DIR Fees, DIR Fees 2024, Pharmacy Growth, Startup Pharmacies

Improving Cash Flow With Long-Term Care at Home Featuring Paul Shelton

How can you diversify your revenue sources as an independent pharmacy? What is long-term care at home? How can you improve cash flow in your pharmacy?  

The reality is, to succeed today as an independent pharmacy, you have to diversify your sources of revenue, especially with DIR fees as high as they are. Incorporating long-term care at home is one of the best ways to diversify your revenue. 

In this episode of the Bottom Line Pharmacy Podcast, Scotty Sykes, CPA, CFP and Bonnie Bond, CPA sit down with Paul Shelton, President of PharmaComplete to discuss the benefits of long-term care at home, how LTC@H can improve cash flow, combo shops, and more! 

The Bottom Line Pharmacy Podcast is your regular dose of pharmacy CPA advice to fuel your bottom line, featuring pharmacists, key vendors, and other innovators.

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If you prefer to read this content, the video transcript is below:

Scotty: All right. Welcome everybody to another episode of the Bottom Line Pharmacy Podcast. Today we are happy to have Paul Shelton with PharmaComplete with us today. And we’re going to be talking about, I imagine some long-term care topics that are hot on the press right now. I know we just got back from NCPA. Paul, I think I saw you there. And long-term care was definitely on the agenda there. There was a lot of activity around long-term care.  

Bonnie: Lots of sessions on that.  

Scotty: Yeah, we’re seeing a lot of activity with our clients with long term care. Why don’t you give us your little take, if you will, on NCPA and what you got out of that and where long-term care is headed in the pharmacy space here going forward. 

Paul Shelton: Yeah, absolutely Scotty. So there’s a few things that are happening in long term care that are I think leading to the influx of new Long term care and specifically combo shop pharmacies that we’re seeing, like in your clientele and my clientele, I mean, it’s a lot of pharmacies are looking at long term care and what they’re seeing is like, we’re already doing this, right? Like they’ve been doing it for years they just weren’t getting paid appropriately for it because there wasn’t a methodology to do that. And so, what I saw in NCPA and heard over and over and over was, “oh, wait, I’ve got 20, 30, 50 of these patients in my book of business already.”  And we just, you know, absolutely you do, we’ve looked at probably 400 pharmacies in the last, call it six months, doing long term care at home assessments, and that’s really what we’re seeing is that long term care at home, but then also group homes, assisted livings, I mean,  we’re seeing a lot of growth in that in the community space, and so what,  What we got from NCPA was every single pharmacy we did an evaluation for long term care at home, we found  at least 50 to 60 patients in their book of business, low hanging fruit, people that they were like, “oh, yeah, well, Miss Jones and Miss Margaret and, and Miss Mildred over there, they’re, they’re all They’re all long term care.” Those are long term care home patients and so now it’s just helping people get access to the right payment structure for those, the reimbursement structure for those, and that was really the message at NCPA was, hey, you’re already doing the work. CMS has put out guidance that’s appropriate for. Plans and payers to pay appropriately for this. Now we’re starting to see some movement with both ESI and optimum at the time of recording. So, if you’re watching this more than about 6 months from now, we’ll probably see something different at that point. But if it’s in the next few weeks, and we’re seeing ESI and Optum are actually paying slightly more in the form of no fees for those claims. And of course, the other big news at NCPA was DIR fees are going away. They’re not, just so we’re on the same page. They’re just not being called DIR fees anymore. And you’re just getting worse reimbursement at that point of sale. Same methodology. It’s, you know, DIR fees were a symptom. They were not a They’re a symptom of a root problem, which is improper reimbursement for community pharmacy. They were just one of the symptoms. They weren’t the actual root cause. And so that was kind of what I saw was the two big messages from NCPA was, how can you deal with the DIR Cliff that’s happening? Um, yeah, we’ve heard it called the DIRmageddon, the DIR Apocalypse. You know, but it’s, that’s what we’re seeing, right? That’s the big gap is how do we overcome January, February, March. And one of the ways a lot of pharmacies are doing it is there.  Finally getting paid appropriately for what they’re doing already for their long-term care at home patients.   

Scotty: Yeah, so a lot of a lot of these pharmacies, you know, like you said, they’re pretty much all of them have some long-term care patients. They’re servicing already. Absolutely. So it’s just, it’s just a matter of fact of getting into that reimbursement,  getting reimbursed properly for that.  And I know, you know, the combo shops, a lot of pharmacies are doing that. They start getting paid, uh,  appropriately for what they’re doing for those patients. Where do you see that going into the future? I mean, are we going to see more reimbursement for maybe some skilled at home services? You know, where does this go? What opportunities do you think are ahead for pharmacies in the future here?  

