Transcript Developing a Business Case for Advancing

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
1
About Our Speakers
 Steve Rough, M.S., R.Ph, is Director of Pharmacy, University of Wisconsin
Hospital and Clinics, Madison, WI
 He is a Clinical Assistant Professor at the UW-Madison School of Pharmacy
 Scott J. Knoer, MS, Pharm.D. is the Director of Pharmacy at the University of
Minnesota Medical Center (UMMC)
 He is a Clinical Assistant Professor at the University of Minnesota College of
Pharmacy and the Graduate Program in Social and Administrative Pharmacy
2
Objectives
 Develop a successful business proposal to justify a new
clinical program, service or personnel
 Describe the key elements of a good executive
summary
 Discuss strategies for securing resources from senior
administration
 Produce a good return on investment (ROI) analysis
that sells
3
Developing a business case for new
programs, services and personnel
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Project/Business Plan
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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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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
6
•
Executive Summary
High level overview, maximum of 1 page, lots of bullet
points
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1.
2.
3.
4.
5.
Proposal (1-2 sentences about your program)
Background (succinctly make case for change)
Benefits to the organization (link to organizational goals)
Financial analysis
Conclusions
Don’t 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
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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Background
•
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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
•
Succinct statement of what you want to do and why
• Strive to be very clear, succinct, believable
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1.
2.
3.
4.
5.
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
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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
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1.
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4.
5.
Patient safety (reduced error)
Patient satisfaction
Provider satisfaction
Operational efficiency
Cost savings/avoidance
Continuity of care
Reduced readmission rates
Executive summary
Table of contents
Background
Proposal of services to be provided
Benefits of the proposal
•
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Revenue growth/capture
Reimbursement
Patient outcomes
Regulatory compliance
Quality indicators
Education/research
Improved throughput/MD efficiency
6.
7.
8.
9.
Resource requirements/financial implications
Milestones, schedule and action plans
Summary
Supporting documentation/appendices
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Resource Requirements/Financial Implications
•
Labor expense (salary plus fringe)
• Pharmacists
• Technicians
• Others
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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
12
Milestones/Action Plans
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Be specific
Use Gantt charts and tables to show organizational
sequence
Have clear actions and timeline (proposed schedule)
Measures of success to build credibility
•
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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?
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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Summary
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Conclusion
Succinctly tell ‘em what you told ‘em
• Proposal
• Benefits
•
1.
2.
3.
4.
5.
Know the organization’s strategic plan and link to it
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
14
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
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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?
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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

