REVENUE GENERATING LEAN PROCESSES FOR THE PHARMACY

Kathryn Pflaum, CMRPSt. Francis Health

CenterTopeka, KS

No disclosures for this presentation.

OBJECTIVES

Identify LEAN processes that apply to Pharmacy

Identify LEAN projects that can be Pharmacy Buyer-managed

Discuss the use of graphs and charts for specific LEAN projects

HOW DO I BEGIN?

LEAN thinking is a way of life for most buyers.

Think about what you see everyday. What process improvements will

you lead in the Pharmacy? How will you communicate your

ideas effectively?

IDEA This project started with a trend and a

question. The trend was a large influx of price

increases (this project also includes when prices decline).

The question was if the buyer knows about these price changes and does not communicate them to other departments, how do the charges get changed to the patient to reflect the cost changes.

FIRST THINGS FIRST

Line up the stakeholders Finance Pharmacy “C” suite Champion for the project

Write a Project Charter

CHARTER Business Case - Medication costs change

continuously occur through out the calendar year. Some medications on contract will receive advanced notification on price changes while notification on others is after the change. Lack of appropriate response to the cost changes at the time of the change puts net revenue in jeopardy. In the case of Cancer Medications, many of the medications do not have contracts, thus allowing for price changes at any time without notification.

CHARTER AIM (Opportunity) STATEMENT

Effective 5/1/2010, Pharmacy wants to start responding to cost changes with appropriate charge changes for Cancer Med.

CHARTER

PROJECT SCOPE – Process Start: Notification/discovery

of a price change Process End: St. Francis charge

adjustment is made for the affected items.

CHARTER MEASURABLE GOAL - Critical To Quality (CTQ):

Net revenue is reflecting a picture of health per the financial guidelines set forth by this project. (2) A smooth flow of information concerning medication cost changes and a corresponding charge change. (3) Methodology and process that can be followed by all departments in the health center to maintain net profits.

Performance Measure: To have a corresponding cost to charge change mechanism process that reflects a positive net revenue for non-DRG revenue that is monitored and updated quarterly.

TOOLS TO BEGIN

Understanding the current process. There are no mechanisms or processes for

communication of price changes in Pharmacy to the charge changing department.

Does another department have a process? How do we change charges in the current

environment? Who are the stakeholders in the current

charge changing process?

FISHBONECAUSES OF NO CORRESPONDING CHARGE CHANGE TO COST

CHANGESCOMMUNICATION PROCESSES/AUTHORIZATIONS

NO CHARGE CHANGES

UPON COST INCREASE/DEREASE

UNDERSTANDING OF CHARGES/REIMBURSEMENT

No communication between Pharmacy & Finance on price changes

Buyer has no authorization to change prices

Buyer has no access to Craneware®

No tools to communicate to finance what changes need to be made.

Metrics to understand improvementWhere information

comes from and goes to

What is it that we do not know and should?

FISHBONECAUSES OF MISSED COST CHANGES

COMMUNICATION TOOLS

NO CHARGE CHANGES

UPON COST INCREASE/DEREASE

Not on GPO or local contract so no notification from vendor

What tools are available to identify cost changes

Wholesaler reports and understanding how to locate these reports

Missed communication from GPO

OTHER REASONS

Not readily available to any reporting for identification

Buyer must watch for every non-contract item price change

Data Collection PlanWhat Questions does your data need to answer?

1.) How much have we charged by billable unit for the affected Cancer Medications?

2.) When did the last cost increase occur?

3.) What does our reimbursement picture look like?

What data are you collecting? How are you measuring the data?

Is the data Discrete or Variable?

Billable charges for the last 12 months for Cancer Medications.Cost information for the last 12 months.

80/20 report based on billable charges.

How will you ensure consistency? What is your plan for actual data collection?

How will you display the data?

Use the same report each time. Run report from Finance to ascertain the 80/20 by billable unit.

80/20 report

WHAT NOW? We need some tools to start our

project. The first tool we used was the 80/20 tool.

7704315 TRASTUZUMAB 10MG INJ J9355 TRASTUZUMAB INJECTION 2,121,936.007704979 OXALIPLATIN 0.5MG INJ J9263 OXALIPLATIN 1,624,550.007703841 PACLITAXEL 30MG/5ML J9265 PACLITAXEL INJECTION 1,437,028.007704851 BEVACIZUMAB 10MG INJ J9035 BEVACIZUMAB INJECTION 1,399,753.507709730 RITUXIMAB 10MG/ML 10ML J9310 RITUXIMAB INJECTION 1,151,829.007709645 GEMCITABINE 200MG VIAL J9201 GEMCITABINE HCL INJECTION 1,048,026.007703715 CARBOPLATIN 50MG VIAL J9045 CARBOPLATIN INJECTION 1,030,390.807704445 PEGFILGRASTIM 6MG/0.6ML J2505 INJECTION PEGFILGRASTIM 6MG 927,376.757700164 FILGRASTIM 480MCGM J1441 FILGRASTIM 480 MCG INJECTION 792,969.007709686 IRINOTECAN 20MG VIAL J9206 IRINOTECAN INJECTION 579,790.00

CDM ACTY DESCRIPTOR NAME Craneware HCPCS NAME YTD Charges

WHAT NOW?