Paul Shelton: Well, so part of what we’re doing at PharmaComplete is we’re working with another organization called Centennial Management Group to create the Long-Term Care at Home Pharmacy Network. And the intent of that network is exactly what you’re talking about, Scotty, is to help raise awareness for what these pharmacies are doing and to encourage payers through long term care PSAOs, so through GeriMed, Innovatix, MHA, through those long-term care PSAOs, get them paid appropriately. for the work that they’re doing. When you look at it by the numbers, right, there were 14 or so million patients last year that had some long-term care paid for by CMS.  There’s only about 3.1 million beds in the United States. So where are the rest of those patients, right? Okay, so let’s say it’s assume another million cycled through skilled nursing beds All right. So now we’re down to 10 million patients that were serviced in their home  Well, it means every community pharmacy in the country should be able to find 50 to 50 to 60 patients inside their pharmacy Just again basic math 50 to 60 patients within their pharmacy  Should be available to them that are long term care at home patients and if they’re doing the work, which is, you know, provide all the 10 criteria from CMS eight of which apply to community pharmacy and long term care at home, you know, specialized packaging, comprehensive inventory, all those, those 10 CMS guide guidelines, if they’re doing that work, they’re providing specialized packaging like a multi dose compliance packaging or unit dose compliance packaging of some sort, and they’re providing delivery. In addition, they’re doing the med reconciliations that are required within skilled nursing. If they’re meeting that level of care, they should be getting paid for that level of care, right? It’s, for the longest time we’ve looked at the patient residence code as it, you know, oh, it’s a level of service. It’s not. It’s a patient residence code. And so, what we have to do is figure out how to get Pharmacies paid for the work they’re doing based on the patients being in their own home with either level of effort or level of service modifier on there. Does that make sense?  

Scotty: Hmm. Without the DIR fees.   

Paul Shelton: Exactly. No DIR fees. And that’s it. It’s like even today, like I said, Optum and ESI are paying retail rates with no DIR fees and ESI is even putting a little bit of a dispensing fee on there as well for these patients. And that makes a huge difference. When you’re talking 8 to 10 percent difference in reimbursement.  On top of that another two to three dollars in dispensing fees per claim. That is material. I mean, you’re seeing in some cases a nine to ten percent shift in gross margin on these claims or on for these pharmacies on these claims and you know, especially doing what you guys do you think about a pharmacy going from a 19, 20 percent gross operating margin going up to a 27, 28 percent gross operating margin.  

Scotty: That’s game changing.  

Paul Shelton: Ya’ll that’s game changing! It’s completely fundamentally shifting the whole space. And so if half your claims go up by 10%, you’re up at 25, 26 percent again, all of a sudden, you’ve got breathing room to pay people to be able to deal with the increased labor costs that we’re dealing with, increased service costs. And of course, the increased cost of service for these patients, because there are things you have to do that are a little bit different.   

Bonnie: So, Paul, what would an independent pharmacy that is interested in looking to see kind of maybe the amount of patients that would qualify for something like this. What’s the first steps to go and to work it on that?  

Paul Shelton: Absolutely. So, it’s a great question. First step really is, okay, you know, we’ve been talking about this for probably six years, but do you have a MedSync program?  If you have a MedSync program, you probably got long term care at home patients in the MedSync program. Yeah. And, you probably can just think about, okay, which are the patients that I deliver to because I have to, not because I won’t to, if that makes sense. It’s like not because it’s an ease of use for them, it’s they can’t get out of the house to come in the farms. Those are your long term care at home patients right there. I mean, and again, most pharmacies can find 50 to 60 of those easily. PharmaComplete actually has a tool we call a long-term care at home assessment, where you actually will look at your claims data for the last 30 days and pull out the BINs and PCNs that are affected by this and can give you a rough idea of dollars that your pharmacy can actually capture. It’s not at all necessary. I mean, you don’t have to do it by any means, but it’s, it’s a, we have a very reliable tool that says, this is what we are able to find for you. And most pharmacies though, if they’ve got a sync program, they’re already doing some packaging already.  That’s their starting point. That’s their beginning book of business. Also, any patients you have that are in group homes. Those are long term care automatically. And this is just a living reimbursement, which again, you know, no DIR fees, adds to between 2 ½ and 4 for a dispensing fee. That’s real money. You’re talking 8 to 9 per prescription and found revenue there.  

Scotty: And these patients have a lot of prescriptions, typically.  

Paul Shelton: Mm hmm. Multiple prescriptions.  

Bonnie: That’s a good point. Yeah. It’s usually not a one prescription type of scenario.  

Paul Shelton: No, these are almost always 7, 8, 9, more. I mean, my chief of staff, her dad’s a great example. He’s on 27 medications, can’t drive himself safely. I mean, he, not saying he doesn’t try to drive on the tractor, getting the, you know, drive out to, uh, drive to the pharmacy, but he shouldn’t be right. He’s, 27 medications insulin twice a day. He’s a prime example of the person that your pharmacy is looking for, because, you know, he also, you know, is kind of stubborn and doesn’t want to have people think that he’s sick. And so, you know, he was very reticent to take compliance packaging. And one of the things that we found very effective, and not just with him, but with other patients, is let the patient know, hey, there’s a benefit that your insurance will pay for, that you’re not taking advantage of. And, fun story, people are like, wait, I’m not getting something I’m supposed to? 

Bonnie: They want the free stuff.  

Paul Shelton: Exactly. I need that. That needs to be for me. And so, the patients are embracing it more now, again, because it’s a benefit. It, they’re leaning into this a little bit more and we found it much easier to get them to accept the care and the, and the concern. And so, looking at his health history, for the six months prior to him receiving, uh, compliance packaging, he was in the hospital once a month, every single month. It was for something different every single time, but he was in the hospital once a month for six months. He’s been on compliance packaging for the last six months; he’s been in the hospital one time. So that’s what we’re doing. That’s what this process is doing is you’re literally providing Differentiated and better care for your patients and reducing their overall health care costs. That’s why we think there’s a huge opportunity here to talk to payers and PBMs and say pay us to do this. We’ll reduce your overall health care costs. This is where care is going.  

