Admin EXAM 2 Notes - Dr. Lepage PDF

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Financial Management Accounting: provides qualitative info about economic entities to make decisions, tracks money flow between financing/investing, determines profitability/growth/tax liability Assets (things a business owns that can generate income, need financing to obtain assets) = equity (owner’s own funds) + liabilities (money owed to others) Obtaining financing (acquiring assets): necessary in business, obtains funds from business owners and creditors, shareholders are owners that fund activities (have a claim on company’s assets and investment results in regular distributions called dividends or an increase in value of assets leading to profit); creditors provide funds but need the company to repay them over a given time period Making investments: pharmacy: acquiring inventory, soft/hardware, robotics, facilities, staf Conducting a profitable operation: obtaining financing, investing funds to acquire assets, operational activities/purchasing/drug distribution/clinical activities/admin/maybe marketing Fiscal year: unit of time to record financial interactions, starts on any day, most don’t use Jan 1 Balance sheet: snapshot of assets/liabilities/shareholder equity at a particular time, doesn’t reveal causes/income source/expenses Income statement: dynamic document of income and expenses (diference = net income, net profit, earnings), connects start/end balance sheets in a time period via details of activities Statement of cash flow: connects start/end balance by indicating impact of investments, financing, operations on cash flows, records in/outflow of money, separates values into operating/investing/financing Linking financial statements: last line indicates amount of cash available, always the same as amount recorded on balance sheet for beginning of fiscal year, reports fluid/linked Financial ratios: profitability/liquidity/turnover allow users of financial info to compare units, organizations, diferences over time, organization with average Profitability ratios: overall success in daily operations, ability to generate gross profits, higher = more available funds for other expenses Gross profit margin = sales – cost of goods sold / total sales Net profit margin: fraction of net profit generated for each dollar of sales Net profit margin = net income after taxes / total sales Liquidity ratios: info on business ability to meet short-term financial obligations, higher = organization taking fewer risks in meeting financial obligations Current ratio = current assets/current liabilities Aim for quick ratio = 1, more = more quick assets than liabilities, less = cash not sufficient to pay liabilities Quick ratio = (current assets – inventory – prepaid expenses) / current liabilities Turnover ratios: efficiency of asset use, efficiency/asset utilization ratios, two most common: inventory turnover/receivables turnover Inventory turnover ratio: measures speed of sold inventory, low = inventory too large for operations, high = desirable, sell inventory efficiently  high profit Inventory turnover ratio = cost of goods sold / average inventory at cost Financial reports in community pharmacy practice: financial ratios, balance sheet, income statement, include third party plan payer reports, evaluate assets/liabilities/income/cost of sales/general expenses/admin expenses/net income

Financial reports in hospital pharmacy practice: info on inventory cost fluctuations/labor cost FTEs and overtime avoidance, part of global hospital budget, also look at pt days/case mix index/drug or labor cost per pt day Budget: detailed quantitative plan, how resources will be acquired/used during time period Budgeting system: procedures used to develop budget: planning, facilitating communicationcoordination, allocating resources, controlling profit-operations, evaluating performance and providing incentives Master budget: sales of services/goods, inventory, materials, labor, overhead, admin Activity based costing: overhead costs assigned to cost pools that represent most significant activities, allocated to cost objects in proportion to amount of activity consumed (begins w/resources, looks at activities, ends w/goods/services) Activity based budgeting: starts w/specifying goods/services to be produced and customers to be served, then activities to produce g/s, ends w/quantifying resources needed Budget admin: pharmacy manager prepares/proposes/meets budget, cycles: fiscal years broken down into smaller periods, budgets shared w/staf, revisited at staf meetings and one-on-one staf meetings, delegate responsibility for line-items to managers Behavioral impact: everyone, staf/managers afects success in daily actions Budgetary slack: padding the budget: underestimating sales, overestimation of HR costs, might pad because: performance viewed more positively if they beat the budget (save money), used to account for unforeseen efects Participative budgeting: employees