-System Pharmacists (ASHP) Practice
Managers Section where he previously served as Director-at-Large. He is a member of the
ASHP House of Delegates, and he has served as Chair of the Section Advisory Group on
Leadership Development and as a member of ASHP’s Commission on Affiliate Relations. He
serves as Chair of the University Health-System Consortium (UHC) Process Improvement and
Compliance Council. Dr. Knoer has also served in a variety of local and state affiliate roles in
Minnesota and Texas.
Dr. Knoer has published articles related to leadership development, pharmacy management,
process improvement and benchmarking. His latest publication entitled, “Lessons Learned from
a Practice Model Change at an Academic Medical Center,” is scheduled to appear in the
November issue of the American Journal of Health-System Pharmacy. This article is a result of
Dr. Knoer’s experience with organizational change management related to practice model
innovation. Dr. Knoer frequently lectures on a various topics including pharmacy operations and
automation, process improvement, leadership development, change management, and disaster
preparedness. He is the co-creator of the ASHP Managers’ Boot Camp, a program designed to
teach leadership and management skills to pharmacists.
3
Fifteenth Annual ASHP Conference
for Leaders in Health-System Pharmacy
ANTHONY ZAPPA, PHARM. D., M.B.A.
STEVE ROUGH, M.S., B.S.PHARM.
SCOTT KNOER, PHARM.D., M.S.
Revenue Optimization and New Pharmacy Business Models
ABSTRACT
Pharmacy leaders will need to begin looking beyond the traditional business models for their
organizations to remain successful. Having the skills to provide entrepreneurial solutions will
help continually improve the value the pharmacy brings to an organization. In this workshop,
you will develop new pharmacy business strategies for continued success in this changing
health care environment.
LEARNING OBJECTIVES
After participating in this application-based educational activity, participants should be able to

Analyze general trends occurring in hospitals and health systems that impact revenue.

Inventory business opportunities that could be evaluated by your organization.

Determine the revenue cycles of services utilizing medications and/or requiring
medication management services.
4
The Changing Landscape of Health Care:
Cultivating Leadership in Health‐System Pharmacy
Revenue Optimization and New Pharmacy Business Models
Tony Zappa, Pharm.D., M.B.A., Fairview
Pharmacy Services
Steve Rough, M.S., B.S.Pharm, University
of Wisconsin Hospitals and Clinics
Scott Knoer, Pharm.D., M.S., University of
Minnesota Medical Center
Introductions
• Steve Rough and the University of Wisconsin
• Scott Knoer and the University of Minnesota
• Tony Zappa and Fairview Pharmacy Services, LLC
Agenda
• Introductions
• Where can you add value to your system?
– Revenue opportunities and models
• Health
Health care reform: How will accountable care care reform: How will accountable care
organizations (ACOs) and case payments change things?
• What do you need to make it happen?
– Infrastructure and processes
• Practical assignment and presentation
5
What systems are represented?
1. <100 beds
2. 101‐300 beds
3. >300 beds
0%
0%
1
0%
2
3
What systems are represented?
1. For‐profit
2. Non‐profit
0%
1
0%
2
What systems are represented?
1. Academic
2. Non‐academic
0%
1
0%
2
6
What systems are represented?
1. Urban
2. Rural
0%
0%
1
2
Do You Have Ambulatory Pharmacy Services?
1. Do not have ambulatory pharmacy services
2 Have ambulatory 2.
Have ambulatory
pharmacy services
0%
1
0%
2
Health System Models
and Ambulatory Services
and Ambulatory Services
25 minutes
7
UW Health Integrated Pharmacy Care Network
Community (Retail)
Pharmacy
Services Network
Unity
i Pharmacy
h
Program//
Prescription Benefit
Management Services
Home Health Care
Pharmacy Services
Management of Corporate
Pharmacy Network
Automation and robotic technology
Clinical and translational research
Education and training
Electronic health record/information technology systems
Entrepreneurial business expansion
Financial management (utilization, contracting)
Medication use policy program
N l
Nuclear
pharmacy
h
service
i
Operations and medication use systems management
Patient care services/practice advancement
Personnel management
Purchasing contract network (Novation/UHC)
Quality and safety
Regulatory compliance
Revenue cycle optimization
Supply chain management
UW Health Acute and Ambulatory Care
Core Pharmacy Services
(UW Hospital, UWMF, DFM)
Specialty Care/
Mail Service
Pharmacy
Hospice Care and
Other Pharmacy
Service Agreements
Rural Hospital Management/
Purchasing Contracts
and Consulting Services
UW Health Department of Pharmacy
1. Receives support from and interacts closely with the CCKM in establishment of evidence-based medication use policy initiatives
2. Reports to Brad Ludwig for operational responsibilities; reports to Steve Rough for overall departmental integration
UWHC Pharmacy Department
Internal Activities
• Inpatient pharmacist services
• Clinic pharmacist services and bleeding disorders
– 16 clinics including anticoagulation (4.5 FTE)
• 13 ambulatory (retail) pharmacies (67 FTE)
– Specialty and mail service pharmacy program
• Vendor Liaison Office (2 FTE)
• Clinical and Translational Research Center (13 FTE)
• Drug Policy Program (8 FTE)
• Informatics team – Epic (10.5 FTE) and Enterprise (2 FTE)
• Indigent medication assistance program (2 FTE)
• Medication prior authorization program (2 FTE)
• Discharge medication specialists (1 FTE)
• Nuclear pharmacy service (3 FTE)
• ED and infusion center pharmacy services (2.5 and 1 FTE)
8
UWHC Pharmacy Department
External Activities
• Unity Pharmacy Program (5 FTE)
• Pharmacy management and consulting programs
–
–
–
–
–
–
Divine Savior Healthcare (DSH)
HospiceCare Incorporated
Wisconsin Dialysis (WDI) and UW Health Kidney Clinic
Several rural hospital affiliate purchasing contracts
p
p
g
Badger Prairie After hours medication order review programs
• UW School of Pharmacy
–
–
–
–
–
310 students on rotation within UW Health locations
Master in Health‐System Pharmacy Administration program
All pharmacists are clinical instructors
Extensive teaching involvement with school of pharmacy
Funds 7.7 FTE pharmacist salaries
Pharmacy Department FY11 Expense, Revenue & Statistics
All expenses are in $millions
Revenues
•
•
•
•
Inpatient
Clinics + Bleeding Disorders Program
Retail
Oncology
Other
Total
$131.7
$63.8
$72.2
$57.9
$0
$325.6
$108 7
$108.7
Drug expense
Drug expense
$22 0
$22.0
$22 6
$22.6
$40 9
$40.9
$23 2
$23.2
$0
% of total drug expense
20.2%
20.8%
37.6%
21.3%
0%
Personnel expense
$12.4
$2.2
$5.8
$1.2
$5.7
$27.3
Total expense
$35.1
$25.3
$47.4
$24.4
$5.6
$137.8
Margin
$96.6
$38.5
$24.8
$33.5
‐$5.6
$187.8
FTEs
132.9
24.0
66.6
12.7
65.8
302.0
3,342 inpatient medication orders per day 14,521 inpatient medication doses administered per day (1 dose every 6 seconds)
99.9% unit dose dispensing
1,853 retail prescriptions per day
UW Health Pharmacy Department Challenges and Opportunities
• Shrinking retail pharmacy margins • Ambulatory (retail and clinic administered) medication reimbursement complexities
• Dramatically rising drug costs for small percent of our total patient population – BMT, Hemophilia, Transplant
BMT Hemophilia Transplant
• Pharmacist workforce cyclical hiring pattern and scheduling expectations
• Electronic Health Record (Epic)