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Most bosses hate surprises
How many pages is it expected to be?
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Helpful Hints
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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
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“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
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Who are your key stakeholders?
What’s 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
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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 patient’s 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.
23
Return on Investment
(ROI) Analysis
24
ROI
•
•
•
•
•
•
•
•
1.
2.
3.
4.
5.
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
25
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 project’s
IRR, the more desirable it is to undertake the project.
 Allows comparison vs. other capital projects
http://www.investopedia.com/terms/i/irr.asp
27
ROI
 Adhere to financial standards and partner with finance
 Enhances credibility
 Costs incurred or reduced/avoided
 Capital
 Labor
 Maintenance
 Operating
 Risk
28
ROI Case – Rx Automation
 Current automation contract is expiring
 Review medication distribution system
 Safety and efficiency potential improvements
 Organizational imperative to minimize labor costs
29
Cost Elements to Consider in ROI
 Equipment
 Installation
 Labor for implementation
 Renovations
30
Savings Potential for ROI
 Labor
 Reduction vs. redeployment vs. avoidance
 Inventory
 One time reduction, wastage reduction
 Current costs of automation
 What you were spending already
 Safety/quality improvement savings
 Medication incident cost
31
Model ROI Format
Year 0
Capital Purchase
Hand-held devices
Software and upgrades
RF Network Installation
Quantity
220
Total Capital Expenses
Actual Unit
Cost
$0
$0
$145,000
$0
$0
$145,000
$0
$145,000
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)
(1FTE)
Nursing project manager
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
$600,000
$2,500
$600,000
$2,600
$600,000
$2,730
$600,000
$2,867
$600,000
$3,010
$600,000
$3,160
$600,000
$3,318
$82,701
$102,960
$75,000
$0
$0
$863,161
$86,836
$108,108
$0
$0
$0
$797,544
$91,178
$113,513
$0
$0
$0
$807,421
$95,737
$119,189
$0
$0
$0
$817,792
$100,523
$125,149
$0
$0
$0
$828,682
$105,550
$131,406
$0
$0
$0
$840,116
$110,827
$137,976
$0
$0
$0
$852,122
($22,000)
($92,000)
$0
($114,000)
($22,880)
($95,680)
($23,795)
($99,507)
($24,747)
($103,487)
($25,737)
($107,627)
($26,766)
($111,932)
($27,837)
($116,409)
($118,560)
($123,302)
($128,234)
($133,364)
($138,698)
($144,246)
($1,358,450)
($1,358,450)
($1,358,450)
($1,358,450)
($1,358,450)
($1,358,450)
($1,358,450)
$0
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
Year 7
Year 6
Year 5
Year 4
Year 3
Year 2
Year 1
($145,000)
($145,000)
($145,000)
($145,000)
$0
$0
$0
$0
$0
$0
($1,472,450)
($1,477,010)
($1,481,752)
($1,486,684)
($1,491,814)
($1,497,148)
($1,502,696)
($749,161)
$609,289
($894,161)
$464,289
($678,984)
$679,466
($1,573,145)
$1,143,755
($684,119)
$674,331
($2,257,263)
$1,818,087
($689,558)
$668,892
($2,946,821)
$2,486,979
($695,318)
$663,132
($3,642,139)
$3,150,111
($701,417)
$657,033
($4,343,556)
$3,807,144
($707,875)
$650,575
($5,051,431)
$4,457,719
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Model ROI - Carousels
AUTOMATED DISPENSING
YEAR 0
Capital Equipment /Interface (1)
$
(317,577)
Additional Interfaces (2)
$
(30,000)
Remodel Cost (3)
$
(50,000)
YEAR 1
YEAR 2
(31,128)
$
284,078
Released FTE Savings (5)
$
93,600
(31,128)
$
Carrying Cost (6)
$
Outdate Reduction (8)
-
$
$15,000
$
(397,577)
YEAR 5
TOTAL
$
Inventory Reduction (4)
TOTAL INVESTMENT (with Inventory
Reduction)
YEAR 4
$ (317,577)
Support Fees
Product Shrinkage (7)
YEAR 3
$
361,550
(31,128)
(31,128)
$ (155,640)
$
-
$
284,078
96,408
$
99,300
$
102,279
$
105,348
$
496,935
$17,045
$
18,493
$
20,065
$
21,771
$
77,375
-
$
-
$
-
$
-
$
-
$18,232.59
$
82,884
$
418,055
$15,750
$
(31,128)
(50,000)
98,075
$16,537.50
$
103,203
$17,364.38
$
108,581
$
114,223
IRR
40%
Payback (years)
2.0
33
Financial Analysis
 Hard costs
 You can track these to the General Ledger
 FTEs (under Salaries and Benefits on GL)



Must extend FTEs for Salary and Benefits (approx 15%)
One shift 7 days a week is 1.4 FTEs
Salary x FTEs x S&B multiplier
 $100,000 x 1.4 x 1.15 = $161,000
34
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…
35
Hard and Soft Dollars
 Hard savings
 Revenue


Real dollars that you can bill insurance
Increased script volume by doing discharge medication
reconciliation
 Decreased costs


Increased inventory turns, decreased inventory volume
Decreased waste in the IV room (real quantifiable waste)
36
Soft Dollars
 You can’t 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
 Don’t have to hire nurses to get other things done
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Presentation Pearls
39
Presentation Pearls
 Every business case should be accompanied by a
PowerPoint presentation
 Great student or resident project!
 Present facts and data – uniquely
 A picture’s worth a thousand words
 Examples:

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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
42
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…
43
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
 Don’t 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:
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This will meet JC requirement MM3.
This will “help” with meeting
Don’t 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
pharmacist’s 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
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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
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Develop protocol or procedures
Use forms from other organizations
Involve pharmacy clerkship students/residents
Consider pharmacy technicians if pharmacists
aren’t 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

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

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
55
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.
56
Suggested Readings
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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 organization’s
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 Healthcare’s 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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