involved, sense of ownership, lengthens process, manager needs to be diligent addressing expectations/padding Financial planning: develop situation, financial goals, ID alternative courses, evaluate alternatives, create/implement action plan, re-evaluate/revise plan (CQI) Third party payer issues/considerations Third parties: organization that reimburses pharmacy for drug cost Private: insurance companies, pharm manufacturers Public: govt programs Cash pts: customers who don’t have insurance that covers rx drugs Service benefit plans: customer may pay pharmacy part of cost, pharmacy reimbursed by third party for most of rx cost Pharmacy benefits managers: hired by third parties to provide rx claims processing: insurance companies, large employers, Medicare D; establish pharmacy networks as part of claims management services; also: rebate negotiation, drug benefit design, formularies, drug utilization/disease/case management, mail order pharmacy Third party rx payment: 20y growth, less private more public, shift toward third party payment afects pharmacy manger (more steps, prior auth, service issues, less flexibility, reimbursement) Third party reimbursement: based on formula in pharmacy/third party contract, formula: product cost plus dispensing fee, most provide reimbursement higher than actual cost and dispensing fees less than pharmacy dispensing cost Actual acquisition cost: price pharmacy pays to obtain product Average wholesale price: list price for what drug wholesalers charge pharmacies, maybe overestimate, contracts to pay AWP minus percentage

Max allowable cost: max cost third payer will pay for multisource drug, often average Wholesaler acquisition cost: price manufactures charge wholesalers, often overestimate Financial impact of third party reimbursement: calculating costs difficult, need direct (drug/supply cost, pharmacist/staf labor) and indirect( shared between rx dept/rest of facility, overhead: rent, utilities, marketing) Considerations in third party contracts: financial/operation implications, benefit outweighs risk, efect on customers, image, private pay customers, message to other third parties, efect on other revenue sources Third party contract terminology: provider rights/responsibilities (records, copays, formularies, std maintenance, reimbursement rate/timing), third party rights/responsibilities (rights to inspect/audit records, help-desk support), claims, network participation requirements Third party contracts: pharmacy must accept assignment: charge pt no more than contract; manager should ensure that this doesn’t prevent pharmacy from charging third parties for other services; most favored nation clause: pharmacies extend lowest price/reimbursement to third party; all products clause: pharmacy must participate in all of the third party’s plans, if it wants any of them Marketing Planning/executing conception, pricing, promotion, distribution of ideas, goods, services for exchanges that satisfy individual/organizational objectives; delivers value to customers and manages customer relationships (customer-focused, benefits all afected) Kotler/Keller definition: societal process for groups to btain what they need/want through ofering/exchanging products/services; managerial: art/science of choosing target markets and growing customers via creating/delivering/communicating superior customer value 6 Kotler marketing activities: production (efficiency, availability/low prices), product (quality improvement), selling (stimulate interest via sales/promotion, coax into buying), marketing (ID/address needs instead of convincing consumers, target markets), customer (same as marketing but market to individuals, customization), societal marketing (preserves/enhances consumer/society wellbeing); holistic marketing (marketing + customer + societal marketing) Needs: basic human requirements (not immediately apparent to pt in health care); wants: desire for a specific satisfier of a need; demand: wants + can pay for it Expressed/stated vs latent need (don’t recognize/understand on their own) Exchange: get product by ofering something in return  transaction (trade of values); transfer: one-sided transaction (nothing in return) Marketing mix: tools to pursue target market: product (goods often combined w/service); price (sacrifice to obtain product), place (when/where want to buy), promotion (informing target market w/ads, etc); (positioning) (designing company’s image in mind of target market) Expectations: internal standards by customers; desired service level: what can/should be delivered; adequate service level: minimum willing to accept; zone of tolerance: desired minus adequate levels; predicted service level: what they think they’ll get Satisfaction: pleasure/disappointment in performance vs expectation Quality: superiority or excellence, technical (what is received), functional (what was performed) 5 dimensions of service quality: tangibles, reliability, responsiveness, assurance, empathy Value: diference between perceived benefit/cost (increase benefits, services; lower price)

