Making Pharmacy the Anchor Tenant of your Retail Strategy
February 22nd, 2010

A conversation with Dick Schirber, Director of Marketing and Consulting Services at Fairview Pharmacy Services, LLC. Fairview has a large, successful retail pharmacy operation that serves as a model for integration of retail sales and patient care in a health system setting.

Describe your role within Fairview Pharmacy Services.

I manage several areas of Fairview Pharmacy Services: The marketing communications process, merchandising process, strategic planning process, marketplace research process and consulting services. I also manage our consulting services business line, which helps other health systems discover how to optimize their ambulatory pharmacy opportunity. We’ve been doing consulting for over two years now.

Fairview Pharmacy Services is a part of Fairview Health Services, a large, non-profit Minnesota-based IDN that includes the University of Minnesota Medical Center. My background is technology/software, product marketing and sales. I’m surrounded by pharmacists and technicians who are among the most talented and successful in their fields. Why should Pharmacy Services be important to a large health system?

Pharmacy Services can be a very profitable part of the parent health system, if it’s planned and run strategically. Fairview Pharmacy brings substantial margin that helps Fairview achieve its overall healing mission. We have a very comprehensive view of ambulatory pharmacy. We view it as not just capturing hospital discharge prescriptions but all the functions that are drug therapy related. This approach has helped us become one of the largest and top-performing health system pharmacy operations in the country.

We opened our first retail pharmacy 21 years ago. A few years later we set a goal of doubling the pharmacy business every five years. We have exceeded that goal. We made a few mistakes along the way, but we learned from them, and FPS is now a $308 million business unit and an integral part of Fairview's mission.

Our success brought us industry recognition; so much that other health systems began contacting us for pharmacy-related advice. We've leveraged our expertise and experience into a formal consulting process that we take to other healthcare organizations.

Where does your expertise lie? Front End/Back End?

We consult primarily on back end services. Our consultants are real-world pharmacy practitioners. We draw on our internal experts from each area, armed with information that is fresh, current and practical. If we propose a new model or recommendation for change, it’s been tested here, not just theorized. We have implemented it ourselves, and our clients are leveraging our best practices. There are many consulting groups willing to give pharmacy-related advice, but we actively do pharmacy as our primary business, day in and day out. That positions our services strongly compared to other consultants.

What type of pharmacy do you typically work with?

We focus on ambulatory pharmacy services within health systems. Everything from MOB pharmacies for clinic-generated prescriptions, to infusion services, to specialty pharmacy. We also have the expertise to help health systems save money on their own employees' prescription purchases. Our own pharmacies dispense 85 percent of Fairview employee and family member prescriptions. We have around 20,000 employees. Instead of the big chain pharmacies pocketing all the dispensing fees, that income is going into our health system. We also started our own Pharmacy Benefit Management (PBM) division to cut down on excessive costs that commercial PBMs add beyond pharmacy dispensing fees. Our PBM-related savings in the first year alone was over $2 million. Sounds incredible, but there's money to be made through smart pharmacy practices in a health system.

Explain the evolution of pharmacies and what you think lies ahead.

When a health system opens a retail pharmacy, the reasons are usually convenience and continuum of care for the patients, and cost management for their employees. But there's also money to be made. There’s a lot of competition for drug dispensing profit – just look at all the drug stores springing up across the country. To counteract the competition, we started looking at all areas of health system pharmacy, including home infusion, clinical trials, medication therapy management, and providing clinics with clinical administered medications. We put a focus on specialty pharmacy, which consists mostly of expensive self-injected medications. There is high revenue and margin in specialty pharmacy, and it requires a high degree of clinical competence and integration with the providers at the point of care. The key is to stay upstream from the competing chain pharmacies and integrate with providers at the point of care with the patient. That yields a convenient experience for the patient and better health and financial outcomes. We have access to patient medical records and can go deep and specific with the drug regimen, especially for complex patients. Pharmacy chains are not equipped to do that. It isn't their model.

What do you think is a big missed opportunity for health system pharmacies?

One big opportunity is for the pharmacy to help the system compete as an ACO (Accountable Care Organization.) Health systems are going to be partnering with providers and payers, and pharmacy represents up to 20% of every dollar spent. So it has to be managed and optimized. If health systems allow the prescriptions to leave the campus for a pharmacy chain, they lose control over the clinical aspect - how the patient is taking the medication, how well it’s working, etc. But the health system is still responsible for the outcome.

