Mgmt Exam 2

Information from the __________ and the _________ is how financial SUCCESS/LOSS is measured

income statement, balance sheet

Income Statement

______________: reports the net income for a specific time period, a tally of revenues and expense over a period of time

profit and loss statement (P&L)

Most ______ follows the same format as an Income Statement

budgets

****INCOME STATEMENT EQUATION

Net income = Revenues - Expenses

COST OF GOODS SOLD (COGS) formula

BI = beginning inventory

EI = ending inventory

P = purchases

COGS = BI + P - EI

Example calculating COGS

BI = $1,200,000

EI = $1,300,000

Purchases = $4,100,000

$4,000,000

GROSS MARGIN “Gross Profit” formula

GM = Sales - COGS

Gross Margin Percent (GM%) formula

GM% = GM / Sales

____________: reduction in the value of an asset over time

depreciation

________________ (Vertical Analysis): Revenues & expenses are converted to % of sales by dividing each revenue or expense by total sales

common size statement

BALANCE SHEET (3)

1. list Assets

2. list of liabilities

3. residual balance “owners equity”

“ACCOUNT EQUATION” formula

Assets = Liabilities + OE

Networth =

assets - liabilities

_________: measure of how fast assets can be converted to cash

liquidity

Which is more liquid? current or noncurrent assets

current

Which can depreciate? current or noncurrent assets

noncurrent

___________: debts due within 1 Year

current liabilities

____________:debts due after the current operating cycle (1 yr)

noncurrent liabilities

CURRENT ASSETS

1. _________ → currency, checking, certificate of deposits (CDs)

2. _________ → moneys owed to business

3. _________ → third party and credit, PBM, medicaid, in store credit, credit card

4. _________ → merchandise, drugs, OTC

5. _________

6. short term investments → _____, _______, etc

7. prepaid expenses → ______

1. cash

2. accounts receivable

3. sales

4. inventory

5. supplies

6. CDs, mutual funds

7. rent

NONCURRENT ASSETS

1. Items _________ by business → delivery truck, leasehold improvements, equipment

2. Intangible assets “goodwill” → 3

1. purchased for use

2. non-phys assets, patents, mgmt

CURRENT LIABILITIES

1. Accounts payable “________” → wholesaler bill, utility bills, etc

2. ____________ notes payable

3. signed _________

4. portion of long term ________

5. accrued expenses →

1. bills you owe

2. current/short term

3. promissory notes

4. debt due in a year

5. employee wages

NONCURRENT LIABILITIES

Notes payable LONG TERM →

mortgages, auto loans, etc

Which of the following would you NOT need to calculate Net Income

A. Current Assets

B. Sales Revenue

C. Cost of Goods Sold

D. Employee Wages

A

(net income = revenues - expenses)

________: number of Rxs Dispensed per Day

Rx activity

TESTS OF PROFITABILITY

1. -

2. -

1. GM/GM%

2. NI/NI%

NET INCOME %

1. Formula =

2. Affected by gross margin and ______

3. Higher NI% →

4. Lower NI% →

5. TARGET FOR PHARMACIES: NI% ____

1. NI% = (NI x 100%) / sales

2. sales

3. higher GM%

4. higher expenses

5. >2%

1. Test of overall performance →

2. Target:

1. ROE = (NI/OE) x 100

2. >10%

1. Tests of liquidity (measures firms ability to pay current debts) →

2. Target: _____ but may be less for larger firms

3. If ___ then significant problem if small firm

1. current ratio = current assets/current liabilities

2. 2-5

3. <1

1. Tests of Efficiency →

2. →

3. Targets

1. ARCP = (accounts receivable x 365)/annual credit sales

2. ITO = COGS / avg inventory at cost

3. ARCP <30 days, ITO 8-12+

To calculate ARCP, will need _________________ reported which is not standard reporting for some income statements

annual credit sales

INVENTORY TURNOVER

1. Generally, as ITO increases, GM% ______

2. Ideally you want to stock products that have …

1. dec

2. high ITO + high GM%

FACTORS INFLUENCING ITO → 4

1. +sales = +ITO

2. inventory on shelves

3. purchase -expensive inventory

4. selecting product mix

Used to evaluate location & building type of pharmacy, particularly useful for front end sales →

sales/sq foot

Misc tests of efficiency →

unit of input/output

Which of the following factors does NOT influence gross margin percent?

A. Pricing strategy

B. Cost of goods sold

C. Level of current liabilities

D. Shoplifting

C

(GM% = GM / Sales)

If sales are $3.0 million, cost of goods sold are $2.2 million dollars, and all other expenses are $0.7 million, what is the Net Income of this retail pharmacy?

A. $0.1 million

B. $0.8 million

C. $2.3 million

D. $3.0 million

E. $3.7 million

F. $5.9 million

A

If sales are $3.0 million, cost of goods sold are $2.2 million dollars, and all other expenses are $0.7 million, what is the Gross Margin of this retail pharmacy?