– All implementations heavily impact pharmacy
– Staff and manager time commitment much greater than expected
– Achieving theoretical return via improved decision support
• Rising number of pharmacy‐related external quality P4P measures
9
University of Minnesota: System Stats
•
•
•
•
•
•
University of Minnesota Medical Center and 6 community hospitals
22,000+ employees
2,500 aligned physicians 44 primary care clinics
55 specialty clinics
A ill b i
Ancillary businesses, including home care, rehab, senior services
i l di h
h b
i
i
2009 data
• $2.8 billion total revenue
• 4.4 million outpatient encounters • 80,314 inpatients served
• $425.1 million community contributions • Total assets of $2.4 billion
Fairview Pharmacy Services Business Model
32 Retail
Pharmacies
Consulting
Home
Infusion
ClearScript
PBM
Community
Infusion
Advanced
Therapies
Clinic
FPS, LLC
Specialty
Pharmacy
30 Anticoag.
Clinics
MTM
Compounding
Pharmacy
Mail Order
Pharmacy
Fairview Pharmacy Services Revenue
$122 MM
$1 MM
$40 MM
Consulting
Home
Infusion
$24 MM
ClearScript
PBM
$55 MM
$?
32 Retail
Pharmacies
Community
Infusion
Advanced
Therapies
Clinic
FPS, LLC
$335 MM
Specialty
Pharmacy
$70 MM
30 Anticoag.
Clinics
$?
MTM
$1 MM
Compounding
Pharmacy
Mail Order
Pharmacy
$16 MM
$5 MM
10
FPS Organizational Structure
Retail Pharmacy
Inpatient Directors
PBM
FPS President
Sales and Marketing
Mail Order & Specialty Pharmacy
Home Infusion
CIO
HR
CFO
Additional Positions:
- Compliance
- Clinical Services
Discussion: What Other Discussion:
What Other
Models are People Using?
10 minutes
Why Ambulatory Services?
Why
Ambulatory Services?
System Objectives
20 minutes
11
Health Systems’ Objectives
Capture, Retain and
Grow Revenue
Leverage Assets
Access All Products
and Therapies
Gain Positive
Returns on Capital
Investments
Optimize Clinical
Performance
Threats and Opportunities
Capture, Retain and
Grow Revenue
Threats
1. Insurers, PBMs, Specialty Pharmacies carving out treatments
2. Insurers shifting clinic meds to lower‐cost options
3. Low Rx capture rates
4. Payors looking for part of the 340B pie
Opportunities
1. Make pharmacy a revenue‐generating business line
2. Incent staff to drive business internally
3. Institute policy against brown‐bagging
4. Coordinate payor contracts (medical and pharmacy)
Risks and Opportunities
Leverage Assets
Threats
1. Focus on cost reductions usually leads to staff cuts
2. Hospitals and clinics operating near p y,
g p
capacity, limiting expansion
Gain Positive
Returns on Capital
Investments
Opportunities
1. Refocus cost controls to revenue growth
2. Centralize and automate
3. Put pharmacy staff closer to the care
4. Consider niche offerings in high‐value conditions
12
Risks and Opportunities
Threats
1. More specialty products defined “limited distribution”
• Small populations/markets
• REMS (risk evaluation and mitigation strategy)
Opportunities
1. Pharma: early and often
2. Leverage clinical trials and research programs
3. Partner with local “competitors”
Access All Products
and Therapies
Risks and Opportunities
Optimize Clinical
Performance
Threats
1. ACO and case‐rate payment strategies will force focus on outcomes
2. Payors’ short‐term focus
Opportunities
1. ACO and case‐rate payment strategies will force focus on outcomes
2. Partner with other systems on best practices
3. Use ancillary professionals more upstream
4. Leverage the medical record
5. Start talking with health plan sponsors directly
Revenue Cycle Management
Scheduling
Check-in
Registration
Patient
Encounter,
Prescribing and
Documentation
Credentialing
Contracting
Self-pay
collection
(patient A/R)
The
Revenue
Cycle
Coding /
Charge
Review
Charge Entry
Payment or
Denial Posting
(3rd party A/R)
Insurance
Follow-up
Claim
Production
• Managing the cycle is crucial to financial performance
• Starts with contracting
– Network access
– Reimbursement rates
Reimbursement rates
– Prior authorization requirements
– Audit rights and take‐back provisions
– Documentation and retention requirements
13
Revenue Cycle Management
Scheduling
• Getting patient benefit plans correct is “linchpin”
Check-in
Registration
Patient
Encounter,
Prescribing and
Documentation
Credentialing
The
Revenue
Cycle
Contracting
Self-pay
collection
(patient A/R)
Coding /
Charge
Review
Charge Entry
Payment or
Denial Posting
(3rd party A/R)
Claim
Production
Insurance
Follow-up
– Benefit investigations
– Patient set‐up verification
• Charge masters must be reviewed regularly
i
d
l l
– Too easy to underprice claims
• Claims denials and audits need to be proactively and aggressively managed
– Fairview: had $3.2 million in payback requests in 2009
– Paid back $42,000
Revenue Cycle Management
Scheduling
• Patient A/R needs to be carefully managed
Check-in
Registration
Patient
Encounter,
Prescribing and
Documentation
Credentialing
The
Revenue
Cycle
Contracting
Self-pay
collection
(patient A/R)
Coding /
Charge
Review
Charge Entry
Payment or
Denial Posting
(3rd party A/R)
Claim
Production
Insurance
Follow-up
– Don’t do it unless absolutely necessary
– Keep statements to a bare minimum
– Be assertive on collections
• 340B programs require higher level of scrutiny
–
–
–
–
Medicaid exceptions
Patient qualifications
Clinic/Provider qualifications
Drug inclusions
Revenue Cycle Management
Scheduling
Check-in
Registration
Credentialing
Contracting
Self-pay
collection
(patient A/R)
The
Revenue
Cycle
Patient
Encounter,
Prescribing and
Documentation
Coding /
Ch
Charge
Review
Charge Entry
Payment or
Denial Posting
(3rd party A/R)
Insurance
Follow-up
Claim
Production
• Several points in the cycle represent marketing opportunities
• Requirements:
– Good system access
– Clinic staff cooperation
– Marketing collateral
• Value messages
– Good follow‐through by pharmacy staff
14
Discussion: What Are Your Discussion:
What Are Your
Systems’ Objectives?