Scotty: I mean and that generation is getting older. There are just going to be more people filling in. I mean… 

Paul Shelton: Absolutely.  

Bonnie: And like you just mentioned, always at the forefront is patient care. 

Paul Shelton: That’s right.  

Bonnie: And so, this also helps with that, like you mentioned, with your father-in-law that’s, you know, because he was on the MedSync and now, he had the packaging. He’s able to take his medications like he’s supposed to and then he’s not in the hospital as much. So, I mean…it’s a win-win really all the way around. 

Paul Shelton: Absolutely, it’s a win-win. The patient’s healthier, the pharmacy, so the pharmacy is healthier because the other thing this does, and this is something that we really, I don’t think many people have talked about is when you go to this model it by definition has to be a MedSync model. It by definition has to be a packaged model, which means it’s proactive, not reactive. So part of the reason that we feel like when we’re in a community pharmacy, our hairs on fire is because everything is reactive. We’re waiting for patients to call us. We’re waiting for patients to walk in the door and tell us they need their prescriptions. Well, this model is proactive by definition. So we’re reaching out to a patient. We’re saying, Scotty, it’s been Let’s say, you know, it’s been 26 days or 25 days since your last meds were delivered to you. Is it okay for me to go ahead and start working on that for you? I’ll have it packed for you and delivered tomorrow. So now you know exactly when that’s going to happen. We actually recommend calling 10 days ahead of time, getting permission to show. Once you have that, now you have 10 days to work on the process. And so, by making it a proactive model, it also reduces your staffing burden. You can put these prescriptions on days that are lighter in your work week. So, in the South especially, Wednesday afternoons has always been the lightest time in a pharmacy. Because every Wednesday in the 60s, 70s and 80s, every doctor in town took Wednesday afternoon off to go play golf.  That’s just, that was what they did.  

Bonnie: Fun fact.  

Paul Shelton: Fun Fact. They just didn’t work on Wednesday afternoons.  

Scotty: Trivia.   

Paul Shelton: Trivia. I mean, and this is consistent across North and Georgia.  

Bonnie: You should get in on that, Scotty. 

Paul Shelton: Right? How do you get in on that? That’s a cool trick. Yeah.  

Bonnie: Wednesday afternoons for golf.  

Scotty: Afternoon.   

Paul Shelton: So, what they did is now you’ve got this lull in Wednesday afternoon in the pharmacy because no one’s prescribing. Well, that lull has, Carried forward 25 35 years. It’s usually still the quietest time in the pharmacy so if you do your packaging proactively on the quiet times you don’t have to have as many people in the pharmacy for your busy times because again your Mondays, instead of being 170 of every other day Now become 110 percent of every other day and your staffing becomes more normalized. 

Scotty: Is compliance packaging required with long term care setting here?  

Paul Shelton: Absolutely.  

Scotty: I’ve gotten…Okay.  

Paul Shelton: So, unequivocally it is, even if a patient is offered compliance packaging and does not accept it. You cannot build that patient as a long-term care patient.  

Scotty: Okay. 

Paul Shelton: So, there are 10 requirements CMS and 1 of them is what’s called specialized packaging. What that means is not vials, and so you cannot bill a long-term care claim if it’s filled in vials. 

Scotty: Gotcha. Okay. I’d confused that in the past, so I’m glad you clarified that.  

Bonnie: Listen, I don’t know why anyone doesn’t want that. My husband’s 42 years old. He takes three medications a day, and I mean, our local pharmacist does not do compliance packaging, but I do it myself for him. 

Paul Shelton: Mmhm. Look, I mean.  

Bonnie: In the little thing, because he will, he’ll take it if it’s like that. But if he has to open, God forbid, he has to open three whole bottles, you know.  

Paul Shelton: Those are my meds. I took my meds this morning. So, it says Wednesday right there. So, I know I took my Tuesday meds. So, I get four meds a day and a vitamin and its compliance package cause it’s easy for us traveling. You talk about going to NCPA, you tear off five packs, you throw it in your briefcase and you’re good. I mean, it’s the easy button and you know, am I a long-term care home patient? No, I am not because I can go to the pharmacy, you know, even though they compliance package it and deliver it to my house, I obviously I’m not a long-term care home patient. So that’s another kind of, it’s another, you talk about things that have gotten tossed out there that are a little bit different. You know, one of the things we have to clarify is a long-term care patient, by definition, needs support and two activities of daily living. So, either a basic or, it’s a BADL and IADL, right? And so you’ve got to have two activities of daily living support. The other thing you’ve got to have is one of those has to be they can’t transport themselves safely, right? Like they can’t leave their house, drive to the store, go shopping, come home, and make lunch for themselves. And so, there’s a couple different IADLs in there that can qualify for that. But it’s really, they can’t, they should not. To be a qualified long term care at home patient, they should not be able to leave the home on their own. Now, if they have to coordinate care and travel to get to the pharmacy, that still qualifies them because they can’t transport themselves.  

Bonnie: So even if they have a relative that can pick it up for them, they can still qualify. Great. 

Paul Shelton: Yep, exactly.   

Scotty: Oh, I had something I was going to ask, but I forgot.  

Bonnie: I know someone who, I think Scotty and I both know someone who might need that, that drops their pills all over the floor every day, probably misses some.  

Scotty: Who?   

Bonnie: I Can’t say on the podcast.  But I don’t even know that the packaging would help because still you have to open it and if you miss one when it comes in your mouth. You need something completely different for that. 

