shrivers pharmacy closes the - ncpashrivers pharmacy closes the door to open another one for new...
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Shrivers Pharmacy closes the door to open another one for new business
By Chris Linville
In the years since John Coler, RPh, graduated from Ohio
Northern University in 1995, his career has been on a steady
upward climb. In 1997, he went to work for Randy Shriver
at Shrivers Pharmacy in Zanesville, Ohio, and six years
later he bought that store. Over the next seven years Coler
expanded the business by acquiring four more locations in
south-central Ohio. The five pharmacies operate under the
Shrivers HealthMart banner.
“When I first started working for Randy, it was a small
store,” Coler says. “He told me that if I built it up and
made it a good business, that he would sell it to me. By
2003, my team and I had taken the store from doing about
100 prescriptions per day, up to about 250. It was just a
handshake deal, but he kept his word and he sold it to me.”
Coler manages an eight-person staff helping him
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www.americaspharmacist.net August 2012 | america’s Pharmacist 37
dabbling in long-term-care services at the Zanesville
Shrivers location, operating a combo shop. It picked up
a few accounts, including some assisted living facilities,
residential homes, and a couple of jails with about 200
inmates each. It’s a decent business, but Coler knew that if
Shrivers wanted a bigger piece of the pie, it would have to
make a more substantial commitment.
“We’re really a small outfit as far as long-term care,
and as a combo shop, we saw that we were missing out
on a lot of opportunities by not going closed door,” Coler
says. “We realized that to pick up more accounts, you really
had to go closed door. By going from a combo shop to
closed door, you can actually access better contracts, better
reimbursement, and better purchasing.”
Those were the factors in deciding to carve out space
run the businesses. The five combined pharmacies, with
locations ranging from 3,500–10,000 square feet, employ
some 100 people. Along with the traditional retail business
(and a healthy annual prescription count), Shrivers offers
items such as home medical equipment and oxygen, and
also has four 340B accounts.
“With the other stores, once they came up for sale, we
were in a good position, and had built up enough equity
and strength to be able to buy them,” he says, adding with
a laugh, “We’ve also gotten better at understanding what
the bank wants and needs in order to make the purchase
happen, which can be cumbersome.”
LTC PresenceAlong with the retail operations, Coler had also been
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at the Brighton facility for a closed-door only section. Visits
to out of state long-term care pharmacies also helped Coler
develop a vision for his business. Starting modestly was a
key part of his plan.
“When I decided to do this, I went and took an NCPA
long-term care class,” he says. “What the class taught was
first, when you are starting out you don’t want to go and
pick up three 100-bed homes, because you might fail
because of the cash flow issue itself. We picked out a couple
of small residential, small assisted living homes, and as we
got better at that, then we went after bigger accounts, such
as some decent sized jails.”
Coler continues, “That fits into my theory about
growing slow. We think there is a lot of opportunity,
especially with an aging population. We’ve always
focused on service—and that’s what everybody says that
they do—but what we’ve found is that if you really give
good service, you seldom lose an account. If we can build
up to 1,500-2,000 beds, then we might consider moving
off site to our own separate facility. Right now it makes
more sense than going out and taking the larger risk of
buying a new building.”
Coler says that the process of converting space for
the closed door LTC facility took about six months.
Greg Paisley, RPh, his retail operations manager, was
given responsibility to run the closed-door operation
as a junior partner. In making the transition, the focus
was on doing things right the first time and building a
strong foundation.
“That’s probably longer than its takes most people,” he
says. “You could probably get it done in three months. But
we like to take our time and make sure we do things right.
My feeling is that you want to make sure that you deliver, so
we’ve taken some extra steps and extra precautions.”
Coler says there are several guidelines that need to be
followed to transition from a combo shop to a closed door
pharmacy. It must have its own entry (separate from the
retail side), its own door, its own address, and its own phone
line. It also has to obtain its own provider numbers on all
of its contracts. Coler says there are a number of highly
qualified organizations that can help with those items, and
he has been extremely pleased with the company Shrivers
chose to assist them.