10 minutes
Health Care Reform:
Health
Care Reform:
Barrier or Benefit?
20 minutes
Have Your Systems Discussed ACOs?
1. Yes
2. No
3. Don’t know
0%
1
0%
2
0%
3
15
ACOs: Game‐changer?
• Accountable Care Organization (ACO) included in Section 3022 of Patient Protection and Affordable Care Act (“PPACA”)
– Shared Savings Program for Medicare enrollees
• ACOs meeting quality performance standards are eligible for payments (“shared savings”)
• Secretary of HHS must establish the program by 1/12/12
• Separate ACO demonstration project for pediatrics to be established by 1/1/12
Who Can Be in an ACO?
• “ACO Professionals” ‐ physicians, physician assistants (PAs), nurse practitioners (NPs), clinical nurse specialists in group practice settings
• Networks of individual ACO‐Ps
• Partnerships of joint ventures (JVs) between hospitals and ACO‐Ps
• Hospitals employing ACO‐Ps
• Others as the HHS Secretary determines is appropriate
In other words, just about everyone but allied professionals
ACO Requirements
1. Accountable for cost, quality and overall care of Medicare FFS (fee for service) beneficiaries assigned to it
2. Three‐year agreement
3. Legal structure to receive and distribute payments
4. Sufficient number of primary care ACO‐Ps
5. Sufficient number of necessary ACO‐Ps
6. Leadership and management structure including clinical and administrative systems
7. Defined processes to:
– Promote evidence‐based care
– Report on cost and quality measures
– Coordinate care
8. Demonstrate it meets patient‐centeredness criteria
16
Financial Impact on ACOs
• Additional payments from Centers for Medicare & Medicaid Services (CMS) if average per‐capita expenditures are X% of a benchmark
– Will use three years of per‐beneficiary expenditures to set y
p
y p
benchmark
– In addition to standard Part A and Part B payments
• Potential abuse will be monitored (avoidance of high‐
risk patients) and sanctions may be applied
• Preference given to ACOs participating in similar arrangements with other payors
ACOs: Threats and Opportunities
• Threats
– Network exclusion if not included in an ACO?
– Lower payments if not in an ACO?
– Increasing quality and cost benchmarks?
– Savings potential erodes as performance improves?
– Spill‐over into the commercial market?
• Opportunities
– Focus on outcomes and total cost of care
– Preferential network inclusion when in an ACO
– Additional payments, at least in the short term
– Spill‐over into the commercial market
– Include clinical pharmacist on ambulatory primary care team
ACOs’ Impact on Outpatient Services
• While PPACA’s ACO language is focused on Medicare, commercial payors already exploring options
• While PPACA’s ACO language is only for hospital and clinic treatments (Parts A and B), commercial payors are talking about total cost of care
about total cost of care
Since drugs are 20% of overall spend…
• Since specialty is 20% of outpatient prescriptions…
• Since home infusion acuity is increasing…
• Since long‐term care acuity is increasing…
• Since outcomes rely on good patient interactions…
17
Opportunity to Improve Access
• Residents in critical shortage areas are 1.7 times more likely to experience preventable hospitalization
• Pharmacists are a highly‐trained, readily g y
,
y
available workforce capable of rapidly expanding patient access to health care
• Pharmacist involvement in primary care has resulted in high satisfaction ratings from patients and providers alike
Opportunity to Improve Quality
• Studies show that optimum medication use is demonstrated in only 4‐21% of patients8
• Quality benchmarks are nationally‐reported
• Greater pharmacist involvement leads to:
Greater pharmacist involvement leads to:
– Fewer hospitalizations9
– Lower health care costs10
– Better adherence to evidence‐based consensus guidelines11
– Better outcomes9‐11,12
Opportunity to Improve Cost Savings and Reimbursement
• Pharmacists have demonstrated benefit‐cost ratios of 2.89:113
• Pay‐for‐performance and Accountable Care Organizations tie reimbursement to
Organizations tie reimbursement to achievement of recognized outcomes measures (higher quality = higher payout)
– Pharmacists have repeatedly demonstrated improved outcomes, thus improving reimbursement under these systems
18
Increasing Support for Pharmacist Involvement
• The Wall Street Journal notes that pharmacists are a useful and necessary resource in the primary care teams14
• The American Medical Association recognizes The American Medical Association recognizes
the important collaborative role pharmacists can fill15
Key Benefits of Pharmacist Involvement
• Maximize efficiency for primary care providers
• UW Health will share in savings and receive bonus payments
from providing higher‐quality, lower‐cost care to Medicare beneficiaries
Improved patient access to comprehensive primary care services
• Improved patient satisfaction with the quality and breadth of health services provided • More effective management of complex, evidence‐based medication regimens for common chronic conditions
• Optimized quality and clinical process outcomes for high‐
performance recognition and external quality reporting
• Cost‐effective treatment including lower utilization rates for ambulatory sensitive conditions
How To Involve Pharmacists
• Monitor medication‐related pay‐for‐performance measures and implement quality improvement initiatives
• Pharmacist‐led prescription renewal service
• Monitoring/dosing high‐risk and/or high‐cost medications
• Pharmacist
Pharmacist‐led
led polypharmacy clinic to identify opportunities polypharmacy clinic to identify opportunities
for more efficient use
• Optimize patient compliance to improve outcomes
• Manage procedures for conflict of interest
• Provide chronic disease state monitoring services
• Many more…
19
Possible Staffing Models
1. As an integral member of the decentral patient‐
centered medical home team (microsystem)
2. As a provider of medication management services through a pharmacist‐run medication therapy management clinic
3. As a provider of centralized telehealth services
4. As a hybrid model incorporating aspects of the above three models.
Funding Opportunities for Pharmacist Involvement
• Maximize outcomes for pay‐for‐performance measures, enhancing reimbursement
• Incident‐to and facility fee billing
• Negotiate payment with managed care organizations
• Reduce total health care costs and resource utilization without compromising quality
• Improve throughput (efficiency) of primary care clinics
• Obtain grant funding for demonstration projects
ACO Pharmacist References
1.
2.
3.
4.
5.
6.
7.
8.
Office of Shortage Designation, Health Resources and Services Administration, U.S. Department of Health & Human Services. Shortage Designation. http://bhpr.hrsa.gov/shortage/index.htm. Accessed June 7, 2010. Bodenheimer T, Pham HH. Primary care: current problems and proposed solutions. Health Aff (Milwood). 2010;29(5):799‐805.
Patient Protection and Affordable Care Act. http://www.aafp.org/online/en/home/policy/ federal/hcrleg2010.html. 2010. Accessed June 7, 2010.