Scotty: I do know a patient, I have been on trips and stuff and I’ve gone in the bathroom and there’s pills on the floor. You know, like prescription meds. Yeah, people do it for sure. And they weren’t taking it. They needed to take it. They forgot.  

Bonnie: But I don’t know what packaging can do about that. We’ll have to come up with something completely different for actually making it from the package to your mouth. 

Paul Shelton: So, there’s some really interesting technologies out there right now that they can Look at, like, did you recover the package, right? Like, did you take the pack? And there’s one that does a card, that’s like, it’s a card, and you can pop open a little canister and take the little thing out. Very cool stuff. There’s others that use strip packaging.  Getting it to make sure it’s been ingested. You know, there are technologies that can do that, but they’re really expensive. So, unless it’s a specialty medication, most of the time they’re not tracked. And so, you know, to your point, it’s like, I can get it into your hand. I can’t make it go in there.  

Bonnie: That’s the only…Yeah.  

Scotty: Do you have to certify, you know, I’m guessing pharmacies and I’ve seen this where you need to have some form of a like a sheet that confirms they are they meet those ADL or whatever requirements they need to?  

Paul Shelton: I think best practice here right now It’s not required Scotty. So the answer your question is do I have to know you don’t have to but just because you don’t have to doesn’t mean you shouldn’t yeah, and in this case, I do think that the best practice is absolutely to, the best practice is absolutely to have an attestation form that says these are the, these are why this patient qualifies. Now there’s, there’s two ways to qualify a patient. One is if they’re on a Medicare or Medicaid waiver program, so, like an age blind disabled program or an IDD waiver program, so, a 1915c home and community-based waiver program. Or they have access to Medicare before 65 or in a qualifying program to get access to Medicare before 65. So, again, disabled patient, a patient who’s actively receiving dialysis. There’s a dialysis waiver program for in-stage renal disease, those would all qualify automatically as a long-term care at home patient.  The second way to do it is through the activities of daily living and chronic conditions, and that’s where you have two IADLs or BADLs, and there’s, those are commonly listed, I think it’s a total of 11 different conditions that can qualify or 11 different criteria there, and then you’ve got three or more chronic conditions. Well, as a pharmacist, most pharmacists can look at the medications the patient’s on and see, okay, well, yep, this persons on three, got three, three or more chronic conditions because I see diabetes, hypertension, hyperlipidemia are all being treated right here. So, okay, cool.  You know, you clearly, clearly need this support, if that makes sense.  

Scotty: What, um, so pharmacies that are, haven’t gotten into a combo shop situation, they do know they have some patients, I guess what are the roadblocks you guys see or what are the common pitfalls or the common bumps in the road to getting set up and started? I know from our perspective we see receivables being a big thing, because you have the separate, I think it’s MPI number, so you have a separate receivable, you know, situation there. But from your end, what, what, what do you see as a kind of those bumps in the roads to getting started there?  

Paul Shelton: Well, exactly what you said, the second MPI and NCPDP, I mean, it’s an easy process if you happen to have about 35 hours of free time to go through and do this…but I’ve yet to meet a pharmacy owner who was just sitting around twiddling their thumbs, looking for something to do, right? Again, most pharmacy owners are in a community pharmacy, which is still in a reactive state, right? So, they’re, and this is not, I mean, that’s probably 95 percent of the pharmacies out there are reactive right now. And that’s the practice of pharmacy. And so, because they’re in that reactive state, there’s always a fire that needs to be put out. There’s always taking two hours to sit down and fill out the pre-enrollment questionnaire for CVS, and then making sure it’s filed correctly, and then seeing the email from CVS when it comes in, and then filling out the 87 page or whatever stupid number of pages it is for the application for CVS. They just don’t have time to do it. It’s just this ridiculous Onerous process. And so, what ends up happening a lot of times is they’ll sell, they’ll select a partner like GeriMed or Innovatix And they’ll say, okay, I’ve got a partner now. I’ve got my GPO and PSAO. Great. And they’ll sign up and they’ll get set up, but then they don’t actually go through the credentialing process. And we’ve got tons and tons of examples of pharmacies that are sitting on a hundred to two hundred patients that they know qualify. But the owner can’t take the time. The owner or manager doesn’t have the ability or can’t take the time to get that paperwork done. And so, this is a big enough problem that we actually created a division of PharmaComplete that does nothing but that. So, it’s literally nothing but a credentialing organization. So, it’s called Simplify Enrollment. And we literally partner with pharmacies to get their enrollment done. And it takes the average pharmacy between 35 and 40 hours to do the paperwork. It doesn’t, if you do it all day every day, it doesn’t take that long, right? So we have some ways to speed the process. Right now, credentialing is taking between 90 and 120 days depending on the pharmacy and if they’re… 

Bonnie: Quicker than II thought it would be. 