A. $0.1 million

B. $0.8 million

C. $2.3 million

D. $3.0 million

E. $3.7 million

F. $5.9 million

B

(GM = Sales - COGS)

Which is NOT a “Current Asset”?

A. merchandise

B. supplies

C. patents

D. moneys owed to the the Business (Accounts Receivable)

E. prepaid expenses

F. cash

C

CASH VS ACCRUAL ACCOUNTING

1. ________ → recognizes revenues + expenses when cash is involved

2. ________ → recognizes revenues + expenses when cash OR services are involved

3. Most common method is _______

1. cash

2. accrual

3. accrual

PRODUCT COST TERMINOLOGY

____________ → price that pharmacy pays wholesaler

actual acquisition cost (AAC)

PRODUCT COST TERMINOLOGY

____________ → list price for what drug wholesalers charge pharmacies

average wholesaler price (AWP)

PRODUCT COST TERMINOLOGY

_____________ → max cost third party will pay for drug

maximum allowable cost (MAC)

PRODUCT COST TERMINOLOGY

____________ → list price for what manufacturers charge drug wholesalers

wholesaler acquisition cost (WAC)

___________: the “fair share” of pharmacy costs over and above the cost of the drug

cost of dispensing

TYPES OF COSTS

1. __________: independent of Rx volume → example?

2. __________: only change with “large” changes in Rx volume → example?

3. __________: change as Rx volume changes → example?

4. __________: completely attributable to Rx department → example?

5. __________: shared btwn Rx department and rest of store → example?

1. fixed → pharmacy license

2. semi-fixed → pharmacist labor

3. variable → Rx vials

4. direct → Rx vials

5. indirect → rent

ALLOCATING INDIRECT COSTS

1. __________ → proportion of time/effort spent on Rx department → examples (4)

2. __________ → portion of pharmacy sq footage allocated to Rx department → examples (7)

3. __________ → proportion of sales coming from Rx sales (not including OTC) → examples (7)

1. effort ratio → pharmacist, tech, clerk, owner

2. area ratio → rent, utilities, real estate taxes, facility insurance, maint/cleaning, depreciation, mortgage interest

3. sales ratio → marketing, services, computer system, office supplies, other insurance, franchise fees, transaction/merchant

For each of the following expenses, determine:

-variable, semi-fixed, fixed

-direct or indirect

-IF INDIRECT, allocate to effort, area, or sales

1. clerk wages

2. account services

3. electricity

4. safe for controls

5. label printer

6. labels

7. cash register

8. bone density POCT machine

9. telephone

1. variable, indirect, effort

2. fixed, indirect, sales

3. fixed, indirect, area

4. fixed, direct

5. fixed, direct

6. variable, direct

7. fixed, indirect, sales

8. fixed, indirect, sales

9. fixed, indirect, area

CALCULATING AVERAGE COD PER RX

1. Step 1: Identify costs associated with Rx department →

2. Step 2: Sum all Rx department costs →

3. Step 3: cost of dispensing =

1. labor, direct, indirect

2. total expenses

3. Rx expenses / # of Rx dispensed

A list price for what pharmaceutical manufacturers charge drug wholesalers is known as:
A. Average acquisition cost (AvAC)

B. Average manufacturer price (AMP)

C. Average wholesaler price (AWP)

D. Estimated acquisition cost (EAC)

E. Wholesaler acquisition cost (WAC)

F. Actual acquisition cost (AAC)

E

Pharmacy labor is an example of a:

A. fixed cost

B. semi-fixed cost

C. variable cost

D. none of the above

B

In a typical pharmacy the highest cost considered in cost of dispensing is:

A. cost of goods sold

B. rent

C. utilities

D. wages and benefits

D

FORMULARY GUIDING PRINCIPLES → 5

1. safe

2. rational

3. evidence-based

4. clinically appropriate

5. cost-effective

GROUP PURCHASING ORGANIZATION (GPOs)

1. Hospitals join together to leverage _________ collectively

2. GPO allows for __________, lowers cost per unit

3. sole source vs generic purchasing →

1. buying power

2. +purchasing volume

3. GPO labeled product

PRIME VENDOR WHOLESALER

Advantages

1. More _____ delivery of orders

2. Less time creating _______ - standing/framework

3. Wholesaler _____

4. Simplified __________ process

Disadvantages

5. What if your prime vendor wholesale is __________?

6. Difficult to get a ________ wholesaler contract

1. timely

2. purchase orders

3. reports

4. credit & return

5. out of a medication

6. secondary

ORDERING MEDICATIONS

Pareto ABC Model

Aggregate value & volume into 3 groupings, ABC

1. Group A → (tight control)

2. Group B →

3. Group C →

4. *Focus on controlling ___________ inventory

1. 10% items, 70% invent cost

2. 20% items, 15% invent cost

3. 70% items, 10% invent cost

4. most expensive

ORDERING MEDICATIONS

EOQ Model → Economic Order Quantity

1. An ___________ that optimizes your order quantity for demand & cost

2. Data used in this model include →

1. accounting formula

2. variable + fixed cost

ORDERING MEDICATIONS

PERPETUAL INVENTORY MODEL

*most popular

1. A fully _________ system where each dispensing action is subtracted from a perpetual inventory

2. Interfaced to pharmacy _______ system

3. Requires ___________ of the medication dispensed

1. computerized

2. ordering

3. accurate accounting

ORDERING MEDICATIONS

MANUAL/DEDICATED PERSONNEL MODEL

1. “_____________”