Loyalty: how likely would you be to recommend company X to friend/colleague Relationship marketing: loyalty programs, long-term cost-efective link to customer, focus on collaboration, partnership, service values, flexibility, active roles/responsibilities Results of relationship marketing: retention marketing, customer benefits Marketing application: competition/pressure on containing cost  new sources of revenue Strategic planning/evaluation of business opportunities: analyze market envt, form goals, determine target market, formulate marketing mix (8 Ps: product place price promotion process personnel physical facilities productivity/quality), design marketing control process Marketing plan: what goods/services a pharmacy will ofer; elements: SWOT analysis, goals/objectives, target markets, marketing mix, control processes Evaluating market opportunities/situational assessment: considers macroenvironment: forces that afect parties (5 sectors: competitive economic regulatory technological social) and microenvironment: stakeholders identified (insurers, employers, care providers, community leaders, public agencies) to support/oppose new ideas, also internal/external environment SWOT analysis: internal strength/weakness analysis in context w/opportunities/threats in external environment, focus on market opportunities to take advantage of strengths SWOT results: goals/objectives, target market/marketing mix Implementing marketing plan: goods/services must fit into pharmacy practice, causes disruption, service blueprint: map of service that permits better understanding, brings details together, integrates details, ID problems before/during implementation; action plan: organizing implementation process, listing of who/what/when tasks Inventory Largest/least liquid current asset, value continues to rise (more variety/expense), acquisition and procurement: obtaining/buying goods/services; carrying: cost of having it on shelves, these rarely afect pharmacy staf but can afect operating margins Stock-out/shortage: failure in customer service, lost sales/low care quality Effective inventory management: low cost of goods/expenses, high gross margins/net profits, meet customer demands for goods/services, minimize investment in inventory Purchasing objectives: right product in right quantity at right time/place from right vendor Manager considers in purchasing: past usage, target market, image/goals, formularies, industry data/reps, consumer info Technology can help determine: how much on hand, when to reorder, how much to order Determining stock depth: point where it’s reasonably certain item will be available on demand: average demand: rate of sale review time: length of time between stock checks lead time: period of time between placing and receiving an order review time plus lead time: safety stock to account for demand variations Considerations: brand vs generic, inventory size reduction, return policies, waste, unclaimed rx/unused pt specific meds, shrinkage monitoring (theft/shoplifting) Right price: buy direct, discounts, select wholesalers, group purchasing for negotiating Inventory: stock of products for future demands; acquisition cost: how much we pay for the product; procurement cost: costs associated w/purchase; carrying costs: storage, handling, insurance, cost of capital to finance, cost of loss via theft/damage/deterioration

Visual method: designated person looks at number of units, compare w/how much should be carried, bring to max if below min Periodic method: designated person counts stock at intervals and compares w/minimum, if below then order Both: may utilize handheld scanning device for barcodes, order transmitted electronically Perpetual inventory systems: computerized inventory management system (IMS), most efficient, monitored at all times, must be accurately entered into system, all dispensing accurately deducted/added Setting max/min: perpetual and visual, preset values that trigger orders, assumes complete accuracy in dispensing (electronic removal) of meds from inventory Other methods: daily wholesaler and warehouse orders, general stores inventory in hospitals where department within hospital does larger order and pharmacy does daily wholesale orders Current topics: FDAAA increased FDA post-marketing surveillance, so now risk evaluation and mitigation strategies (REMS) sometimes required for specific drugs/classes to ensure safe use Integrity of drug supply chain: distribution scrutinized, counterfeit potential, provide chain of custody documentation for drug packages especially w/high risk expensive brand names Merchandising: attracts customers in, invites them to make purchases Early 1900s: handful of drugs, compounded mixtures, low-cost traditional items, rx small portion of total sales, reputation based on individual customer achievements; after WWII: filling more rx via prefabricated dosage forms rather than compounding Pharmacy