Hoven AD. Doctor‐pharmacist teamwork can apply to many settings. American Medical News. http://www.ama‐assn.org/amednews/2010/08/16/edca0816.htm. August 16, 2010. Accessed August 23, 2010. Wisconsin Council on Medical Education and Workforce. Who will care for our patients? http://www.wha.org/pubArchive/special_reports/2008PhysicianReport.pdf. Accessed June 16, 2010. Parchman ML and Culler SD. Preventable hospitalizations in primary care shortage areas. Arch Fam Med. 1999;8:487‐491. Collins C, Kramer A, O’Day ME, Low MB. Evaluation of patient and provider satisfaction with a pharmacist‐managed lipid clinic in a Veterans Affairs medical center. Am J Health‐Syst Pharm. 2006;63:1723‐1727. Garfield S, Barber N, Walley, P, Willson A, Eliasson L. Quality of medication use in primary care‐
mapping the problem, working to a solution: a systematic review of the literature. BMC Med. 2009;7:50.
20
ACO Pharmacist References
9. 10.
11.
12.
13.
14.
15.
Royal S, Smeaton L, Avery AJ, Hurwitz B, Sheikh A. Interventions in primary care to reduce medication related adverse events and hospital admissions: systematic review and meta‐analysis. Qual Saf Health Care. 2006;15:23‐31.
Yanchick JK. Implementation of a drug therapy monitoring clinic in a primary‐care setting. Am J Health‐
Syst Pharm. 2000;57(S4):S30‐S34.
Altavela JL, Jones MK, Ritter M. A prospective trial of a clinical pharmacy intervention in a primary care practice in a capitated payment system. J Manag Care Pharm. 2008;14(9):831‐843.
Smith M, Bates DW, Bodenheimer T, Cleary PD. Why pharmacists belong in the medical home. Health
Smith M, Bates DW, Bodenheimer T, Cleary PD. Why pharmacists belong in the medical home. Health Aff (Milwood). 2010;29(5):906‐913.
Perez A, Doloresco F, Hoffman JM, et al. Economic evaluations of clinical pharmacy services: 2001‐
2005. Pharmacotherapy. 2008:28(11):285e‐323e. Vanderveen RP. How to care for 30 million more patients. Wall Street Journal. July 19, 2010.
Hoven AD. Doctor‐pharmacist teamwork can apply to many settings. American Medical News. http://www.ama‐assn.org/amednews/2010/08/16/edca0816.htm. August 16, 2010. Accessed August 23, 2010. Discussion: How are Your Systems Responding to Health Care Reform?
Responding to Health Care Reform?
10 minutes
Break Time
Break Time
20 minutes
21
Ambulatory Services:
Success Factors and Evaluation Tools
10 minutes
What are the Real Revenue Opportunities?
• Retail Pharmacy
– Maximize on‐site Rx capture
– Maximize employee capture
– Expand into community
• Mail Order
– Maximize patient capture
– Maximize employee capture
Specialty Pharmacy
Home Infusion
PBM
Clinical Trials
Long‐term Care and Assisted Living
• Consulting Services
• Indigent Drug Program Management
•
•
•
•
•
Retail Pharmacy Goals
• Maximize patient care and safety
‐ Screening programs and immunizations
‐ Medication therapy management
‐ Compliance management
• Growth and revenue enhancement
• Outstanding customer service
• Branding
22
Retail Pharmacy
• Model: full‐service or professional?
• Factors affecting financial performance
–
–
–
–
–
–
–
Rx/patient
Revenue per RX
p
Capture rate from system
Staffing levels
Labor costs
Systems and technology (Rx software, POS, IVR, robotics, etc)
Opportunity/capacity for community expansion
Mail Order Pharmacy
• Model: Employee‐only or open‐access?
• Factors affecting financial performance
– Rx/patient
– Revenue per RX
– Capture rate from system
– Staffing levels
– Labor costs
– Automation
Specialty Pharmacy
• Factors affecting financial performance
– Number of specialists in the system
– Payor mix
– Rx/patient
– Revenue per RX
– Capture rate from system
– Staffing levels and labor costs
– Delivery logistics
23
Home Infusion
• Factors affecting financial performance
– Number of patient encounters
– Payor mix
– Revenue per patient
– Capture rate from system
– Staffing levels and labor costs
– Delivery logistics
PBM (pharmacy benefit management)
• Big Question: Is your system self‐insured?
• Second Big Question: Are you getting the best deal from your existing PBM?
• Factors affecting financial performance
F t
ff ti fi
i l
f
– Plan size
– Build or buy?
– Ability to expand into the open market
– Pass‐through versus traditional model
Clinical Trials
• Factors affecting financial performance
– Level of research being done
– System and provider interest
– Patient volume (i.e., recruitment volume)
P ti t l
(i
it
t l
)
– Relationships with Pharma
– Ability to manage distribution and data
24
Examples of Retail Optimization Strategies
• Employee Rx program (retail and mail order)
– Copay incentives to use a system pharmacy
– Low‐price generic program
– OTC discounts
– Payroll deduction for convenience
– Own‐use opportunity?
• Centralized order processing
• Web‐based refill site
– With selective product marketing
• E‐Prescribing
E Prescribing
• Enterprise‐wide software
• Marketing and capture programs in clinics
• Indigent drug program (340B • Prior authorization coordinators focused on LCD eligible?)
documentation for Medicare
• Central fill (automation)
UW Health Ambulatory Ambulatory
Pharmacy Reform
6 Strategies to Improve Ambulatory Pharmacy Financial Performance
1.
2.
3.
Restructure operations and hold ourselves accountable to new operational efficiency performance parameters (15 Rx/RPh/hr) with recent technology investments
Reduce drug expense through better purchasing
Improve reimbursement/collections (reduce bad debt/charity care)
•
•
•
•
•
4.
5.
6.
Medicare provider number issue will be resolved
Transfer charity care to a new account outside of retail pharmacies
More strict charging privilege guidelines
Accounts receivable system improvement to reduce bad debt
Daily monitoring of negative margin reports
Close 2 pharmacies 6/30/10 ‐ 70% retention
Strengthen marketing efforts to increase volumes
Evaluate performance on the “whole” to incentivize sites to feed business to more efficient central mail/fill operations
25
$3.4 million margin improvement
Initiative
Impact
closing 2 pharmacies
Comment
$211,000
These templates will be zeroed out when opened.
Personnel savings $889,326 •Restructure operations to new performance standards • 5.65 pharmacist FTE reduction (8 FTE off schedule to create supervisor).
• 5.7 technician FTE reduction.
Drug expense savings
1,133,000
•Dedicated ambulatory pharmacy buyer
Transfer drug inventory
$280,000
One‐time savings
Charity care reduction
$101,852
• Requesting an account to charge Fiscal‐approved charges at CSC (mostly discharge prescriptions to facilitate inpatient discharge). •Pharmacy management of AR instead of hospital billing staff.
Bad debt reduction
$844,436 •Medicare provider number issue since 2002.