Paul Shelton: Yeah, well, they’ve actually sped up pretty dramatically. So, when we first started doing simplify enrollment two years ago our average turn time this, the time from the time we start the process to the time It’s back from ESI, usually ESI is the slowest to get our full credentialing back. We were looking at usually about six months. Yeah, now it’s and which is I mean, that’s ridiculous. It this is an already credential pharmacy like they’re already in the system. They’re just doing it under a new NPI and NCPDP like why? Why would it take this long it? You know, it’s a whole different conversation, but we’re getting we’re seeing that time now down to about 90 to 120 days. We’ve seen some come back as fast as 35 just depends on how quickly you’re turning the paperwork and who’s putting it in. I mean, we’ve got a  customer of ours up in New York City, so all of New York City is a heat zone. So, of course, there’s all the extra paperwork you have to do for heat zone, but, you know, he submitted his paperwork about 45 days ago, and he’s probably in the last final stage of the ESI after having a good back and forth around the heat zone paperwork. Right. So, you know, we are seeing it happen a little bit faster sometimes and that’s the one we’re not working on. That’s just he’s a customer in another format for a PharmaComplete. So, he’s doing that paperwork himself. So, it’s 100 percent possible for pharmacies to do this themselves. We strongly encourage them to, but if they can’t, we do have a solution to help them fix it.  

Bonnie: So, Paul, when you have a startup, would you suggest that any of these startups, because I work with a lot of startups, just to go ahead and do this right out of the gate? 

Paul Shelton: Absolutely.  

Bonnie: Even if they don’t really know if they’re going to have a lot of that, or just maybe for the future they have it in case?  And then they will have to go through that process.  

Paul Shelton: Great question, first off, because there are some pros and cons to this. So, if you start too early and you don’t put a claim through the long-term care PSO for 60 days, ESI and CVS will de roster you.  

Bonnie: Of course.  

Paul Shelton: So you’ve got to, of course, yeah. How can we make this as hard as possible? Oh, wait, we figured it out.  And so what they’ve done, what I would recommend they do is get set up with GeriMed, get set up with Innovatix or MHA. Again, all three of the long-term care GPOs can help with this. Get set up with your GPO partner of choice. And once that’s done, then once you identify patients, go ahead and go through the credentialing process. So, if you’re a startup pharmacy, the other thing to do too, the interesting thing around startups is, this should just be your default process. So, every time a patient walks in the door, if they’re on more than two medications, it’s not a, would you like to be on our synchronization program?  

Bonnie: They get to start fresh.  

Paul Shelton: It’s right, you’re on sync.  

Bonnie: You’re on sync. We sync. You’re on sync.  

Paul Shelton: Hey, fun story. This is the only way we fill prescriptions. Yeah, we’ve got some great partner pharmacies that we work with that, that’s their method, and it’s crazy.  

Bonnie: It has to be, yeah.  

Paul Shelton: We’re talking 300 patients in one pharmacy, average patient load is about nine prescriptions per patient. And, we’re seeing ridiculous gross margins on this pharmacy because every patient is synchronized. Every patient gets packaging. Every patient gets delivery. And where appropriate, they bill it through a long-term care PSAO. And where not, they bill it through the retail. But the interesting thing about this is every patient gets 12 refills a year. Every single one. And so, when you look at their performance metrics, it’s through the roof. And they’re filling for 2,200 patients, 26,000 or so prescriptions a month, with three people. So, they’re using automation. They’ve got two fulfillment techs that are still using the automation. A third fulfillment tech is doing all non-oral solids. Okay, that’s a thousand prescriptions a day for those in the cheap seats. Think about doing that in traditional community pharmacy in reactive mode. It’s not possible with just three people. Yeah, I mean, just it’s best techs in the world, you can’t do that with 3 people because you’re constantly having to and again, that’s just the fulfillment process with 3 people. That’s not the whole process. They’re not doing data entry. You’re not doing outreach. Someone else does that, but they’re operating model is much more like a long-term care pharmacy, or they have a call center that’s calling out to the pharmacies or calling out to the patients. And so, it’s really weird being in that pharmacy because you can be there for four or five hours and only hear the phone ring once an hour, twice an hour. And if you go to any other community pharmacy, it’s ringing off. I mean, just like constantly ringing. I mean, and it’s just interrupting the workflow, right? And so, the phone’s ringing. It’s just not ringing at the pharmacy, it’s ringing at the patient’s homes because it’s a proactive model. Yeah, so for your startups.  

Bonnie: Oh, I love that.  

Paul Shelton: Having them proactively reach out means that people aren’t calling them. They’re able to pull up a patient profile, reach out to the patient, have the conversation. It’s just, it’s incredibly efficient workflow. And they can set their own work schedule, right? Like, so I don’t need five people on Monday and two people every other day of the week. I need three people every single day. \ 

Scotty: Yeah, I love that efficient workflow and maximizing that which just pushes dollars to the bottom line. 

Bonnie: Absolutely. I mean, I’m a lazy person at core, I guess. I mean, if someone would offer me, Hey, would you like us to call you to see if you wanted to refill your prescription? I’d be like yeah. Every single time.  

Paul Shelton: And even better, if you don’t have to call me, that’s even just briefly. 

Bonnie: Oh yeah, don’t even have to call me. 

Paul Shelton: You know that I need this. Come on. Just do it. Yeah. Thanks.  

Scotty: We can look at the numbers and know a pharmacy that’s a reactive pharmacy versus a proactive. Proactive stores, their payroll is tight. It is streamlined. It’s efficient. Yeah. They’re on it, they’re MedSync out the wazoo, you know? Yep. All of it. The ones that are struggling, 10, 11, 12% of, of revenue with payroll, you know, they’re in a more reactive situation.  

Paul Shelton: 14, 15, 16%.  

Bonnie: Man, one of my most efficient stores that I’ve seen, and it was a startup, so like you said, I’ve never really thought about it that way, but they do kind of have an upper hand in that they can start fresh and get people on the right track. But his payroll is under 5 percent now, and that’s with him pulling a great salary too.  

