How to Consistently Improve Your Gross Margins
Achieving a good industry average gross margin can be challenging when managing the expenses the independent pharmacy owner is faced with. In this video, Scotty Sykes of Sykes & Company, P.A. discusses what you can do to consistently improve your gross margins. Some of these tips include third-party reconciliation systems, reviewing scripts daily to ensure accurate billings, medication synchronization programs for your patients and high-value specialty products and services. Your pharmacy can achieve healthy gross margins with the proper steps and tools.
Find out how outsourcing can also be a way to improve your margins!
If you prefer to read this content, the video transcript is below.
Consistently improving your gross margins will begin with a few of the basic processes. And that’s gonna be making sure you got a third party reconciliation service in place and you’re tracking, reconciling your third party claims. You don’t wanna be just hoping that what’s coming in your bank account is accurate, is correct, is what you billed for. We all know that that’s probably not the case. Have someone going in there, reconciling those 835’s and making sure you’re getting paid for what you’re filling and if you’re not getting paid, why? Is it DIR fees? Is it just short? A lot of those systems will go after short claims. That’s gonna recoup some monies right then and there. I have seen instances where a few thousand dollars was just caught like that with these systems. Use a third party reconciliation system. It is your most unreconciled bank account and manage that system. That’s gonna help you recoup some dollars in your pharmacy. Another thing is to, at the end of each day, overview your audit logs, script audit logs. What scripts did you fill, what do you need to re-bill? Maybe at 9 a.m. you filled something, were like I’m gonna come back to that and get that corrected in the system, and then you find out two days later you forgot or whatever it may be. At the end of each day, make it a habit to go back, look through your scripts, and see if there’s anything you need to re-bill. That’s gonna help you capture some margin dollars and should just be a standard practice process along with a third party reconciliation system. One of the other things I like to see is for your high value or your high profitable patients, making sure they’re on some kind of sync adherence program, because it’s proven that, as most of you know, that if you get them on a system, on a structure as far as adherence, you’re gonna be getting a couple more refills maybe in a year. And obviously with those high value or high profitable patients that’s gonna add some bottom line dollars as well to your margins. Taking advantage of that script and adherence, especially with your high profit patients is going to be key. And then of course tying these … tying in your managing … taking care of your patients, adding in the OTC side, the out front side, what high value ancillary products can you present, introduce, and market and sell to your patients? Vitamins, supplements, nutraceuticals, whatever it may be to throw in some extra margin dollars. It’s really about being entrepreneur to your patients as a business owner, not just filling these scripts and getting them out the door. Manage that patient and manage your business. Bring in that revenue. Take care of them and you’re gonna see those margin dollars creep up. And obviously it goes without saying making sure that those carriers, those prescriptions, those high dollar profit prescriptions and carriers, that you’re maximizing those and bringing in patients to expand that as well. Bottom line it’s gonna come back to the daily processes, make sure those are in place. But at the end of the day, I think it’s gonna come down to just being entrepreneur in your business and diversifying those revenues. Again, seeking to add revenue where you can, whether again that’s OTC out front or whatever it is in that process. And you’re gonna see that those margins creep up. And we’re seeing margins in the 23 to 24 percent range for 2019 but if you’re able to get to 25, 26 percent margins just doing a few of these ancillary things, that’s gonna really add up in the grand scheme of things and add to that bottom line. Be that entrepreneur pharmacy that you need to be to grow your pharmacy, take care of your patients, and add some bottom line revenue. Looking at the daily logs to see what you’ve billed and making that a habit to do at the end of each day, maybe take 10 or 15 minutes at the end of each day, have a top tech or one of your pharmacists do that, you’re gonna see … I mean if you’re filling two, 300 prescriptions a day, there’s gonna be a couple in there that you probably need to re-bill or just go back and do whatever you need to do to make sure you’re maximizing that revenue coming in. If you’re not doing that on a daily basis, say you do it once a month, it’s gonna be very difficult for you, for the pharmacy owner, to say alright 23 days ago I filled that prescription. You’re just not gonna know, you’re not gonna be able to go back through the thousands of scripts you filled and probably pinpoint what that issue was and what you need to do. And then you’re just going to put your hands up in the air and say oh well. Making it a daily habit to just review what you’ve done for the day. And ultimately, hopefully, you’ll catch maybe an error or two. And if it’s just one or two errors a week, then maybe that’s 100, 200, 300, dollars, that’s two, 300 dollars you’re gonna see on your bottom line. It will add up over time. But it’s just certainly a good practice to put in place.