“Anyone going combo shop to closed door is going
to want to use one of those entities,” he says. “I’ve been
through five acquisitions, and they made the process of this
really, really smooth. They have been extremely helpful.”
LTC Versus RetailObviously there are distinctions between a traditional retail
pharmacy and an LTC business. Coler points out that in
LTC, pharmacists are mainly interacting with physicians and
other health care professionals, along with doing rounds
and checking charts at the various facilities.
“That’s a big difference from a pharmacy standpoint,
versus being in the retail setting and dealing directly with
more customers,” he says.
Coler says that LTC can be a solid revenue driver—but
it takes work and attention to detail.
“In long-term care, everybody knows that there is
more margin there, but at the same time, there is a lot more
responsibility, there’s more paperwork, more requirements
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“It’s not like we have to go out and lease a new building
and start from scratch,” he says. “That can be pretty intense
and pretty scary.”
One area where Coler is laser focused is on cost to
dispense ratios. He says it needs to be measured closely.
“Pharmacists have always looked at margin, but margin
doesn’t mean as much anymore,” he says. “That’s because
when you start talking about us being at 80–85 percent
generic utilization, and all of these brands going to generic,
and with the erosion of MAC [maximum allowable cost],
you can’t pay your bill with margin. We’ve heard that a lot,
and it’s so true. You have to pay with dollars. I think both
retail and long-term care independent pharmacists have
to constantly pay attention to their cost to dispense, and
comparing that to their revenue and their gross margin.”
Coler adds, “If your cost to dispense is higher than
your return, and if you are not paying attention to that,
you can have an upside down model awfully quickly. We
are going to try everything from being efficient on our
deliveries, to constantly working on our purchasing and
our overall efficiency. But we are constantly looking at
cost to dispense to keep that under control to make sure
we are driving profit.”
that you have to meet, and the cost to dispense is higher,”
he says. “And that’s what we ran into in with the combo
shop. There, you’re just kind of doing it as an adjunct to
your business, something to help out, and you are really
not making the profits that you need, because you are on
those retail contracts, and you aren’t maximizing your
reimbursement for your purchasing. However your cost to
dispense goes up—because you have a blister packet, you
have the delivery piece, the chart review—all of those things
are added expenses.”
Going to a closed door facility helps remove some of
those obstacles. Even a few potential bumps wasn’t going to
dissuade Coler from what he sees as a worthwhile venture.
“I think another big difference with long-term care is
that it’s about going out there, creating relationships and
getting those contracts,” he says. “I think if you look at the
independent guys who have been successful, it’s because
they have been good at building relationships with the
clients that they serve, and coming through and providing
the service that they promise. There’s a lot of long-term care
facilities that are excited to do business with an independent
company that can provide good service.”
Additionally, Coler says a basic part of building and
maintaining relationships is to simply ask questions.
“When we get a new customer or client, we try
to ask how things are going and get a sense of how
things are for them,” he says. “That’s how we get our
contracts—we go in and find out what their ‘pain
points’ are, things that are making life difficult for them,
and see if we have the solution.
“I’m not saying life is perfect all the time, but usually
when you find a client that’s with an independent, they are
usually pretty happy. I think a big part on this side [LTC]
is not just focusing on the service, but focusing on the
relationship. You always stay in contact with them, know
if things are going smoothly, and know if there is an issue.
You want to have the type of relationship where they can
call and let you know if there are any problems, and you can
work to solve them.”
Measuring ROIColer, like anyone who is serious about running a successful
business, keeps his eye on the ball when it comes to return
on investment. He says that having a physical location
already in place, along with staff who have some LTC
background, has kept his overhead fairly low.
www.americaspharmacist.net August 2012 | america’s Pharmacist 39
Mentor ConneCtion Helps Aspiring ltC providers
Have you been approached by a potential custom-
er requesting new pharmacy services for a group
home, hospice, or other long-term care facility and
you didn’t know where to turn for information to get
started? Perhaps you offer some LTC services and
you’d like to expand but you’re not sure about next
steps. Sometimes all that is needed is a little guid-
ance to get moving in the right direction.