Paul Shelton: That’s fantastic.  

Bonnie: Now he’ll tell you that he works them to the bone. But they love it. They love working there too. So, it’s very efficient. It’s incredible. 

Scotty: Like clockwork.  

Paul Shelton: Well, and if you can set that up, I mean, you talk about that you know, kind of targeted where’s your payroll target, right? It’s, 10% and below. It’s 10 percent and under. In a long-term care pharmacy usually that’s a little bit higher because there’s some additional work that has to be done, and then you also have delivery drivers or a courier service jeopardy,  but when you’re working, starting at 34 percent gross margin in a true closed or long term care pharmacy, instead of 21 percent gross margin,  it’s okay to have 11, 12% Labor because again, you’ve got the increased revenue, right  

Bonnie: No DIR fees 

Paul Shelton: No DR fees. I mean you’re talking real increase in revenue there that actually makes it serviceable. Whereas in the community space if you’re much over 9% you’re up the creek. I mean because you’re just you’re so far behind to start with.   

Scotty: Well, I mean, that’s all your profit. You know, if you’re above 10%, all your profits go into payroll at that point. So, yeah. But we’ve got some closed-door long-term care pharmacies that are just  Killing it. ATM machines. It’s the craziest thing I’ve ever seen. I’m in the wrong profession. I should have done it but… 

Bonnie: Might want to get your pharmacy license first, but… 

Scotty: Is it too late, Paul? Is it too late for me to go? 

Paul Shelton: It’s not too late. Not too late never too late to go learn. I mean like so people ask about oh, we got the silver tsunami 65 year olds. I’m like, I am not even remotely concerned about people turn to 65. My dad is 72 years old, just opened his third business, is in his final semester at NC State for his executive MBA Because he was bored. 

Bonnie: He’s at school?  

Paul Shelton: Yeah, he’s literally finishing at NC State, so it’s hilarious because he, he is by far, like, he’s like three times older than every other person in the class, and the professor is like 15 years younger, like his primary professor is 15 years younger than him, and he’s like, Mr. Shelton, why are you here? You don’t need this. He says, well, I thought it’d be interesting to have an MBA. Cool. He’s like, I want to, I want to learn, I want to learn how to use Excel better. I want to get to learn how to like run my businesses more efficiently. And this is a great way for me to do it. Well, he’s 72 years old. Awesome. You know, so people are like, what happens when we have these guys who don’t have technology, they’re not technologically savvy. I was like, well, his older brother literally was writing apps before there were smartphones and putting them onto. You know, the old flip phones. And so like, those are the people that are going to be turning 75 and 80. And when they’re going to start needing care in their home is when they’re 80, 83, 84, that’s the people that we’re trying to build this long term care at home pharmacy network for, because I can tell you right now, neither my mom or my dad is going into a facility because I’ve met them. They don’t want to. If they don’t want to, they ain’t going to do it.  

Scotty: A lot of people don’t. After seeing what all they did with my granddad, I’m kind of like, I don’t want to go.  

Paul Shelton: No. And you know, look, you know, there are times where it’s appropriate for a patient to go into a facility, especially for short term rehab. And that’s what skilled nursing facilities are really becoming now is the rehabilitation, post-acute rehabilitation centers. You’re not seeing the extensive long nursing stays that you were seeing even three years ago. I mean, COVID has taught us a few things. One is that our skilled nursing program in the United States is a little broken. Assisted living is different story. We are seeing an increase in assisted living beds. We’re seeing them actually opening new assisted livings. No one’s building new skilled nursing facilities right now. At least no one in any type of volume is building new skilled nursing facilities. And so, when you look at what is a traditional or a true closed-door pharmacy covering, now it’s group homes, IDD, assisted living, and then a large smattering of independent patients who need that type of care.  

Bonnie: Man, there’s a lot of opportunity with this.  

Scotty: There is.  

Paul Shelton: Huge amount. 

Bonnie: And obviously anything in a pharmacy right now that doesn’t include DIR fees is a win-win.  

Paul Shelton: Absolutely.  

Bonnie: It’s a plus. 

Paul Shelton: And I think it’s really important, too. Again, you know, there’s been some misconceptions about DIR fees going away. Just reinforce this. They’re not going away. It’s like CVS is just going to punch you in the face at the point of sale versus waiting three months to do it or four months to do it. It is what it is.  

Bonnie: I’m just going to tell you right now 

Paul Shelton: Yeah, I’m just going to put it out on the table. I’m not going to hide it.  

Scotty: At least you’re going to know when you get reimbursed, and then at least you know you’re going to know your costs. 

Paul Shelton: And that’s huge, Scotty. You’re right. You’re at least, you at least know up front. But it’s still important to know that a lot of people said, oh, I’m going to go into long term care to be able to avoid DIR fees. And what you’re really doing is A) getting paid for the work you’re already doing B) making sure you’re getting reimbursed fairly for the work that you’re doing, and C) just get, I mean, again, DIR fees, they’re not, they weren’t the problem, they were a symptom of the problem, which is insufficient reimbursement for community pharmacy, and we advocate on that, we advocate about that all the time. It’s like, you know, if you would just pay community pharmacy what you’re doing. They should be paid for the work they’re doing and for them being the hub within the community where Patients can actually go and see a licensed medical professional. 

Bonnie: Right.  

Paul Shelton: I mean, have you tried to go to the doctor recently?  

Scotty: Walk right in.  

