Developing a Business Case for Advancing Pharmacy Services

Presented by:
Steve Rough, RPh, M.S. Director of Pharmacy University of Wisconsin Hospital and Clinics Scott Knoer, M.S., Pharm.D. Director of Pharmacy University of Minnesota Medical Center

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

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

Developing a business case for new programs, services and personnel

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)

Project/Business Plan
Key Components of a Project/Business Plan
1. 2. 3. 4. 5. 6. 7. 8. 9.

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
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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

1. 2. 3. 4. 5.

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
6. 7. 8. 9. Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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Executive summary Table of contents Background Proposal of services to be provided 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

1. 2. 3. 4. 5.

Executive summary Table of contents Background Proposal of services to be provided Benefits of the proposal

6. 7. 8. 9.

Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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Proposal of Service to be Provied

1. 2. 3. 4. 5.

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

Executive summary 6. Resource requirements/financial implications Table of contents 7. Milestones, schedule and action plans Background 8. Summary Proposal of services to be provided 9. Supporting documentation/appendices 9 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 pharmacistbased anticoagulation monitoring program

1. 2. 3. 4. 5.

Executive summary Table of contents Background Proposal of services to be provided Benefits of the proposal

6. 7. 8. 9.

Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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Benefits of the Proposal

Sell based on organizational goals, look for win-wins

1. 2. 3. 4. 5.

Patient safety (reduced error) Patient satisfaction Provider satisfaction Operational efficiency Cost savings/avoidance Continuity of care Reduced readmission rates

6. 7. 8. 9.

Revenue growth/capture Reimbursement Patient outcomes Regulatory compliance Quality indicators Education/research Improved throughput/MD efficiency
Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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Executive summary Table of contents Background Proposal of services to be provided Benefits of the proposal

Resource Requirements/Financial Implications

Labor expense (salary plus fringe)
Pharmacists Technicians Others

1. 2. 3. 4. 5.

Supplies Travel Computer Office Return on Investment (ROI) analysis

Executive summary Table of contents Background Proposal of services to be provided Benefits of the proposal 6. 7. 8. 9. Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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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

1. 2. 3. 4. 5.

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?
6. 7. 8. 9. Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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Executive summary Table of contents Background Proposal of services to be provided Benefits of the proposal

Summary

Conclusion Succinctly tell em what you told em

Proposal Benefits

Know the organizations strategic plan and link to it

1. 2. 3. 4. 5.

Executive summary Table of contents Background Proposal of services to be provided Benefits of the proposal

6. 7. 8. 9.

Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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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

1. 2. 3. 4. 5.

Executive summary Table of contents Background Proposal of services to be provided Benefits of the proposal

6. 7. 8. 9.

Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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Supporting Documentation/Appendices

1. 2. 3. 4. 5.

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
Executive summary Table of contents Background Proposal of services to be provided Benefits of the proposal 6. 7. 8. 9. Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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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 Table of contents Background Proposal of services to be provided Benefits of the proposal 6. 7. 8. 9. Resource requirements/financial implications Milestones, schedule and action plans Summary Supporting documentation/appendices
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1. 2. 3. 4. 5.