consumer behavior: 80% purchases made by people who planned to purchase items less than a week in advance, 50% decisions made after customer enters, 14min/trip, women Pharmacy design/size: industry averages or sales per square foot ADA considerations: equal access for all customers: counter heights, aisle widths, phones, doorways, etc HIPAA considerations: health insurance portability and accountability act for pt information confidentiality, disclosure of PHI minimized Pharmacy layout: move patrons around, visit as many areas of pharmacy as possible, rx dept prominent/visible from all other parts, travel past merchandise on their way there grid: right angles to each other, parallel lines, max travel time in aisles, community pharmacies free-flow: irregular shapes, gift shops/specialty stores Theft reduction: items liable to theft placed in open areas, other precautions Pharmacy merchandising: proper placement of goods on shelves: cross-selling across depts, cross-merchandising items in more than one dept, aisle dimensions not more than 50ft (larger pharmacy height 60-72 inches), plan-o-grams show placement of each item in given section Product placement: end caps, floor stand (large quantities), facing, most popular at eye level Merchandising rx dept: vitamins/herbals, pharmacist advice items, high-priced specialty items, waiting area, consultation, drive-through window (more comfortable approaching when rx dept designed to be open) Risk management Risk: threatens ability to accomplish mission, degree of probability that exposure  negative outcome; risk management: knowledge/experience application to manage bad incident occurrence; enterprise risk management: risk management in business/organization

In pharmacy: fire, theft, errors, injury, competition Speculative risk: chance of gain as well as lost, not insurable Pure risk: only opportunity of sustaining loss, accidental/unanticipated/unavoidable; insurance assists in managing exposure to these Insurable: dollar figures, time/place, accidental for insured, probability calculated, insurable interest, insurance costs reasonably priced Risk management process: context (goals, vulnerabilities, whose risk, reputation, avoiding), ID risks (pharmacy managers, risks from activities, issues w/facilities or PHI), prioritize risks (uncommon/high loss, common/low loss), pick/implement strategy (avoid and manage incidents), monitor/update strategy (monitor compliance, new strategies) Risk avoidance: impractical in pharmacy, risk outweighs benefit Risk prevention: most efective, all pharmacists, minimizes likelihood Risk absorption/retention: some absorbed regardless of setting Risk sharing/transfer: share risk with insurance companies Risk with info management/tech: strategic risk, info tech compatible with pharmacy goals Performance risk: degree of uncertainty in procurement/application of info tech Operational risk: loss resulting from inadequate/failed internal processes Psychosocial risk: moral/legal issues from safety/health hazards + info tech Managers role: liaison between upper management/staf, discuss risks, encourage reporting Compliance with regulations: legal/regulatory environment outside pharmacy, state/federal laws protect public from practice; standard: model or example by authority OBRA 90: proper pt records/prospective drug review, pt counseling HIPAA: privacy rule, appropriate documentation maintained, manager responsible for: training, notice of practices, definition of associates, PHI release authorizations Negligence: failure to do something that a reasonable person would do, doing something a reasonable person wouldn’t do, key in lawsuit outcomes Latent failures: structural weaknesses/properties of the med use process/system: faulty info management/training/decisions, unclear comm, sound-alike drugs, lack of computer warnings Ordering process: errors in handwriting, look/sound-alike, ambiguous orders, abbreviations Steps for filling rx: in text, understand steps and where risks occur Confirmation bias: people see what they are looking for and stop looking when they think they’ve found that item Sterile admixture prep: great error potential, acute illness, directly to blood, look alike, incorrect measurement/calculation Minimizing error in sterile admixture: commercially available, standardize, double-check systems for high-risk meds, automation Pre-printed order forms: standardizes work/concentrations/monitoring/info, decreases opportunity for errors in rx process Pt counseling/education: prevent dispensing error (direct pt ed, literacy, compliance) Reporting/monitoring systems: manager/staf, systems approach, lots of inhibitions Med error reduction strategies: high to low power: fail safes, forcing functions, automation, standardization, redundancies, reminders, rules, education, suggestions Med error analysis: analysis of pharmacy errors for harm, organizational data, near misses (often not done), other organizations (often not done), share w/staf at all levels...