Total financial gain
3,459,614 Did not include volume increase
Operational Efficiency Improvement
Initiatives
• Central Order Processing and Load Balancing
• Central Fill
• RAMP (autofill) –
(
) Refill Assistance Monitoring g
Program
Load Balancing
• All Rx’s must be put through reception at all sites
• No prescriptions should be left on the counter at the end of each day
26
Central Fill
• Generate reports for mail out, delivery etc and will work with each site to MOVE and have medications processed out of a central location and delivered to the originating site g
g
• Shift staffing accordingly to ParataMax sites/Central fill locations
RAMP
• Have patients sign up for the RAMP program
• Rx’s should be sent to the central fill location
• Will need a mechanism to call and remind patients to pick up Rx’s in will call
patients to pick up Rx’s in will call
Drug Expense Savings
• Brand to generic migrations: $813,677
– Prograf to tacrolimus:
– Cellcept to mycophenolate:
– Neoral to cyclosporine:
$298,150
$291,427
$224,100
• Monitor
Monitor the negative margin report on a daily basis
the negative margin report on a daily basis
• Run the slow movers report on a monthly basis
• Assure compliance with best practice purchasing at all sites
27
Financials – Strategic Marketing
Initiatives
Providers and Staff:
• Develop stronger relationships with clinic providers, promote the quality difference our pharmacies offer
• Cashless Convenience‐ payroll deduction for over the counter (OTCs) and prescription co‐pays
• Employee OTC discount, 20%
• Low cost generic program ‐
L
i
30 d
30 day supply for $9.99 and 90 day supply for l f $9 99 d 90 d
l f
$11.99 for identified drugs
Patients:
• Low cost generic program ‐ 30 day supply for $9.99 and 90 day supply for $11.99 for identified drugs
• Interactive web response feature for online refills (future enhancement)
• Pilot – Express discharge concept. Requires processing discharge Rx’s on the nursing units, process TBD
70
Marketing Brochure
Admission Packets and Clinics
Marketing Brochure– Mail Order
28
Customer Satisfaction Measurement
Customer Service Standards
Customer Service Standards
• 2 major things impacting the patient experience
– People • Get the right people on the bus
• Be quick to fire, slow to hire
– Processes
• Efficient, streamlined systems
• Clear expectations (standards) you routinely measure yourself against
• Then let feedback/data drive your decisions/actions
29
Customer Service Standards
• 5 things customers (patients) want from people
–
–
–
–
–
Respect (do things with them, not for/to them)
Confidentiality
Listening
Kindness
Compassion
• Good things to measure
–
–
–
–
–
The above 5 things
Wait time
Telephone response time
Pharmacist availability
Communication
Specialty Pharmacy Clinic Pharmacist Strategy
• Improved annual revenues by $626,000 due to growth hormone prior authorization service in AFCH endocrine clinic ($82,000 margin)
• 0.2 FTE new pulmonary clinic pharmacist documents 3 avoided CF admissions per month ($320,000 savings per year to UWHC, additional business in specialty pharmacy)
• 90‐day retail contracts Reducing Write‐offs
• Ambulatory medication cost‐avoidance and revenue optimization programs (3.6 FTE)
– Medication Assistance Program (MAP)
• Started 2003
• Serves underinsured and uninsured patient populations
• 2 FTE pharmacy technicians
– Medication Prior Authorization Coordinators (MPAC)
• Infusion Center started 3/09, 1 FTE
• Oncology Clinic started 8/09, 1 FTE – Pharmacy staffed without additional FTE
– FY10 total program cost savings/avoidance to UWHC = $4.6 million
30
Reducing Write‐offs
• MAP Program
– Maximize patient participation in manufacturer‐sponsored “take home” drug programs
– Maximize hospital participation in manufacturer‐sponsored “replacement drug” programs
– Work closely with providers and clinic staff
• MPAC Program
– Assure proper medical record documentation for Medicare patients prescribed high‐cost clinic drug (with local and national coverage determination criteria) to maximize hospital reimbursement and avoid write‐offs
• Facilitate completion of Advance Beneficiary Notice (ABN) forms when therapy falls outside Medicare covered indication
– Pre‐certification of high‐cost clinic administered medications for patients with private insurance
– Enroll patients in medication co‐pay assistance programs
754
800
585
600
500
$2.50
34.2%
436
$2.96
92.7% $1.85
200
100
$2.00
60%
400
300
$3.50
$3.00
28.9%
700
$1.50
(milllions)
Ave # of MAP patients/month
MAP Savings FY08 – FY10
$1.00
$0.50
$0.96
0
$0.00
FY08
FY09
Total value to UWHC
FY10F
Ave # of MAP patients/month
FY10 MPAC Estimated Annual Value
• Value determined based on detailed intervention documentation (8 patients per day) • Salary plus fringe = $106,000 in FY10 • We are just at the tip of the iceberg as more private plans are requiring prior‐authorization per guidelines similar to Medicare
FY10
Maximize hospital reimbursement and avoid write‐offs for high‐cost clinic medications for Medicare patients
$1,300,000
Pre‐certification of high‐cost clinic administered medications for private insurance patients
$230,000
Enroll patients in medication co‐pay assistance programs
$133,000
Total Documented Savings in FY10
$1,663,000
31
Revenue Maximization Threats
• Revenue leakage due to missing or miscoded data in chargemaster
• Purchasing drugs that cost more than reimbursement
• Procedural breakdowns that block reimbursement (coding, ABNs, etc)
• Keeping up with change to CMS regulations
• Labor intensive workflows
Discussion: Are Capital Dollars Discussion:
Are Capital Dollars
Available in Your Systems?
10 minutes
Building
g the Business Case:
Pro forma Models
20 minutes
32
Health‐system Ambulatory Pharmacy Business Case and ProForma Exercise
• Retail Proforma
• Specialty Proforma
Home Infusion Proforma
• Home Infusion Proforma
Pro Forma: Major Sections
• Revenue: Gross and Net
• Cost of Goods Sold
Gross Margin
• Expenses
–
–
–
–
Labor
Supplies
Utilities and Infrastructure
Purchased Services and Allocations
• Interest and Taxes
• Depreciations
Operating Income
Net Income
Small Group
p Exercise:
Build and Present a Pro Forma
Build: 20 minutes
Present: 30 minutes
33
Case Study
• Retail Proforma
• Specialty Proforma
– Start with Prevalence model
Additional References
•
•
•
•
Pharmacy reimbursement: A guide for the reluctant pharmacist. Jarrett A. ASHP website. http://www.ashp.org/s_ashp/docs/files/SPPM_Pharmacy_Reimbursement.pdf
(access 24 Sept 2010).
The ABCs of ACOs. Bass, Berry and Simms website: http://www.bassberry.com/files/Publication/f55dbab0‐b844‐4a1f‐bf0a‐
0e34ebab8d7d/Presentation/PublicationAttachment/a98eb254‐ce4f‐48f3‐924b‐
/
/
/
0e91896128f7/HealthReformImpact‐ABCs.pdf (accessed 29 April 2010). Susan Dentzer, Editor‐in‐Chief, Health Affairs. Presentation to ASHP 2010 Summer Meeting. http://www.ashp.org/DocLibrary/SM2010/SM10‐Dentzer‐Slides.aspx
(accessed 24 Sept 2010).
