Our clinic services the geriatric community where the majority of our patients will be ensured by Medicare. The pharmacist on staff will be tasked with the dual purpose of conducting medication reviews and Medicare Annual Wellness Visits (AWVs).
Revenue Projections
Medication reviews, while leading to a decrease in medication-related issues for the patient, do not translate into any direct cost savings for the clinic. Thus, AWVs will be relied upon solely for the revenue generation needed to offset the expenses of the position. Our model was created based on the following assumptions: our staff pharmacist will work a total of 48 weeks per year, considering paid time off and holidays; conducting 4 AWVs per day; total AWVs will be split into 10% initial and 90% subsequent based on a relevant study’s assumptions. [2]
| Revenue | First Year | |
| Initial Annual Wellness Visits (96) | $15,503 | |
| Subsequent Annual Wellness Visits (864) | $92,387 | |
| Total Revenue | $107,890 |
Expense Projections
In this chart expenses were separated into First Year and Second Year costs to highlight the differences between start up costs and subsequent year costs. Laptop allowance, office supplies, marketing and education all decreased in amount after the initial start up costs. The only expense that increases is the pharmacist salary, which will increase by 2% annually. Overall, the amount of total expenses remained nearly the same for both years.
| Expenses | First Year | Second Year | |
| Pharmacist Salary | $120,000 | $122,400 (2% increase per year) | |
| Laptop Allowance | $1,200 | – | |
| Office Supplies | $1,000 | $600 | |
| Education Supplies (pill boxes) | $300 | $300 | |
| Marketing | $200 | $100 | |
| Education (BCGP) [1] | $600 (initial certification) | $125 (annual certification fee) | |
| Total Expense | $123,300 | $123,525 |
Net Generated Revenue
Our financial analysis of the pharmacist’s first year shows the clinic suffering a net loss of $15,410. Our clinic is content with this initial loss for a two-fold reason. First, the pharmacist position is in its pilot phase. This loss shows that our initial model demonstrates feasibility in the long-run by avoiding debilitating losses, and this net loss can be regenerated with modifications to the current pilot program in the future. Secondly, the medication review aspect of the pharmacist position cannot be accounted for based on its intangible nature. Decreased adverse drug reactions and increased medication adherence are beneficial to the improved quality of care to the patient but cannot be given a monetary value. Additionally, as our program evolves, other areas for revenue generation may present opportunity. Administering vaccinations and recommending laboratory testing may be future areas in which the pharmacist can become involved.
|
$107,890 (Revenue) |
– |
$123,300 (Expense) |
= |
-$15,410 (Net Loss) |
Break-even Analysis
Initial Year Break-even
The initial year break-even analysis is included to display how close the the pilot program is to becoming sustainable. While this is hypothetical, only 137 more AWVs would be required to meet the cost of adding a pharmacist to the geriatrics clinic in the initial year. This translates into roughly 3 additional AWVs per week, which our team feels is attainable, but we want to give the pharmacist a year adjustment phase before striving to eclipse expenses completely.
- Total Annual AWVs: 1097
- initial: 110
- subsequent: 987
- Average AWVs per week: 23
- Total Revenue: $123,304
Short-run Break-even (Years 2-4)
The short-run break-even demonstrates the necessary revenue to recoup the initial deficit of $15,410 from the initial year. In this analysis, reimbursement rates for the AWVs were held constant but would likely fluctuate from year-to-year. Also, expenses were all held flat except for the salary of the pharmacist, which was increased 2% annual. Aiming for a break-even rate of 4 years, the pharmacist would need to average 24.3 AWVs per week from years 2-4. This break-even goal seems reasonable given the ability to include more AWVs per day since the pharmacist is only performing AWVs during half of their work day currently. Additionally, the pharmacist will become more accustomed to performing AWVs and managing documentation to decrease overall time spent in each visit in the subsequent years.
- Total Expense: $377,968
- Average AWVs per week: 24.3
- Total Revenue: $378,048
- Total Net Revenue Generated after 4 years: $80
Citations
- Annual certification fee. Board of Pharmacy Specialties website: http://www.bpsweb.org/recertification/annual-certification-fee/. Accessed February 17, 2017.
- Park I, Sutherland SE, Ray L, et al. Financial implications of pharmacist-led medicare annual wellness visits. J Pharm Am Assoc. 2014;54(4):435-440. http://www.sciencedirect.com.ezproxy.butler.edu/science/article/pii/S1544319115302193. Accessed February 17, 2017.