Long-term Budgeting for Pharmacy Automation

November 2011 - Vol.8 No. 11 - Page #18
Category: Revenue Cycle Management Software

The cost of automation can account for a significant portion of a hospital pharmacy’s overall budget and according to Pharmacy Purchasing & Products’ 2011 State of Pharmacy Automation survey, automation spending continues to increase in facilities of all sizes.1 Given this, extra care must be taken when evaluating and determining which hospital operations require automation upgrades or new technology in order to provide a positive return on investment (ROI) and lasting benefits to the facility as a whole. Developing an annual budget for automation can be complicated enough, but when planning long-term technological solutions, these evaluations become exponentially more critical. To account for this, pharmacy leadership should seek to develop a robust process for investigating, evaluating, negotiating, and ultimately purchasing major automation technology for long-term use.

Yuma Regional Medical Center is a 333-bed, Medicare-certified, acute care hospital that serves as the base for the area’s emergency medical system and operates one of the busiest emergency departments in Arizona. In 1991, Yuma implemented its first unit-based automated dispensing cabinet (ADC) system and in 1998, we added an IV compounding robot. The cost structure, staff impact, and long-term ROI for each project differed greatly, but in both cases, we developed long-term goals that would qualify success. The challenges of these projects illustrated the importance of approaching automation budgeting from a long-term standpoint, and as a result, long-term automation planning has become one of pharmacy leadership’s important missions. 

Short- versus Long-term Budgeting 
An effective approach to long-term budgeting for capital purchases often differs widely from an annual, or short-term budgeting procedure. Annual budgeting typically involves accounting for consumable medications and supplies, whereas the concept of evaluating needs and planning for automation purchases that will be used in the long-term—usually seven to ten years—must be a completely separate process. Expensive, and sometimes complex automation systems should be seen as tools that enable pharmacy to not only better facilitate day-to-day tasks, but also improve standing methods, policies, and procedures. To allow for this broader view, long-term budget planning must be developed in alignment with the overall goals of the pharmacy department and the facility’s care model in general. 

Establish Long-term Goals
Establishing goals for any long-term project should be a priority early on in the process, as the results will indicate what capital equipment is needed to meet those goals. All objectives should align with and reflect the missions of the institution as a whole, as every institution sets up its mission statement around specific patient care areas it seeks to provide. All proposed pharmacy automation must be compatible with and confirm that mission to ensure pharmacy can gain administrative support for its capital needs. A long-term automation plan does not typically cover a single procedure or event, but rather a combination of multiple equipment purchases that integrate to supplement the facility’s overall strategy.

It is imperative that the plan comprises all steps required to reach the facility’s long-term automation goals, so appropriate funds, staff, and time must be accurately allocated to support the eventual changes. This allocation should include the time needed for physical installation of hardware and system training, areas often overlooked in early planning stages. Whether the plan involves an entire, hospital-wide program such as BCMA or CPOE implementation, or a pharmacy-specific process, such as purchasing a TPN compounder, it should always require expectations to be discussed and agreed upon during the early planning stages. Quickly determining and communicating inadequate expectations for the automation can lead to confusion throughout various departments and become a critical failure point if not addressed early on. 

Increase Interdepartmental Support
Most long-term automation plans typically impact multiple departments, so it is crucial to involve other key stakeholders—including departmental directors, clinical educators, and physicians—in automation decisions early in the process. Actively communicate how the automation acquisition project will affect and benefit other departments. For example, most, if not all automation should expand the facility’s ability to provide patient care-related services ranging from increased clinical surveillance to pharmacist-based drug dosing programs that will improve overall safety in the hospital. Focusing on safety benefits and how new automation will positively affect others is always an effective way to garner support from other departments. Each institution has limited capital dollars to devote to large-scale, long-term projects, so expensive pharmacy automation purchases can mean the needs of other departments may be going unfulfilled. Gaining multidepartmental support for the goals of pharmacy’s capital purchase will improve the chances of approval and form a strong foundation for project success.