Zubiago S. A linchpin of health care reform: accountable health care organizations. Nixon Peobody website. http://web20.nixonpeabody.com/healthcare/sitepages/A%20linchpin%20of%20he
alth%20care%20reform%20accountable%20health%20care%20organizations.aspx
(accessed 24 Sept 2010).
The Changing Landscape of Health Care:
Cultivating Leadership in Health‐System Pharmacy
Revenue Optimization and New Pharmacy Business Models
CE Session Code for this workshop:
_________
34
Fifteenth Annual ASHP Conference
for Leaders in Health-System Pharmacy
SELF-ASSESSMENT QUESTIONS
1. Which of the following, while still important, is not a key high level health-system growth
objective listed in this presentation for developing a successful ambulatory pharmacy
program?
a. Capture and retain revenue.
b. Leverage assets.
c. Reduce overtime.
d. Optimize clinical performance.
2. Which of the following is not a requirement for ACOs (accountable care organizations) as
defined in the Patient Protection and Affordable Care Act (PPACA)?
a. Sufficient number of primary care providers.
b. Level-1 trauma center.
c. Defined process to promote evidence-based care.
d. Patient-centeredness criteria.
3. Capture rate from clinics and hospitals is an important factor when considering an
ambulatory pharmacy start-up?
a. True.
b. False.
4. Specialty pharmacy limited distribution networks are a threat to the financial performance of
the specialty pharmacy business model.
a. True.
b. False.
ANSWERS:
1.
2.
3.
4.
c
b
a
a
35
Fifteenth Annual ASHP Conference
for Leaders in Health-System Pharmacy
REFERENCES
1. Bodenheimer T, Pham HH. Primary care: current problems and proposed solutions. Health
Aff (Milwood). 2010; 29(5):799-805.
2. Collins C, Kramer A, O’Day ME, Low MB. Evaluation of patient and provider satisfaction with
a pharmacist-managed lipid clinic in a Veterans Affairs medical center. Am J Health-Syst
Pharm. 2006; 63:1723-27.
3. Garfield S, Barber N, Walley et al. Quality of medication use in primary care-mapping the
problem, working to a solution: a systematic review of the literature. BMC Med. 2009; 7:50.
4. Hoven AD. Doctor-pharmacist teamwork can apply to many settings. American Medical
News. http://www.ama-assn.org/amednews/2010/08/16/edca0816.htm. (accessed 2010
Aug 23).
5. Office of Shortage Designation, Health Resources and Services Administration, U.S.
Department of Health & Human Services. Shortage designation.
http://bhpr.hrsa.gov/shortage/index.htm. (accessed 2010 Jun 7).
6. Parchman ML and Culler SD. Preventable hospitalizations in primary care shortage areas.
Arch Fam Med. 1999; 8:487-91.
7. Patient Protection and Affordable Care Act. http://www.aafp.org/online/en/home/policy/
federal/hcrleg2010.html. 2010. (accessed 2010 Jun 7).
8. Wisconsin Council on Medical Education and Workforce. Who will care for our patients?
http://www.wha.org/pubArchive/special_reports/2008PhysicianReport.pdf. (accessed 2010
Jun 16).
ADDITIONAL ONLINE RESOURCES
1. Pharmacy reimbursement: A guide for the reluctant pharmacist. Jarrett A. ASHP website.
http://www.ashp.org/s_ashp/docs/files/SPPM_Pharmacy_Reimbursement.pdf (accessed
2010 Sept 24).
2. The ABCs of ACOs. Bass, Berry and Simms website:
http://www.bassberry.com/files/Publication/f55dbab0-b844-4a1f-bf0a0e34ebab8d7d/Presentation/PublicationAttachment/a98eb254-ce4f-48f3-924b0e91896128f7/HealthReformImpact-ABCs.pdf (accessed 2010 Apr 29).
3. Susan Dentzer, Editor-in-Chief, Health Affairs. Presentation to ASHP 2010 Summer
Meeting. http://www.ashp.org/DocLibrary/SM2010/SM10-Dentzer-Slides.aspx (accessed
2010 Sept 24).
36
Fifteenth Annual ASHP Conference
for Leaders in Health-System Pharmacy
4. Zubiago S. A linchpin of health care reform: accountable health care organizations. Nixon
Peobody website.
http://web20.nixonpeabody.com/healthcare/sitepages/A%20linchpin%20of%20health%20ca
re%20reform%20accountable%20health%20care%20organizations.aspx (accessed 2010
Sept 24).
37
38
$
RX Discounts
% of Gross Revenues
Discount Amount
Medication Therapy Management
Interventions per Rx
$
$
$
Gross Revenues
RXs
OTC
Total
$
$
$
-
$
-
-
$0.00
0
% Annual Price Incr.- OTC
Average OTC price
0
OTC Units
OTCs per Rx
Total OTCs
0
0
0
0
0
$0.00
0
0
0
Rx Units
Number of Clinic RXs
Community RXs
Total RX Units
Year 2
Charge per Unit
% Annual Price Incr.
Average Rx price
0
0
-
2011
Year 1
Retail Proforma
Target Rx per day
Rx from clinic
Additional Rx needed per day
Revenues
Prescribers in clinic
Patients per Day per Prescriber
Rx per Patient
Clinic Capture Rate (%)
Store size (sq ft)
Hours
Operating days per year
Newco Pharmacy, Inc.
New site #50
$
$
$
$
0
0
0
0
0
0
-
-
$0.00
$0.00
Year 3
$
$
$
$
0
0
0
0
0
0
-
-
$0.00
$0.00
Year 4
$
$
$
$
0
0
0
0
0
0
-
-
$0.00
$0.00
Year 5
9/10/2010
39
FTE
Hourly Rate
Annual Increase %
Total Salaries
Manager
Pharmacist
Technician
Clerk
Clerk
Technician
Pharmacist
FTE
Hourly Rate
Annual Increase %
Rx/FTE/day
FTE
Hourly Rate
Annual Increase %
Rx/FTE/day
RPh Rx/FTE/day
FTE
Hourly Rate
Annual Increase %
$
$
$
$
$
Net Revenue
Costs
Salaries and Benefits
Pharmacist Manager
$
-
#DIV/0!
#DIV/0!
#DIV/0!
-
-
2011
Year 1
-
$
$
$
$
$
$
-
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
$0.00
-
-
Year 2
-
Retail Proforma
Total Interventions
Charge per Intervention
Total MTM Revenue
Store size (sq ft)
Hours
Operating days per year
Newco Pharmacy, Inc.
