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REVENUE GENERATING LEAN
PROCESSES FOR THE
PHARMACY
Kathryn Pflaum, CMRP
St. Francis Health Center
Topeka, 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?
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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
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This project started with a trend and a
question.
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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
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Write a Project Charter
Line up the stakeholders
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Finance
Pharmacy
“C” suite
Champion for the project
CHARTER
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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
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PROJECT SCOPE –
Process Start: Notification/discovery of
a price change
Process End: St. Francis charge
adjustment is made for the affected
items.
CHARTER
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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
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Understanding the current process.
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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?
FISHBONE
CAUSES OF NO CORRESPONDING CHARGE CHANGE TO COST CHANGES
COMMUNICATION
PROCESSES/AUTHORIZATIONS
Buyer has no
authorization to
change prices
No communication between
Pharmacy & Finance on price
changes
No tools to communicate to
finance what changes need to
be made.
Buyer has no
access to
Craneware®
Metrics to understand
improvement
Where information comes
from and goes to
What is it that we do not
know and should?
UNDERSTANDING OF
CHARGES/REIMBURSEMENT
NO CHARGE
CHANGES
UPON COST
INCREASE/DEREASE
FISHBONE
CAUSES OF MISSED COST CHANGES
COMMUNICATION
Not on GPO or local contract
so no notification from vendor
What tools are
available to
identify cost
changes
TOOLS
Wholesaler reports
and understanding
how to locate these
reports
Missed communication
from GPO
Not readily available to any
reporting for identification
Buyer must watch for every noncontract item price change
OTHER REASONS
NO CHARGE
CHANGES
UPON COST
INCREASE/DEREASE
Data Collection Plan
What 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?
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We need some tools to start our project.
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CDM
7704315
7704979
7703841
7704851
7709730
7709645
7703715
7704445
7700164
7709686
The first tool we used was the 80/20 tool.
ACTY DESCRIPTOR NAME
TRASTUZUMAB 10MG INJ
OXALIPLATIN 0.5MG INJ
PACLITAXEL 30MG/5ML
BEVACIZUMAB 10MG INJ
RITUXIMAB 10MG/ML 10ML
GEMCITABINE 200MG VIAL
CARBOPLATIN 50MG VIAL
PEGFILGRASTIM 6MG/0.6ML
FILGRASTIM 480MCGM
IRINOTECAN 20MG VIAL
Craneware
J9355
J9263
J9265
J9035
J9310
J9201
J9045
J2505
J1441
J9206
HCPCS NAME
TRASTUZUMAB INJECTION
OXALIPLATIN
PACLITAXEL INJECTION
BEVACIZUMAB INJECTION
RITUXIMAB INJECTION
GEMCITABINE HCL INJECTION
CARBOPLATIN INJECTION
INJECTION PEGFILGRASTIM 6MG
FILGRASTIM 480 MCG INJECTION
IRINOTECAN INJECTION
YTD Charges
2,121,936.00
1,624,550.00
1,437,028.00
1,399,753.50
1,151,829.00
1,048,026.00
1,030,390.80
927,376.75
792,969.00
579,790.00
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 $
Jul 11
Jun 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
Jan 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
Jul 10
37
10
546.50
546.5000
20,220.50
Jun 10
44
12
546.50
546.5000
24,046.00
VOICE OF THE CUSTOMER
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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
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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
NEED
DRIVER
Contract changes from GPO
Respond to cost
increases/decreases
as they occur to
promote a healthy
net revenue for the
Pharmacy
CTQs
Timely communication from the GPO
Timely communication from
Pharmacy to Finance
Lack of processes to
Communicate change
Proper authorizations and access to
Tools for the Inventory Control
Coordinator
Good Communication Tools
Cost changes that are noncontract items
Inventory Control Coordinator
Identification of items
A FEW TERMS
CLARIFICATIONS
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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
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Know your audience.
Key elements for the “C” suite
audience:
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Keep it to the point
Know your numbers
Be prepared to answer questions
If you need something from them – ASK
ELEVATOR SPEECH
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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
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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
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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
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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
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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
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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
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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.
Loss of
gross/net
revenue is
occurring.
January arrives
and it is time for
the annual
charge increase.
NEW PROCESS MAP
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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
80/20 ______________________ Pay Matrix
Department _____________________________
Beginning Date for New Charges ______________
To be filled in by Finance
Medicare BCBS United Health Medicaid
CDM
Current
New Cost
NEW
ACTY DESCRIPTOR
Old Cost New Cost Old Cost
NEW
Craneware Billable
Unit
Fee Sch/%
per
%
CHARGE
NAME
Fee Sch
58% of charge Fee Sch (from
(from
___ per
AWP (if
Charge
Increment
charge
billable CHANGE
EFFECTIVE
Supplier) Supplier) billable unit
applicable)
unit
__________
CONCLUSION
Metrics
(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.
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.
Current: All 7 items had charge increases on 5/1/2010
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
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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
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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
$6,000.00
$5,000.00
$4,000.00
OLD OLD
$3,000.00
2009/2010 NEW
$2,000.00
2010/2011 NEW
$1,000.00
US
SE
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PT
EM
BE
O
R
CT
O
BE
NO
R
VE
M
BE
DE
R
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M
BE
R
AU
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JU
LY
JU
NE
JA
NU
AR
FE
Y
BR
UA
RY
M
AR
CH
AP
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L
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AY
$0.00
WHAT WE LEARNED
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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
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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
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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
CURRENT PROCESS
Albuterol &
Ipratropium
ordered for
patient
Albuterol
removed from
Omnicell® by RT
and mixed
together
Medications is
given to
patient
Documentation
is done
NEW PROCESS
Albuterol &
Ipratropium
ordered for
patient
Medications
removed from
Omnicell® and
given to
patient
Documentation
is done
CRITICAL TO QUALITY
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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
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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
800
700
DOLLARS
600
500
Separate vial costs
400
Combo cost
300
200
100
0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16
MONTH (started in March)
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
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Inventory reductions
 Remicade
Baclofen Refill Kits
Orencia
Reclast
EXPLORATION OF OTHER
IDEAS FOR LEAN THINKING

Inventory reductions
 Consignment programs
 PAR analysis rotation schedule
EXPLORATION OF OTHER
IDEAS FOR LEAN THINKING

Pharmaceutical Hazardous Waste
 Processes of collection of waste
 Processes of maintaining the hazardous waste
listing.
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 ??