The next tool we used was understanding any price increases in the last 6 month. We used our McKesson history to see if any of these items increased/decreased in cost. The answer was that 7 items had cost changes.

PURCHASE HISTORY

Month Quantity Frequency Avg. Price Avg. Unit Price Purchase $ J ul 11

J un 11 43 9 576.96 576.9600 24,809.28

May 11 24 7 576.96 576.9600 13,847.04

Apr 11 34 10 576.05 576.0524 19,585.78

Mar 11 23 8 561.53 561.5300 12,915.19

Feb 11 24 8 561.53 561.5300 13,476.72

J an 11 71 5 561.53 561.5300 39,868.63

Dec 10 52 14 561.53 561.5300 29,199.56

Nov 10 45 10 561.53 561.5300 25,268.85

Oct 10 39 11 561.53 561.5300 21,899.67

Sep 10 16 8 546.50 546.5000 8,744.00

Aug 10 31 11 546.50 546.5000 16,941.50

J ul 10 37 10 546.50 546.5000 20,220.50

J un 10 44 12 546.50 546.5000 24,046.00

VOICE OF THE CUSTOMER

Who is the customer in this case? Finance is a customer, Pharmacy is a customer, the health center is a customer

What does the customer want? What is a defect?

THE 5 WHY’S Why is there no communication? Why is there not a mechanism to trigger

a charge change upon a cost change? Why do we only change charges one

time per year? Why does it take a significant amount of

steps to accomplish changing charges? Why has no one asked this question

before?

CRITICAL TO QUALITY

Respond to cost increases/decreases as they occur to promote a healthy net revenue for the Pharmacy

NEED DRIVER CTQs

Contract changes from GPOTimely communication from the GPO

Timely communication fromPharmacy to Finance

Lack of processes to Communicate change Proper authorizations and access to

Tools for the Inventory ControlCoordinator

Cost changes that are non-contract items

Inventory Control Coordinator Identification of items

Good Communication Tools

A FEW TERMS CLARIFICATIONS

GROSS REVENUE – What is actually charged on the initial bill.

NET REVENUE – What you actually are reimbursed (this is what keeps the lights on and the doors open).

COST – What you actually pay

ELEVATOR SPEECH

Know your audience. Key elements for the “C” suite

audience: Keep it to the point Know your numbers Be prepared to answer questions If you need something from them – ASK

ELEVATOR SPEECH We are not taking advantage of our

charges to add additional net revenue to the bottom line of our health center.

We can change this by taking full advantage of changing our charges when the cost changes occur. Not always will it be an increase, but based on the drug cost increases we are experiencing, we anticipate that having a process which adds profits to our bottom line.

ELEVATOR SPEECH

We know that in Cancer Med especially, it will also be dependant upon our patient population what additional net revenue we can achieve.

Cancer Med also presents a difficult task because many of these medications are not on contract.

STANDARD WORK

Standard work involves having a process that everyone follows.

We determined that standard work in this case comes from Pharmacy to Finance in the form of a spreadsheet that both parties agreed upon and has the appropriate information.

TOOLS FOR STANDARD WORK Tools used for cost increases/decreases.

GPO quarterly Contract Price Change impact report.

Buyer awareness of increases for non-contract items or local contract items. Historical data from Wholesale online information. Wholesaler reporting system. McKesson®

Purchase Cost Variance Report

TOOLS FOR STANDARD WORK Craneware®

This tools gives information to fill in the spreadsheet on the CDM #, billable

unit size, current charges and “J” code

McKesson®

This tool provides cost information, historical cost data and units

purchased.

STANDARD WORK FOR THIS CASE

The only standard work originally in this process was to have a charge increase one time per year based upon a variety of factors.

Standard work must change.

IDENTIFICATION OF PROCESS IN PLACE

Where we started:

January arrives and it is time for the annual charge increase.

Pharmacy has a cost increase on item A middle of the year.

January arrives and it is time for the annual charge increase.

Loss of gross/net revenue is occurring.

NEW PROCESS MAP

Where we went next:

Cost change occurs in Pharmacy and Inventory Control Coordinator is notified or finds the increase.

Spreadsheet is filled out with all information & forwarded to Finance

Finance changes charges on item's) immediately

Potential net revenue is gained for facility

NEW PROCESS MAP

Where we are today:

Cost change occurs in Pharmacy and Inventory Control Coordinator is notified or finds the increase.

Spreadsheet is filled out with all information and forwarded to Finance. Copies also go to the Pharmacy Manager and Lead Technician

Finance changes charges on item's) immediately. Once change is made an email is sent back to the ICC.