New site #50
$
$
$
$
$
$
-
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
$0.00
-
-
Year 3
-
$
$
$
$
$
$
-
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
$0.00
-
-
Year 4
-
$
$
$
$
$
$
-
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
$0.00
-
-
Year 5
-
9/10/2010
40
$
$
$
Bldg Operating Exp
Square Feet
Base Rent/sq ft
Base Rent
Operating Expense/sq ft
Operating Expenses
Total Rent (Base+Expenses)
Maintenance
Cost/Square Foot
Annual Increase
Utilities
Telephone
Annual Increase
-
$
-
-
-
$
-
$
OTC Supplies
% of OTC Net Revenue
OTC COGS
Gross Margin
Total Gross Margin
-
-
-
$
$
Office Supplies
% of Net Revenue
Total Office Supplies
Pharmacutical Supplies
% of RX Net Revenue
Rx COGS
Gross Margin
Total Gross Margin
$
2011
Year 1
$
-
0
$
$
$
$
$
$
$
$
$
$
$0
0
$0.00
-
-
-
-
-
-
-
-
Year 2
-
Retail Proforma
Benefits % of Salaries
Total Benefits
Total
Store size (sq ft)
Hours
Operating days per year
Newco Pharmacy, Inc.
New site #50
$
$
$
$
$
$
$
$
$
$
$0
0
$0.00
-
-
-
-
-
-
-
-
Year 3
-
$
$
$
$
$
$
$
$
$
$
$0
0
$0.00
-
-
-
-
-
-
-
-
Year 4
-
$
$
$
$
$
$
$
$
$
$
$0
0
$0.00
-
-
-
-
-
-
-
-
Year 5
-
9/10/2010
41
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
Automation
Life (months)
Monthly Depre
# mths 1st yr
Leasehold Improvements
Life (months)
Monthly Depre
# mths 1st yr
Total Depreciation
#DIV/0!
#DIV/0!
#DIV/0!
Computer/POS/Fax/Phones
Life (months)
Monthly Depre
# mths 1st yr
-
#DIV/0!
#DIV/0!
$
2011
Year 1
$
-
$
$
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-
-
Year 2
-
Retail Proforma
Depreciation
Fixtures (Millwork, Furn)
Life (months)
Monthly Depre
# mths 1st yr
Bad Debt
% of Net Revenue
Total Bad Debt
Insurance
Cost
Annual Increase
Total Maintenance
Store size (sq ft)
Hours
Operating days per year
Newco Pharmacy, Inc.
New site #50
$
$
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-
-
Year 3
-
$
$
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-
-
Year 4
-
$
$
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-
-
Year 5
-
9/10/2010
42
Pmt Allocation:
Working Capital
Goodwill/other assets
Total Purchase Price
9/10/2010retail proforma - default blank 080210.xlsx
Total Business Valuation:
Year 5 EBITDA
P/E Multiple
Business Value
Net Present Value @ 19%
IRR
Cash Flow
Fixtures
Computer/POS/Fax/Phones
Equip (Filamaster)& Sign
Computer/POS
Leasehold Improvements
Working Capital (Inv & AR)
Goodwill/other assets value
PV Lease Commitment
Net Income/(Loss)
Improvement
Depreciation
Net Cash Flow
Operating Expenses
Salaries
Benefits
Licenses
Reference Books
Suppl/Computer/Postg
Rent Base
Rent Operating Exp
Telephone
Security
Maintenance
Depreciation
Bad Debt
Marketing
Other (incl ins)
Total Operating Expenses
Net Income
% Net Revenue
$
$
$
RX Supplies
OTC Supplies
Gross Margin
-
$
$
$
$
$
#DIV/0!
#VALUE!
-
$
$
$
#DIV/0!
#DIV/0!
#DIV/0!
$
$
$
-
#DIV/0!
#DIV/0!
$
-
#DIV/0!
$
#DIV/0!
#DIV/0!
0.65% $
#DIV/0!
$
-
-
$
$
$
$
-
$
$
#DIV/0!
-
$
-
$
-
-
$
2011
Year 1
$
Year 0
MTM Revenue
OTC Revenue
Total Net Revenue
Revenues
RX Revenue
Discounts
Newco Pharmacy, Inc.
New site #50
0
0
0
-
-
#DIV/0!
-
-
-
-
#DIV/0!
#DIV/0!
#DIV/0!
($20/RX)
#DIV/0!
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
-
$
$
$
$
$
$
$
$
$
$
$
$
$
Year 2
0
$0
0
0
-
-
#DIV/0!
-
-
-
-
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
-
$
$
$
$
$
$
$
$
$
$
$
$
$
Year 3
0
$0
0
0
-
-
#DIV/0!
-
-
-
-
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
-
$
$
$
$
$
$
$
$
$
$
$
$
$
Year 4
0
$0
0
0
-
-
#DIV/0!
-
-
-
-
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
-
$
$
$
$
$
$
$
$
$
$
$
$
$
Year 5
Retail Proforma
0
$0
0
0
$
$
$
-
-
9/10/2010
43
$10,000
$21,000
$2,400
$12,000
$11,700
$30,000
$10,000
Anemia/Neutropenia
Growth Deficiency
Infertility
Organ Transplant
Hepatitis C
Cystic Fibrosis
Bone Marrow Transplant
TOTAL
Fairview Confidential
$20,000
$24,775
$141,180
Total
Multiple Sclerosis
Hemophilia
HIV/AIDS
$15,000
Rheumatoid Arthritis
$7,550
$15,000
Psoriasis
Oncology
Gastroenterology
$15,000
Disease State
Immune-mediated Conditions
Crohn's Disease
Pulmonology
Transplant
Transplant
Infection Disease
Endocrinology
Fertility
Hematology
Oncology
Nephrology
Infection Disease
Oncology
Neurology
Hematology
Rheumatology
Dermatology
Physician
Specialty
Health Plan X
250,000
Annual RX
Spent Per
Patient
Client:
Population:
Fairview Specialty Pharmacy
Disease Prevalence and Specialty Expense Model
As of 8/2/2010
124
50
9,000
1,800
450
113
4,000
50
25
10
3,466
4.5% of affected use biologic
0.02% of Population
3.6% of population affected
20% of affected seek treatment
25% of those treated use biologic
140,000 living recipients in US (0.045% prevalence)
1.6% of Population
1.25% of affected are treated
30,000 Total US Population (0.0098% prevalence)
13,000 done per year (0.004% incidence)
9/10/2010
2,750
525
263
1,400
450
70
5,000
250
25
2,450
613
708
250
25
Disease State
Estimated Market
(Patients)
1.1% of population
0.1% of Population
0.01% of Population
0.16 % of population with Pharmacy benefit usage
0.40% of population with Medical benefit usage
0.3% of population are HIV positive; 70% are diagnosed
50% of diagnosed are treated
0.18% of Population
280 people per million use biologic
2% of Population
5% are severe cases
10% of severe use biologic
0.98% of population
25% of affected use biologic
Prevalence of Disease
Prevalence Model
Page 1
$585,000
$735,000
$100,000
$42,293,250
$1,080,000
$1,350,000
$1,237,500
$1,050,000
$5,250,000
$10,570,000
$9,187,500
$10,612,500
$6,193,750
$3,529,500
$375,000
$1,050,000
Total Revenue
Per Disease State
44
$
$
$
Net Revenue
Cost of Goods Sold
Gross margin %
Gross Margin
Total COGS
Expenses
Salaries and Benefits
Manager
$
Medication Therapy Management
Interventions per patient
Total Interventions
Charge per Intervention
Total MTM Revenue
$
$
FTE
Hourly Rate
Annual Increase %
2,000
260
#DIV/0!