Paul Shelton: I mean, come on like I called because you know, it’s like, all right. I’ve got upper respiratory issues, I think I’ve got COVID, I call in and they’re like we this is on a Monday afternoon, but we can see you Friday that’s not going to do me any… 

Bonnie: That’s better than… 

Paul Shelton: I mean, it’s not going to do me any good. 

Bonnie: Last time I called, it was like, we’re not accepting any new patients, everybody I called.  

Paul Shelton: Right.  

Bonnie: Oh, well, that’s great.  

Paul Shelton: Yeah, I was trying to get my son a, my, I’ve got a 16 year old, trying to get him a physical. And they’re like, oh yeah. So, we’re calling 1st of September to get this, oh, the first appointment we have for him, Mr. Shelton, is the 19th of November or something like that. And I’m like… 

Bonnie: Sports are starting by then.  

Paul Shelton: Exactly. So cool. I’ll just go to the local orthopedist, and they can do it. So, you know, it’s, it’s crazy, but you can walk into your pharmacist, have a conversation with a licensed pharmacist at any point, get your vaccines without an appointment. I mean, that’s what the whole healthcare system in the U. S. has to realize and has to see, this is the most accessible healthcare professional in the community. How can we compensate them fairly for what they’re doing so that they stay open.  

Bonnie: Right 

Paul Shelton: You know, we’re going to see pharmacy deserts that weren’t there by March of 2024 because community pharmacies, you know if they’re not being extraordinarily well run, we will see closures of community pharmacies in the next four months five months.  

Scotty: And that’s what we’ve been…that’s the theme we’ve been talking about community pharmacies being the health care centers their communities, the health hubs of their communities, and it’s going towards that and diversified revenue opportunities, long-term care, easy access to walk right in. And in some places point of care testing and you know, getting Yeah. Your prescription right there with the pharmacy in some states, so, absolutely.  

Paul Shelton: I mean it’s crazy when in states where test and treat is authorized. Yeah. Where the ability to test for a specific disease state and then immediately use that test as a diagnosis and provide a prescription on the pharmacist own direction, it’s weird, healthcare costs in those states have gone down because it’s now, again, it’s a more accessible provider.  

Bonnie: Who would have thought that they would have gone down because of this?  

Paul Shelton: Who would’ve thought? Yeah. Weirdest thing. Yeah, but it’s a great, I mean, there’s, the data exists. This is the thing. It’s like, it’s literally, the data is there. So it’s just getting some folks in Washington and each of the state capitals to understand and see that and then replicate it. I mean, we’re all here in North Carolina and the North Carolina board has done some phenomenal changes over the last two years in opening up practice in North Carolina. They’ve really done a great job of  giving technicians access to remote work so they don’t have to be inside the pharmacy to do data entry. So we’ve got technicians in remote portions of North Carolina, which traditionally were grossly underemployed. These very highly skilled technicians who were making $12 $13 an hour post COVID are now making $18, $19, $20 an hour because they’re working for pharmacies that are a hundred miles away. Which they couldn’t access before. Well, that’s forward thinking on the state’s part, right? So what else could we do? How further, how much further could we push that to really change the direction for North Carolina? Because I mean, you, you guys know, we’ve got some grossly underserviced areas in North Carolina who the only health care provider in an entire county may be the community pharmacy.  

Bonnie: Right. 

Paul Shelton: And so how can we empower that?  

Scotty: That’s around where we live.  

Paul Shelton: Yeah, where I live too.  

Scotty: I mean, we’re, Northeast North Carolina is one of the poorest areas of the state.  

Paul Shelton: I mean, yeah, I grew up in Kinston and Clinton, which down east and same concept. I mean, it’s just, we had a great little medical center, but it was the only medical center in the county. And so, if you lived in the southern part of Sampson County, it was a 45-minute drive to the hospital, you know. And that was the best option you could get. So, there’s a lot of underserved markets where there is a community pharmacy in the south part of that county, but there’s no other medical provider down there. And so if you can empower those folks to do more, I mean, again, you know, we’ve got some great medical care here and I live in Oxford, so central-northern North Carolina. Got some, we have a fantastic local nonaffiliated medical center, so it’s not part of either Big Duke or UNC. They’re doing some great work, but they are also grossly, I mean, they’re just swamped with people. Same thing with all of our local providers, all of our local doctor’s offices. Best case scenario, four to five day wait. I can walk in and see my community pharmacist in 15 minutes.  

Scotty: Absolutely.  

Paul Shelton: Which is great.  

Scotty: Yep.  

Bonnie: And the providers, I think there’s been some concern. I’ve heard people make comments about taking that away from providers, but I have a friend that’s a provider in the central part of the state. She said, we don’t want to see that stuff. I mean, they want to do more important things. They don’t want, I mean, not to say that it’s not, but you know, 9 times out of 10, I know that my kids probably have strep or they have mono or whatever, you know, it’s one or two or three things.  

Paul Shelton: Yep.  

Bonnie: You just take them to the pharmacist, let them do that, the test, boom, give them an antibiotic that you know you’re gonna get, or whatever, flu, whatever and be done with it. They don’t want to see that stuff. They want to deal with stuff that’s taken more, you know.  

Paul Shelton: Actual chronic problems. They want to actually treat, they want to treat longer patients that they can actually make a difference for, right?  

Bonnie: Exactly. 

Scotty: They want the stuff that’s actually going to make them scratch their head a little bit and say “what do we have here?”  

Bonnie: Yeah, I mean, help someone. 