Gain Administration Buy-in
Because administration is most likely to support a long-term budgeting plan that is in alignment with the overall strategic plan of the organization, the pharmacy director must assess the entire hospital culture focusing on specialties that are emphasized to the community. Forming pharmacy department goals and objectives to fit with and supplement these key areas prior to seeking capital dollars will surely provide a leg up. In addition, creating an automation proposal that addresses specific deficiencies in your facility—areas in which the facility will receive the greatest returns—is a tactful starting point. Once a prudent course of action is selected, garnering the necessary administrative support to see the project through is likewise essential.

When it comes time to present your proposal to administration, provide as much specific, supporting data as possible. The justification should include all costs of research, acquisition, implementation, training, and maintenance. Any cost savings, specific safety improvements, or other benefits that will be realized due to the project should be highlighted early in the presentation so they become the process goals to be achieved. Key to any long-term automation planning presentation is to address specific goals, as this will go a long way in convincing administration that the solution you are seeking will legitimately provide the desired—and predicted—outcomes. For example, if improving patient satisfaction by decreasing turnaround time for medication delivery is one of the project’s primary goals, state how the desired automation will assist in meeting this objective. Ensuring all parties fully understand what specific needs the automation will satisfy should play a large role in purchase approval. 

Present administration with requests for proposals (RFPs) that outline financial requirements and projections so they are made aware that the requests will garner realistic proposals from vendors. If the facility is currently focusing on minimizing waste and saving resources, then data showing that the new technology will support such initiatives should be highlighted in the justification portion of the proposal. If, for example, the facility is seeking to improve clinical support for a patient education program meant to reduce patient length of stay, then special emphasis should be placed on the idea that additional clinical pharmacist hours saved as a result of the new automation could be devoted to such a program. 

Though the data should be presented in such a way as to reflect administration’s overall desired strategic goals, it must also be accurate and comprehensive. Be sure to present both the strengths and weaknesses of the selected automation, providing a detailed and facility-specific description of its capabilities while drawing attention to the reasons one solution was selected over any others. Discuss the role that the automation will play in reaching both short- and long-term goals of both the pharmacy and the facility’s patient care mission. If certain data is soft or based on a projection, be sure to convey that information. Likewise, if certain data reflects an absolute measurement, then emphasize that fact as well. Honesty and transparency at the nascent stages of long-term planning will help avoid costly reevaluations further down the line.

Remember that while the importance of making a purchase that will fill a specific, emergent need in the pharmacy might seem obvious to the pharmacy director, it may be viewed as merely another expense to a CFO. Providing clear evidence of why the selected automation solution is preferable to another option—or to doing nothing at all—will help administration fully understand that the benefits will outweigh the challenges in the long run. Be cognizant that, especially in large facilities, the administrators you must convince also must convince those higher up in the organization. A movement toward BCMA will affect many other areas of the hospital and those at the top of the organization will want to know how that will play out. Therefore, it is vital to sell and resell the supporting reasons for large-scale, long-term automation solutions throughout the entire process. Using Lean or Six Sigma methodology also may be useful in determining and developing the most effective type of data to present.

The Role of the Pharmacy Director
After all capital equipment purchasing decisions have been determined, the pharmacist’s role shifts from planner and decision-maker to acquisition champion. Keep in mind that while selling the projected benefits of new technology to administration may not be part of a typical pharmacy director’s core role, it is often the benchmark of a successful high-end automation purchase. 

Ensuring that all relevant data have been presented to administration should include providing proprietary information from the chosen capital equipment vendor. Automation vendors should be able to supply matrixes and indicators of a successful program. Additionally, support all justification claims using information provided by national safety organizations such as ASHP and ISMP, which actively support the value of improving clinical pharmacy services through automation. 

Once a long-term plan has been developed, then it is imperative that you stay the course for that plan. This does not mean that changes will not be required; if the accepted approach is progressive in nature, then myriad changes may become necessary. However, any changes should be made in alignment with the main goals of the automation project and should not diverge significantly from that plan. For example, when ADCs first entered the marketplace, their primary function (and the most common justification for acquisition) centered on ensuring charge capture and narcotic control. At the time, patient safety was not the primary reason to invest in this technology. Today, ADCs play a crucial role in ensuring timely, accurate, and safe dispensing of a large portion of medications in most institutions. Often the intended use of equipment will need to be adjusted as a result of changes in other hospital systems or in regulations from agencies such as TJC, CMS, or state boards of pharmacy. 