Potential net revenue is gained for facility

STANDARD WORK FORM

St. Francis Health Center

Beginning Date for New Charges ______________

Medicare BCBS United Health Medicaid

Billable Increment

Fee SchFee Sch/%

charge58% of charge Fee Sch

Old Cost (from

Supplier)

New Cost (from

Supplier)

Old Cost ___ per

billable unit

New Cost per

billable unit

% CHANGE

NEW AWP (if

applicable)

NEW CHARGE

EFFECTIVE __________

To be filled in by Finance

Department _____________________________

80/20 ______________________ Pay Matrix

CDMACTY DESCRIPTOR

NAMECraneware

Current Unit

Charge

CONCLUSIONMetrics (This is the metric that measures the success of the project)

Baseline: 7 items had cost increases since our last blanket charge. By changing our charges concurrently with the cost changes there is additional revenue to be gained.

Current: All 7 items had charge increases on 5/1/2010

Financial Benefit YTD:$137,000 additional net revenue

Primary Root Causes No communication between Pharmacy and Finance on cost increases/decreases by item.

Key Learnings By changing our charges concurrently with the cost changes we gain net revenue. There are a significant amount of variables that contribute to gaining that net revenue including patient population, appropriate action on pharmacy and finances part, having proper authorization for the positions that have the leading information and all charging information.

Issues Pending/ Barriers

Plan for shared knowledge

To be placed on line with findings for the entire SCLHS group to see.

NEXT STEPS TO PROJECT

We have implemented the process to take all cost changes to a charge change upon discovery of cost change.

As we move toward our new computer system, there will be ways to automate this process significantly.

PHARMACY BUYERS LEAD THE WAY

OTHER CASE STUDIES FOR BUYERS

Dr. preference items. We had a Doctor preference item on

a contrast for the Cath Lab. Our Doctors preferred Visipaque over the contracted Isovue. An opportunity arose to make it clinically easy to suggest a switch. We wrote up a charter and made the change.

RESULTS THE BUYER TALKS ABOUT

VISIPAQUE TO ISOVUE

$0.00

$1,000.00

$2,000.00

$3,000.00

$4,000.00

$5,000.00

$6,000.00

OLD OLD

2009/2010 NEW

2010/2011 NEW

WHAT WE LEARNED First thing we learned was to make

sure to have all the proper stakeholders. OOPS

Make the case factual and about the clinical outcomes of the medication.

Be prepared to have push back on the change and work gracefully through the push back.

CASE STUDY WORKING WITH RESPIRATORY THERAPY

PHARMACY & RESPIRATORY THERAPY

95% of the patients receiving Albuterol also receive Ipratropium as part of the treatment for breathing treatments. These 2 medications are currently being mixed and then given to the patient.

PROJECT SCOPE Process Start: Identify the

combination medication available Process End: Treating all patients

that require this combination with a premixed medication.

Exceptions: Only if a different dose is required for one of the parts of the combination medication.

PROCESS MAPS

Albuterol & Ipratropium ordered for patient

Albuterol removed from Omnicell® by RT and mixed together

Medications is given to patient

Documentation is done

CURRENT PROCESS

NEW PROCESS

Albuterol & Ipratropium ordered for patient

Medications removed from Omnicell® and given to patient

Documentation is done

CRITICAL TO QUALITY

Patients receive the proper medication dose.

No mixing needed to insure proper dose.

More efficient delivery to patient in breathing distress.

HARD GREEN & SOFT GREEN There are 2 types of savings for this

project. Hard green dollars in the savings

gained by buying the combined product.

Soft green dollars from the time savings realized by the RT personnel not having to mix the 2

products.

RESULTS THE BUYER TALKS ABOUT

RESPIRATORY THERAPY CHANGE TO COMBO MEDICATION

0

100

200

300

400

500

600

700

800

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

MONTH (started in March)

DO

LL

AR

S

Separate vial costs

Combo cost

EXPLORATION OF OTHER IDEAS FOR LEAN THINKING MEDICATION WASTE

Outdates Manufacturer outdates Pre-made outdates

Informed decision making Is it less expensive to….. Pills, should we have both

sizes if the costs is the same for both sizes?

EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

MEDICATION WASTE Size of vials Multiple items of similar

nature (i.e.: Bupivacaine, Lidocaine and other “caines”)

IV mixtures

EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

Inventory reductions Remicade

Baclofen Refill KitsOrenciaReclast

EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

Inventory reductions Consignment programs PAR analysis rotation schedule

Pharmaceutical Hazardous Waste Processes of collection of waste Processes of maintaining the hazardous

waste listing.

EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

EXPLORATION OF OTHER IDEAS FOR LEAN THINKING

There are many opportunities with in the Pharmacy to practice LEAN thinking.

There are many opportunities to work with other departments that Pharmacy touches too.

Think outside the box!

QUESTIONS ??