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

Year 0 Capital Purchase Hand-held devices Software and upgrades RF Network Installation Total Capital Expenses Ongoing Operating Expenses Annual lease expense for software and handhelds, including maintenance Printer and paper suppliesa Additional pharmacy technician labor (FTE) for barcoding and inventory/catalog maintenance (2 FTE) Nursing project manager (1FTE) Additional nurse go-live support resources Maintenance (included above) Batteries for hand-held (included above) Total Operating Expenses Ongoing Savings--Hard Printer and paper supply cost avoidance Bulk drug purchases less than unit dose medications Net hard savings Ongoing Savings--Soft ADE avoidance (see calculation below, conservative estimate applied) Other benefits: nursing satisfaction, improved documentation accuracy, reduced litigation expenses, improved charge capture, patient confidence in care, public relations benefits Total Savings Potential including soft savings Total Net Savings (Loss)--Hard Savings Only Total Net Savings (Loss)--Hard and Soft Savings Cumulative Net Savings (Loss)--Hard Savings Only Cumulative Net Savings (Loss)--Hard and Soft Savings ($145,000) ($145,000) ($145,000) ($145,000) Quantity 220 Actual Unit Cost $0 $0 $145,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 $0 $0 $145,000 $0 $145,000 $600,000 $2,500 $82,701 $102,960 $75,000 $0 $0 $863,161 $600,000 $2,600 $86,836 $108,108 $0 $0 $0 $797,544 $600,000 $2,730 $91,178 $113,513 $0 $0 $0 $807,421 $600,000 $2,867 $95,737 $119,189 $0 $0 $0 $817,792 $600,000 $3,010 $100,523 $125,149 $0 $0 $0 $828,682 $600,000 $3,160 $105,550 $131,406 $0 $0 $0 $840,116 $600,000 $3,318 $110,827 $137,976 $0 $0 $0 $852,122

($22,000) ($92,000) $0 ($114,000) ($1,358,450)

($22,880) ($95,680) ($118,560) ($1,358,450)

($23,795) ($99,507) ($123,302) ($1,358,450)

($24,747) ($103,487) ($128,234) ($1,358,450)

($25,737) ($107,627) ($133,364) ($1,358,450)

($26,766) ($111,932) ($138,698) ($1,358,450)

($27,837) ($116,409) ($144,246) ($1,358,450)

$0 ($1,472,450) ($749,161) $609,289 ($894,161) $464,289

$0 ($1,477,010) ($678,984) $679,466 ($1,573,145) $1,143,755

$0 ($1,481,752) ($684,119) $674,331 ($2,257,263) $1,818,087

$0 ($1,486,684) ($689,558) $668,892 ($2,946,821) $2,486,979

$0 ($1,491,814) ($695,318) $663,132 ($3,642,139) $3,150,111

$0 ($1,497,148) ($701,417) $657,033 ($4,343,556) $3,807,144

$0 ($1,502,696) ($707,875) $650,575 ($5,051,431) $4,457,719

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Model ROI - Carousels

AUTOMATED DISPENSING YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL Capital Equipment /Interface (1) $ (317,577) $ (317,577) Additional Interfaces (2) $ (30,000)

Remodel Cost (3) Support Fees

(50,000) (31,128) (31,128) (31,128) (31,128) (31,128)

(50,000)

$ (155,640)

$ Inventory Reduction (4) Released FTE Savings (5) Carrying Cost (6) $ $ 284,078 93,600 $ 96,408 $17,045 $ $ 99,300 18,493 $ $ 102,279 20,065 $ $ 105,348 21,771 $ $ $

284,078 496,935 77,375

Product Shrinkage (7) Outdate Reduction (8) TOTAL INVESTMENT (with Inventory Reduction) IRR Payback (years)

$15,000

$15,750

$16,537.50

$17,364.38

$18,232.59

$ $

82,884

(397,577)

361,550

98,075

103,203

108,581

114,223

418,055 40% 2.0

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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 Increased inventory turns, decreased inventory volume Decreased waste in the IV room (real quantifiable waste)

Decreased costs

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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 <100 days

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Presentation Pearls
Be prepared for being challenged Consider all alternatives honestly Acknowledge the risks of your proposal

OR Rx example Limited space available, territoriality We have no OR pharmacy experience.. We could put an ADM in each OR suite, but

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Presentation Pearls
Know how everyone is going to vote before the vote
Hallway conversations Lobby the executives be subtle Get buy in from key physicians Medical director of ??? P&T Chair Who is deciding? CEO Sr. Leadership meeting of VPs CFO Your VP
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Presentation Pearls
Dont overplay the regulatory card If you use it every week, it loses its credibility If you use it, make sure you put it in context:

This will meet JC requirement MM3. This will help with meeting Dont overstate the impact on JC requirements Are there different interpretations of the requirements that people in the room will bring up?