Scotty: I mean, you know, they want the, they, they want the cool stuff. They don’t want the… 

Bonnie: Because in all honesty, a provider’s not doing anything. If they come in, the nurse swabs them and the test comes back. Oh, they have whatever they have the flu. And so, the, I mean, that provider’s not adding any huge value there.  

Paul Shelton: And again, if they have, if they had more time to be able to, they could treat the patients they are seeing differently, right?  

Bonnie: Exactly.  

Paul Shelton: And it’s not having 15-minute windows for treatment. One of my team members just joined a concierge medical practice near her home in Maine. And she got done with her first appointment and literally like called me to tell me she’s like “I literally just had the best healthcare experience of my entire life.” I’m like, okay, “please tell me more.” And she’s like, “I spent 45 minutes talking to a doctor who listened to what I was, what I needed, and we found solutions to problems immediately. Just literally just worked through some issues and challenges.” And she’s like “it was amazing because he wasn’t rushed to go to his next appointment” because in concierge, it’s what can I do…how do I provide the best possible solution to the challenges that my patient has? And so, if we could just have that be the norm, not like, you know, she’s, she’s like, I’ve got 35 years’ experience in the healthcare field, and this is the best experience I’ve ever had as a patient.   

Bonnie: You don’t usually hear those types of conversations. It’s usually the opposite “you won’t believe what happened when I went to the doctor for two hours.” Never saw anybody.   

Paul Shelton: Yeah.   

Bonnie: Well, Paul, at the end of each of our podcasts, we have what we call the bottom line. So, we all just kind of give a quick kind of what we learned, wrap it up, summary of our takeaways from the discussion. I’ll go first today.  

Paul Shelton: Shoot. 

Bonnie: I guess from this discussion, it’s very interesting, but I think it’s very important. I know you said it’s going to take some time, but for all businesses, all pharmacies to evaluate your business, evaluate your patients, see what you have, you may have more out there as far as long term care options and availability and people that need that service and something that could obviously help the patient, which is again the most important thing, but as well as help your, your pharmacy business, but to take a look at that and see what’s there. 

Paul Shelton: I mean, we’ve looked at going to give you some idea here. We think we’ve looked at over 300 pharmacies. They’re real data, right? Like, real data over 300 pharmacies and 1 of them. One pharmacy out of that many did not make sense to go to just one shop  

Bonnie: One  

Paul Shelton: And now that pharmacy is only doing 40 prescriptions a day. So, we had a very candid conversation with that pharmacy owner and said, you’re not making money. There’s no possible way you’re making money. It’s not that you can’t go into long term care. It’s like you need to make a choice. You need to grow your pharmacy or close your pharmacy. But right now, you’re sending good money after bad.  

Scotty: You got other problems.  

Paul Shelton: Yeah. And so, I mean pharmacies as small as 100 prescriptions a day, we’re still seeing $40,000 a year in impact Yeah. In this. I mean, so what could you do with an extra $40,000 a year in a community pharmacy right now? I mean, that’s another technician or, being very frank, it’s maybe a little bit more savings for going into next year or even better, it’s an opportunity to you know, actually get paid as a pharmacy owner, which is a new and novel concept for many pharmacy owners. 

Bonnie: That’s kind of the goal.  

Scotty: And we’ve seen, I mean, the pharmacies we work with, the ones that are doing the combo shops. I mean, they’ve got higher margins. They’ve got bigger bottom lines, we see it every day. So, I saw one this morning. I was looking at; they had just switched to combo shop back in the summertime. And you’re already seeing the numbers and the DIR fees shrink, the margins increase. So, we’re seeing it every day, but I guess my bottom line is – If you’re not doing the combo shop, you need to, I mean, that’s, you need to be doing it. It’s pretty simple. Like that’s my bottom line. Easy. 

Paul Shelton: I’d say my bottom line from this, honestly, is, you need to have somebody, if you don’t have a partner, who’s helping you. Look at your business as an outside set of eyes. You need to have one, right? You need to have someone who can look at it, understand it, know it, and be able to tell you things like “hey man, your labor is at 14%. We see other pharmacies performing in your same space at 9%. How do you fix that?” And you know, hearing about pharmacies that are doing 5 percent labor, I mean, that’s, a new and novel bottom line for me. I’m just saying.  

Bonnie: Your DIR fees are 10%. We see them at four.   

Paul Shelton: Right, exactly. I mean, and so, like, and that’s great, exactly. It’s a great call. I mean, like, the best pharmacy we’ve seen performance wise, literally 99% compliant in every single line. They still pay 2.1% DIR fees this year.  

Bonnie: Yeah 

Paul Shelton: Help me understand how that’s How does that even make sense?  

Bonnie: It doesn’t.  

Paul Shelton: I mean, it doesn’t. There’s no possible way it makes sense. 

Scotty: So awesome.   

Bonnie: This is very interesting.  

Scotty: Well thanks so much for coming on and… 

Bonnie: Absolutely. 

Scotty: Good, good discussion.  

Bonnie: Great discussion.  

Paul Shelton: Yeah, thanks for having me.  

Scotty: It’s been a lot of fun. Shared a lot of great information with the audience here. Hopefully everybody liked it. And if you have any questions reach out to Paul or us and we appreciate everybody listening in and Paul, we’ll have you on again sometime. 

Paul Shelton: Absolutely. Thank you so much, Scotty, thanks, Bonnie.  

Bonnie: Happy holidays.  

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