Using Script Audit Logs When Analyzing Pharmacy Cash Flow and Profitability
Comparing your script audit logs to your financial statements can help you understand the financial position of your pharmacy. If your pharmacy is in growth mode, your new scripts will be around 50% or more of your total scripts.
In this video, Scotty Sykes of Sykes & Company, P.A. explains that while your audit logs and financial statement margins won’t be exactly the same, they should be close. If not, you need to determine why that might be and where your pharmacy can make some adjustments. Looking at all the pieces of information available to you provides a big picture that allows you to catch and address any challenges before they significantly impact your pharmacy.
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If you prefer to read this content, the video transcript is below.
Pharmacies that are analyzing their financial statements, a good rule of thumb is to pull up your audit log for the month or the year to date from your script system and compare the two and see how the two talk to each other. And a couple of the metrics I like to look at are revenues. Are revenues pretty close to what we’re reporting on the financial statements? If not, why? If it’s a material difference… Typically, there’s always a difference because what you’re adjudicating is really never what you’re picking up or receiving in actual, but they should be pretty close there to some degree. Another thing that I’m looking at is your new scripts versus refill. We’d like to see the new scripts in the 50% plus. That means you’re in a growth mode at the pharmacy and you’re not dying.
So that’s something we’d like to look at. Obviously, your margins on the financial statements versus your margins on your audit log… They typically should be pretty close. If the margins on the audit log are way off, that typically means your pricing updates are not doing what they should be doing. You’re not updating the price updates correctly or you’re using a lot of other vendors, purchasing from other vendors, not your primary. And the primary uploads are overriding what you’re actually paying for those drugs. So you can see a difference there and that all ties into, of course, your perpetual inventory system as well. So making sure those price updates are as accurate as you can is very important. If margins are very low in the pharmacy, for example, and we’re not sure, and you’re a standard retail pharmacy and there’s no real explanation for that.
For example, if the average is about 23% margin and you’re at, say, 15% and you’re a standard retail community pharmacy and both the financials and your audit logs are showing this similar margin, well, what are you doing behind the bench to not maximize that margin? And it could go back to those price updates and what’s your download and what’s your billing out to the third party payor. So if you’re billing under AWP, for example, third party payors are going to pay you less than what they would normally pay.
And so your margins are going to be lower. And we see that sometimes. We see that where the pharmacies are not maximizing what they’re adjudicating. And that is very apparent when we get the financials in order and we’re analyzing those financials. So the auto logs are a valuable tool that should be used in conjunction with your financial statement analysis and they can pretty much open the doors to other metrics and key things you need to be aware of.