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Step 1 & 2: Prepare and Assess

Understand the literature, and use it Start with admission process Conduct a pilot project, and collect data to demonstrate

pharmacists accuracy and accuracy of other providers Identify key stakeholders, educate them and build their interest and support
Physicians, Nurses, QI, Fiscal, Administration, Risk

Management

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Step 3 & 4: Analyze and Plan

Quantify resource requirements Quantify pharmacist accuracy vs. other providers Assess skill level of current staff Develop a business plan for investing in pharmacist resources
Quality safety impact (project annual error avoidance) ROI with literature-based and institution-specific

statistics (savings of avoided harmful errors) Other benefits

Time savings for other providers Improved pharmacist job satisfaction and retention As pharmacist relations with physicians develop, it is easier to implement services that dramatically reduce drug cost

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Medication Reconciliation Pharmacist ROI Framework

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Medication Reconciliation Pharmacist ROI Framework

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Medication Reconciliation Pharmacist ROI Framework

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Step 5 & 6: Execute and Measure

Once approved, get started quickly

Develop protocol or procedures Use forms from other organizations Involve pharmacy clerkship students/residents Consider pharmacy technicians if pharmacists arent easy to find

If new FTEs are not approved

Work on putting a pharmacist in the ED Physicians may see big impact Have pharmacy develop forms and procedures

for other disciplines, and provide training Keep trying

Measure and report outcomes

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Step 7 & 8: Communicate and Replicate

Communicate updates and successes to key stakeholders Work to gain credibility and leverage this for future

initiatives
Once admission process is going well, repeat above steps

again for discharge process Schedule meetings with providers and pharmacists in the community to discuss two-way sharing of lists

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Summary
Pharmacist performed medication reconciliation
Improves patient safety in a collaborative fashion Reduces transcription errors (improves accuracy and

completeness of med lists and orders) Maintains continuity of care Promotes physician collaboration Improves pharmacist job satisfaction Decreases workload of nurses and house staff, increasing time available for other activities

A business case can be made for obtaining pharmacist resources for medication reconciliation Multidisciplinary collaboration is necessary
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Medication Reconciliation: A Golden Opportunity

Medication reconciliation activities are only as good as the med list, and pharmacists are the most accurate Need a clear owner of the process It is simply the right thing to do for our patients Pharmacist job satisfaction and retention Keep patients in the loop Next logical steps
Information from the hospital to/from the community

pharmacist
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References
1. 2.

3.

Calculating return on investment. BNET. http://www.bnet.com/2410-13240_2366470.html?tag=content;col1. Accessed May 24, 2010. Internal rate of return. Investopedia. http://www.investopedia.com/terms/i/irr.asp. Accessed May 24, 2010. Cornish PL, Knowles SR, Marchesano R, et al. Unintended medication discrepancies at the time of hospital admission. Arch Intern Med. 2005; 165(4): 424429.

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Suggested Readings

Lazarou J, Pomeranz BH, Corey PN. Incidence of adverse drug reactions in hospitalized patients: a meta-analysis of prospective studies. JAMA. 1998;279(15):1200-1205. Hohl CM, Dankoff J, Colacone A, Afilalo M. Ann Emerg Med. 2001;38(6):666-671. Rozich JD, Resar RK. Medication safety: one organizations approach to the challenge. J Clin Outcomes Manage. 2001;8(10):2734. Young D. Massachusetts moves ahead with patient safety initiatives. Am J Health Syst Pharm. 2004;61(5):434,437-438. Whittington J, Cohen H. OSF Healthcares journey in patient safety. Q Manage Health Care. 2004;13(1):53-59. Nester TM, Hale LS. Effectiveness of a pharmacist-acquired medication history in promoting patient safety. Am J Health Syst Pharm. 2002;59(22):2221-2225. Michels RD, Meisel SB. Program using pharmacy technicians to obtain medication histories. Am J Health Syst Pharm. 2003; 60(19):1982-1986.
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