The NCPA LTC Division has identified experts
in the field of LTC pharmacy services to mentor
pharmacists who are new to LTC and want to know
more about this profitable niche or those who cur-
rently offer LTC services and want to expand and
grow their business. The Mentor Connection is a
member benefit for NCPA LTC Division members.
Go to www.ncpaltc.org for more information and
sign up today.
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40 america’s Pharmacist | August 2012 www.americaspharmacist.net
In other areas, Coler thinks he can keep costs in check.
He says the business can probably add 300–400 beds
without bumping up staff numbers significantly.
“It’s really only been a matter of physically changing
our building and getting the proper contracts and then
going after the business,” he says. “Now we can afford
growth in overhead as we grow the business.”
Knowledge Trumps FearColer is certainly familiar with the challenges facing
the profession, whether it be PBM antics, low and slow
reimbursements, cost to dispense, short cycle, mail order,
Medicaid and Medicare uncertainties, and a litany of
other issues. He doesn’t dispute that they pose threats.
But he insists that they aren’t going to deter him.
“I spent five or six years not going into oxygen or
the HME business out of fear because everybody kept
saying how horrible it was—you have this coming down
the pike, and that coming down the pike,” Coler says.
“I just don’t believe you can run a retail operation, a
long-term care operation, or an HME operation in fear
of what’s coming down the road. I think you have to be
knowledgeable and stay on top of things, and I believe
we will always find solutions to still provide care and
access to those patients.”
Coler says a bit of education can go a long way.
“I go to NCPA and other pharmacy events and attend
seminars and listen to the ideas that other people are
coming up with,” he says. “I don’t know all of the answers,
but we are going to be informed. I see too many operators
that don’t do certain things out of fear. When I bought my
first pharmacy in 2003, people said I was crazy. When I was
in college, they were saying the independent world wasn’t
even an option. The biggest thing we need to do is just stay
active within our profession, and network together to come
up with solutions.”
LTC TrendingIn Coler’s opinion, even though he thinks independent
retail pharmacies have done a good job of responding to
the challenges they face, he believes that many are going to
consider adding an LTC component to their practice. It can
provide a decent niche revenue stream, and also act as a
buffer against retail issues such as MAC.
“I think we are going to see a lot of independents across
the country develop that side of the business,” he says,
“and I think they are smart to do that. Especially with the
population aging, it’s going to diversify them and overall I’m
confident it’s going to help them in business. I believe NCPA
and its Long-Term Care Steering Committee sees this as a
real opportunity for pharmacists.”
Coler understands that there may be some pharmacists
interested in LTC who might be hesitant to take the plunge.
“I think there is a fear among retail pharmacists
not knowing if they can do it,” he says. “But what NCPA
wants to do is get the message out there that you can do
it. Not only can you do it, it’s just like retail; you can do
it better than the big guys. That’s the message that I hope
we get out there, that ‘hey, you can do this, and you can
do it better.’’’
Again, he says that education and networking are the
best ways to learn.
“Those are the keys to being successful,” Coler says. “It’s
not something where you need to re-invent the wheel. You
need to speak to people who have started where you are,
and have become successful. It’s been amazing how many
people out there have been helpful with us on this venture.
Find people who have done it, and done it well, and they are
usually very willing to help you out.”
Chris Linville is America’s Pharmacist managing editor.
ltC’s Cost-to-dispense study AnAlyzes Business Fee struCture
NCPA has launched a cost-to-dispense study for
independent, closed-door LTC pharmacies in an
effort to ensure fair and reasonable dispensing
fees. It is not evident that Medicare Part D plans or
state Medicaid programs have considered the new
technology or staffing burdens LTC pharmacies
must bear to meet not only the short-cycle dispens-
ing requirements, but also the current costs of the
Centers for Medicare & Medicaid Services LTC
performance guidelines. To help quantify reason-
able LTC dispensing fees, NCPA is pursuing a cost-
to-dispense study specific to long-term care and
will share the results with government and private
health care industry payers. Visit the LTC Division
website (www.ncpaltc.org) for more information.