There is a lot of missed opportunity to integrate with the providers around patient care. We recently did a study with a number of clinics at the University of Minnesota Medical Center, asking providers about their pharmacy needs and the needs of their patients. We learned that the clinic staff aren’t overly concerned about the financial aspects of pharmacy. They are focused on quality patient care, 100 percent, as they should be. If your pharmacy can integrate with providers and help them optimize patient care, you will end up with the prescriptions. Especially when it comes to complex patients: Let the retail chains handle the routine, low margin pharmacy needs. The complex patients and prescriptions should be handled by the clinical/ambulatory pharmacy on the health system campus. Talk about the marriage of the'back end' and 'front end' of the pharmacy. How important is one to the other?

They are very complementary at different levels. A retail pharmacy with a good front end is very popular with employees. The pharmacy becomes a convenience store within the hospital. Create additional revenue and employees become walking, talking billboards for your pharmacy.

The cash and carry part also allows you to provide convenience for the patient and family. You can also deliver other health related solutions, everything from DME/HME to OTC items to vitamins. Those are items patients need with their prescription. You have to have the right front end to support those needs.

What do you think makes a successful cash-and-carry/retail pharmacy?

You need the right product mix for the demographic and location, and you have to ensure that each customer has an excellent experience.

There has to be a good product balance to meet every need, from OTC to food to vitamins--the right selections and the right amount. You have to be integrated with the care that is being provided. Even for front end merchandise, you have to work closely with the clinical/providers. You have to be aware of what they are recommending to their patients, and make it available. The front end is where the quality customer service comes in to play. A "yes, we can do that" attitude is crucial. Customers won't come back without it.

How important is retention and knowing the data? How do you capture the scripts written in your facility and make sure they are filled in your pharmacies?

Our motto is "Inspect what you expect." We measure the capture rates on a monthly basis, both in clinic and hospital settings. We know, to the exact floor of each clinic/hospital, how many scripts are written by those providers. When you present them with data that says you may not be capturing a large amount of prescription business, it really opens the eyes of the provider. It gives you a basis of where to start and is an ongoing measuring tool. It’s also important to treat the provider staff as customers. They have problems that need solving, and ideas that can be capitalized on. Because of where the provider is in the care process, they have significant leverage to affect financial outcomes and health outcomes by integrating with the pharmacy.

How do pharmacies market their business? What are some tips for success and things to avoid?

Besides provider integration, we've had success by placing posters about pharmacy in every exam room. There is nothing else on the wall besides the pharmacy poster - no drug company calendars, pens or information to overwhelm he patient. All that patients see is pharmacy and clinic messaging. This has been very effective.

We encourage an employee discount program to get our health system employees into the pharmacies. In the pharmacies, we dedicate an end cap to a particular provider. That addresses provider integration and sells front end merchandise.

We solve problems and entertain new ideas. We say 'Yes' 99 percent of the time when someone comes to us with a problem or a suggestion for improvement. We want to know what our customers need and want - whether that customer is a patient or a provider. You have to be pleasant and willing to solve real problems in a personable way. Yes, we're in healthcare, a highly regulated, protocol-driven industry, but we're also a business. The patient doesn't have to choose our pharmacy. We have to go the extra mile to earn their loyalty. If I was a hospital administrator, what are the most important things to keep in mind about my pharmacies?

The pharmacy staff can be an integral part of the care you provide. They can dramatically impact health outcomes and financial outcomes. A well run pharmacy operation is everaging the assets that the health system has already invested in the community. You have employees and patients receiving care, which includes drug related care. You have to invest in the right people and infrastructure to support it. Within Fairview, FPS does our own contracting, purchasing, revenue management training, and marketing. Pharmacy is very different than other hospital operations. It should be supported accordingly

A patient-first, revenue-generating, can’t-believe-we-didn’t-do-this sooner business strategy.

We believe retail is an essential part of a patient's care. It's the driving idea behind Healthcare Retail.

THE NEED
From nursing pillows to wicking pajamas to memory loss aids, patients need and want retail products and services that help in their recovery. Healthcare systems are in the perfect position to meet this need.

THE DEFINITION
Healthcare Retail is about providing cash-and-carry, health-related products, along with convenience and gift items, directly on the healthcare campus through professionally-run stores, e-commerce or catalogs.

THE BENEFIT
Offering this level of convenience is an enormous benefit to patients, as well as caregivers, physicians, visitors and employees. Customers can get exactly what they need, when they need it, from the place they trust most - the hospital or clinic.