Shrivers Pharmacy closes the door to open another one for new business. By Chris Linville

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1 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 36 america s Pharmacist August

2 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 Presence Along with the retail operations, Coler had also been 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 August 2012 america s Pharmacist 37

3 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 Retail Obviously 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 photography: istockphoto 38 america s Pharmacist August

4 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 ROI Coler, 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. 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 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 Mentor Connection Helps Aspiring LTC Providers Have you been approached by a potential customer 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 guidance 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 currently 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 for more information and sign up today. 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. August 2012 america s Pharmacist 39

5 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 dispensing requirements, but also the current costs of the Centers for Medicare & Medicaid Services LTC performance guidelines. To help quantify reasonable LTC dispensing fees, NCPA is pursuing a costto-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 ( for more information. In other areas, Coler thinks he can keep costs in check. He says the business can probably add 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 Fear Coler 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 Trending In 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. 40 america s Pharmacist August