Outsourcing Pharmacy Services
Mike Cross
Managing Director
Hambleton Medical Ltd
Outsourcing Pharmacy Services
• Overview of the concepts of strategic management
• Outsourcing dispensing
• Strategic choice
Aims
• Understand the political and environmental factors affecting outsourcing
• Understand the key drivers
• Understand how strategic management concepts can be applied to outsourcing
• Understand the benefits risks and concerns in outsourcing outpatients dispensing
• Be aware of the key considerations in making a decision
Strategy – the fundamentals
• Learning curve effects
• Tight focus or integration and scale effects
• Philosophy
• The changing nature of large organisations
• Financial climate and politics
Strategy – learning curve effects
• Principal
• Example of Pharma and homecare
• Example of a Trust board
Strategy – tight focus, or integration and scale
• The importance of focus
• Integration
• Scale effects
Strategy – tight focus, or integration and scale
• The importance of focus
• Integration
• Scale effects
Strategy - philosophy
• Communism or capitalism
• Promoting vibrancy
• Remember – there are good and bad companies in both public and private
Strategy - philosophy
• Communism or capitalism
• Promoting vibrancy
• Remember – there are good and bad companies in both public and private
Strategy-the changing nature of organisations
• The availability of information
• The importance of governance
• The ‘factory’ provision
Outsourcing dispensing
• Strategic decision
• Benefits of outsourcing
• Concerns of outsourcing
• Alternatives
Outsourcing dispensing- strategic decision
• Complex
• Long term
• Risk– Changes to VAT rules– NHS not good at commissioning– Effects on future provision of pharmacy and structures
Outsourcing - benefits
• VAT saving
• Patient experience
• Reduction in headcount
• Scale effects
• Potential to increase the scope to some inpatients
• Applicable to a wide range of patients
• Focus – avoiding lost opportunity costs
Outsourcing - benefits
• VAT saving
• Patient experience
• Reduction in headcount
• Scale effects for a focussed provider
• Potential to increase the scope to some inpatients
• Applicable to a wide range of patients
• Provider access to capital
• Focus – avoiding lost opportunity costs
Outsourcing - concerns
• Long tie-in
• Market and skills underdeveloped
• Market intrinsically less vibrant
• Information
• Purchasing
• Contracts
• Thin end of the wedge
• Margin retreat
• As the market matures will the quality drop?
Alternatives to Outsourcing
• Homecare
• FP10
• Reduction in hospital prescribing
• Social partnership
• Holding company structure
Making the Decision
• What is core?
• What capacity is there to deliver the core
• What is the ability to manage the contract
• How do the figures add up?
• How do the figures add up if the present is optimised?
• How realistic is it to optimise the present?
• What is you outpatients area like
Case history 1
• One of the very best hospital pharmacy departments
• Low waiting times
• Excellent clinical service
• Excellent governance
• Teaching hospital
• Safety focussed
• Good management good staff
• Low residual op RX
• High use of homecare
Case History 2
• 25% saving on drugs budget
• Poor staffing levels and recruitment
• Historically poorly managed
• Underdeveloped clinical pharmacy
• Long op waits
• Awful waiting area
Summary
• Usual decision– Reduce opRx– Increase homecare– Increase clinical control of outpatient prescribing
• For others– Ensure you retain the benefits and maximise the
opportunities– Manage it well
• The future?
In Conclusion -what is needed?
• An informed decision made with an understanding of the strategic context, based on the present and future capabilities to optimally deliver the core.
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