#DIV/0!
2011
Year 1
-
-
-
-
-
-
$
$
$
$
$
$
$
$
0%
$0.00
-
-
-
-
-
#DIV/0!
#DIV/0!
-
-
-
Year 2
Specialty Proforma
RX Discounts
% of Gross Revenues
Discount Amount
Average price per Rx
Annual increase
Total Rxs
Rx/day
Total Gross Revenue
Revenues
Total population
Likely patients (from model)
Total potential revenue
Annual increase
Capture Rate (%)
Facility size (sq ft)
Operating days per year
Newco Pharmacy, Inc.
New site #50
$
$
$
$
$
$
$
$
0%
$0.00
-
-
-
-
-
#DIV/0!
#DIV/0!
-
-
-
Year 3
$
$
$
$
$
$
$
$
0%
$0.00
-
-
-
-
-
#DIV/0!
#DIV/0!
-
-
-
Year 4
$
$
$
$
$
$
$
$
0%
$0.00
-
-
-
-
-
#DIV/0!
#DIV/0!
-
-
-
Year 5
9/10/2010
45
Rx/Tech
Projected FTE
Real FTE
Hourly Rate
Annual Increase %
Rx/Shipper
Projected FTE
Real FTE
Hourly Rate
Annual Increase %
Calls/Rx
Total calls/day
Calls/Rep
Projected FTE
Real FTE
Hourly Rate
Annual Increase %
Rx/Person
Projected FTE
Real FTE
Hourly Rate
Annual Increase %
Technician
Packer/Shipper
Call Center Representative
Other support staff
Total Salaries
Manager
Pharmacist
Technician
Packer/Shipper
Call Center Representative
Rx/Rph
Projected FTE
Real FTE
Hourly Rate
Annual Increase %
2,000
260
$
$
$
$
$
-
$
$
$
$
$
#DIV/0!
#DIV/0!
-
$0.00
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
Year 2
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
2011
Year 1
Specialty Proforma
Pharmacist
Facility size (sq ft)
Operating days per year
Newco Pharmacy, Inc.
New site #50
$
$
$
$
$
-
$0.00
$0.00
#DIV/0!
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
Year 3
$
$
$
$
$
-
$0.00
$0.00
#DIV/0!
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
Year 4
$
$
$
$
$
-
$0.00
$0.00
#DIV/0!
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
$0.00
#DIV/0!
Year 5
9/10/2010
46
$
$
$
$
$
Office Supplies
% of Net Revenue
Total Office Supplies
Medical Supplies
% of Net Revenue
Medical Supplies COGS
Bldg Operating Exp
Square Feet
Base Rent/sq ft
Annual increase
Base Rent
Operating Expense/sq ft
Annual Increase
Operating Expenses
Total Rent (Base+Expenses)
Insurance
Cost
Annual Increase
Maintenance
Cost/Square Foot
Annual Increase
Total Maintenance
$
$
Benefits % of Salaries
Total Benefits
Utilities
Telephone
Annual Increase
$
$
2,000
260
-
-
-
-
-
-
-
2,000
2011
Year 1
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$0
-
-
$0.00
-
-
-
$
$
$
$
$
$
2,000
$
-
-
-
Year 2
-
Specialty Proforma
Other support staff
Total
Facility size (sq ft)
Operating days per year
Newco Pharmacy, Inc.
New site #50
$
$
$
$
$
$0
-
-
$0.00
-
-
-
$
$
$
$
$
$
2,000
$
-
-
-
Year 3
-
$
$
$
$
$
$0
-
-
$0.00
-
-
-
$
$
$
$
$
$
2,000
$
-
-
-
Year 4
-
$0
-
-
$0.00
-
-
-
2,000
-
-
-
-
Year 5
-
9/10/2010
47
#DIV/0!
#DIV/0!
#DIV/0!
Leasehold Improvements
Life (months)
Monthly Depre
# mths 1st yr
Total Depreciation
#DIV/0!
#DIV/0!
Automation
Life (months)
Monthly Depre
# mths 1st yr
#DIV/0!
#DIV/0!
Computer/POS/Fax/Phones
Life (months)
Monthly Depre
# mths 1st yr
$
2011
Year 1
#DIV/0!
#DIV/0!
2,000
260
-
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-
Year 2
Specialty Proforma
Depreciation
Fixtures (Millwork, Furn)
Life (months)
Monthly Depre
# mths 1st yr
Bad Debt
% of Net Revenue
Total Bad Debt
Facility size (sq ft)
Operating days per year
Newco Pharmacy, Inc.
New site #50
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-
Year 3
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-
Year 4
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-
Year 5
9/10/2010
48
$
$
RX COGS
Gross Margin
-
$
$
$
$
$
#DIV/0!
#VALUE!
-
$
$
$
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
-
-
$
$
$
$
$
$
-
$
$
0.65% $
Pmt Allocation:
Working Capital
Goodwill/other assets
Total
Purchase
Priceblank 080210.xlsx
9/10/2010specialty
proforma
- default
Total Business Valuation:
Year 5 EBITDA
P/E Multiple
Business Value
Net Present Value @ 19%
IRR
Cash Flow
Fixtures
Computer/POS/Fax/Phones
Equip (Filamaster)& Sign
Computer/POS
Leasehold Improvements
Working Capital (Inv & AR)
Goodwill/other assets value
PV Lease Commitment
Net Income/(Loss)
Improvement
Depreciation
Net Cash Flow
Net Income
% Net Revenue
Operating Expenses
Salaries
Benefits
Licenses
Reference Books
Office Supplies
Medical Supplies
Rent Base
Rent Operating Exp
Telephone
Security
Maintenance
Depreciation
Bad Debt
Marketing
Other (incl ins)
Total Operating Expenses
-
$
#DIV/0!
-
2011
Year 1
$
Year 0
Revenues
Gross RX Revenue
Discounts
MTM Revenue
Total Net Revenue
Newco Pharmacy, Inc.
New site #50
0
0
0
-
-
#DIV/0!
-
-
#DIV/0!
#DIV/0!
#DIV/0!
($200/Rx)
#DIV/0!
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
-
$
$
$
$
$
$
$
$
$
$
$
$
Year 2
0
0
0
-
-
#DIV/0!
-
-
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
-
$
$
$
$
$
$
$
$
$
$
$
$
Year 3
0
0
0
-
-
#DIV/0!
-
-
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
-
$
$
$
$
$
$
$
$
$
$
$
$
Year 4
0
0
0
-
-
#DIV/0!
-
-
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
$
#DIV/0!
#DIV/0!
$
#DIV/0!
$
-
$
$
$
$
$
$
$
$
$
$
$
$
Year 5
0
0
0
Specialty Proforma
$
#DIV/0!
#DIV/0!
9/10/2010