Reevaluate Long-term Goals
Although remaining cognizant of the facility’s mission is important, long-term goals should not be static and should evolve over time to reflect current and projected trends. Likewise, as new solutions come to light for other challenges, the goals for those projects should compliment and reflect existing long-term plans. For instance, at our facility we are in the process of implementing an EMR system to meet meaningful use guidelines established by current federal regulations and the CMS. The long-term goal of this program is to provide continuous care to our patients across different locations and levels of care and the pharmacy automation we are implementing fits into this plan. We also are installing a BCMA system that will integrate with our bar code dispensing robot and ADC array to further decrease the potential for medication errors. All of these systems should fit with one another to avoid redundancy and counter-actions. Further to this example, many reimbursement programs assign a high level of emphasis to quality of patient care and avoiding adverse events. The time savings gained as a result of implementing the above-mentioned automation-based technologies will be utilized to support other major hospital-wide initiatives, such as the prevention of hospital-acquired infections and decreasing readmission rates. 

Ensure a Smooth Transition
Managing department change to ensure a smooth transition to using new automation systems is an absolute requirement for the success of the program. Initiating a plan to address staffing issues to match changing technology, shifting schedules, and preparing for a possible transformation in departmental culture are all beneficial concepts. Mainly, involve pharmacy staff early on in the process so they can become comfortable with the transition. Staffing changes are inevitable with the implementation of automation, whether they be to job duties, the number of employees required to do the job, workflow, or employee work hours. Whatever the individual case, implementing capital automation purchases will most likely impact the bulk of your staff to varying degrees. Mitigate this effect by educating staff members on the benefits of the automation. Developing and actively communicating a clear expectation of what is required from staff to fulfill the promise of new technology will help bring about an unfettered implementation. However, be sure not to oversell the value of the new automation to staff. Rather, provide realistic goals and metrics to ensure there are no surprises when go-live day arrives. 

Planning for and securing funding for capital automation acquisition requires matching pharmacy goals with institutional goals, as well as a multistep plan. Thorough planning, active communication, gaining and maintaining administrative support, and allocating resources toward a pharmacy-based, overall patient care improvement process will dictate the success of the project. Any large-scale, multisystem-dependent automation initiative will require that you take a broad view of the current and projected impact of that system on all other systems in the facility. Creating a comprehensive plan, staying the course, and maintaining proper communication throughout will best ensure success.


  1. Pharmacy Purchasing & Products Web site. 2011 State of Pharmacy Automation Survey: Automation Budget. http://www.pppmag.com/article/947/State_of_Pharmacy_Automation_2011/Pharmacy_Automation_Budget/ 
    Accessed October 28, 2011.

Tom Van Hassel, RPh, MPA, is director of pharmacy at Yuma Regional Medical Center. He attended Ferris State University in Michigan, graduating in 1976, and received his MPA from Western Michigan University in 1982. Tom completed a pharmacy fellowship at the University of Pennsylvania Wharton School of Business in 1991. He was president of the Arizona Society of Health-System Pharmacists in 1997 and president of the Arizona State Board of Pharmacy in 2009. Tom is an adjunct professor of pharmacy at several colleges of pharmacy.  



One Approach to Address Capital Automation Purchases
Most successful large-scale automation acquisitions are achieved by thorough communication of the program. As a result of an FDA recall, pharmacy leaders at our facility recently decided to replace old smart IV pumps with new ones. We put together a multidisciplinary team comprising physicians, nursing representatives from all clinical areas, pharmacists, and representatives from purchasing, biomedical, information technologies, and sterile processing departments. This team then set the goals and timetable for the pump replacement project. All relevant data was presented to administration and after gaining their support, the pump evaluation process began. 

Physicians, pharmacy leaders, and nurses attended a pump fair and thereafter voted on their pump of choice. The vote centered on a clinical ease-of-use perspective to identify which pumps among those available would meet our facility’s needs. Several possibilities were identified and RFPs were sent to those vendors. The committee evaluated the data provided by vendors and selected trial products, which were then used in multiple departments during a two-week trial period to evaluate which product best suited the facility’s needs and fit the systems already in place. After the best pump option was selected, this decision, along with the data from our trial that supported our selection, was communicated to administration, which, having been presented with a comprehensive plan, approved the purchase.


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