2. _________ process - bar coded shelves, bar code scanning devices, iphone/ipad applications

1. “Walking the shelves”

2. semi-automated

ORDERING MEDICATIONS

“REQUEST BOOK” MODEL

*least reliable

1. _________

2. requires participation by the ________

3. typical for non-formulary/______ requests

1. request list

2. entire staff

3. special

OTHER INVENTORY ISSUES/TERMS

1. _________ → controlled & monitored temp, space, special requirements for vaccines/drugs

2. _________ process

3. _________ meds

4. _________ products

5. _________ of pharmaceuticals

6. _________ compliance

7. _________

8. _________ levels = decreased inventory

9. _________ → ______ is better

10. drug ______

11. drug ______

1. storage

2. receiving

3. expired

4. SALAD

5. borrowing

6. 340B

7. Drug supply chain security act

8. dec PAR (periodic automatic replenishment)

9. inventory turns → higher

10. recalls

11. shortages

OTHER INVENTORY ISSUES - NARCOTIC ORDER

1. Paper ordering - 222 form (_____ turn around)

2. can now order electronically - CSOS (_____ turn around, digital signature)

3. need secure _______

4. checks and balances for ______ prevention

1. 72h

2. 24h

3. storage

4. diversion

Pharmacy Budget Components → 3

1. revenue

2. expenses

3. capital expense requests & position requests

BUDGET PROCESS

1. Negotiation, review, and _____ of budget by finance budget committee

2. Presentation of ___________

3. _________ of budget and budget variance throughout the year

4. variance ____________ (good stewardship)

5. ______ from variance and budget more accurately next year

1. approval

2. capital expense analysis

3. monitoring

4. analysis & reporting

5. learn

PHARMACY TECHNOLOGY: AUTOMATION

1. improved ________ efficiencies

2. enhanced ___________

3. cost ________

4. improving customer _______

5. compensate for staff __________

6. eliminate personnel ________ due to inefficiency

1. operating

2. pt safety

3. reductions

4. services

5. shortages

6. frustrations

______________: computer software designed to permit physicians and other practitioners to electronically transmit requests for patient care

computerized provider order entry (CPOE)

CPOE COMPONENTS

1. Patient-specific information is ________

2. ________ tool which includes order sets, decision support systems, and follow-up care for better “transitions of care”

3. ______ documentation → MAR, flow sheets

4. ______ documentation areas → MedREc, provider visit data

5. Patient _________ and ______

1. consolidated

2. order entry

3. nursing

4. ancillary

5. charge capture, billing

2 types of CPOE systems

• Integrated systems - combines components of order entry, pharmacy system, and pharmacy billing

• Interfaced systems - communication btwn order entry software program and other software systems

Which is more used today? (new standard)

integrated

AUTOMATED DISPENSING MACHINES

Advantages

1. Puts medication at ________

2. Decrease or eliminate ______

3. Improved _________

4. Helps with nursing _______

5. Decreased ________ time

6. Perpetual inventory & _______ tracking

Disadvantages

7. _________

8. open access to certain medications (________)

9. medication in ____ pocket/lack of verification

10. increased ______

11. increased time checking for ________ supply

1. point of need

2. cart fills

3. narcotics control

4. availability

5. turnaround

6. expiration

7. expensive

8. matrix drawers

9. wrong

10. inventory

11. outdated

__________ dispensing can help increase inventory turns

carousel

RADIO FREQUENCY IDENTIFICATION (RFID)

Advantages

1. _______ process for product detection and accuracy checking

2. Can store ______, ______, and other information in RFID tag

3. Enables more accurate ______

Disadvantages

4. Tagging each dose by hand is _________

5. Tags can be _______

6. Passive RFID tags must be read with a ________

7. Active RFID tags are ______

1. automates

2. lot number, exp date

3. reporting

4. time consuming

5. expensive

6. sensor device

7. bulky

__________________ → inventory control system that automates dispensing and administration processes

“biggest bang for the buck” for safety

bar code medication administration (BCMA)

Which of the following are disadvantages of CPOE Integrated systems?

A. Minor changes can impact various aspects of the systems

B. Various computer languages are used

C. Drug Databases need to be maintained and updated consistently

D. A & B

E. A & C

F. All of the above

E

Which of the following is an advantage of Automated Dispensing Machines?

A. Increased inventory

B. Open access to medications

C. Decreased turnaround time

D. Inexpensive

C

Which of the following is NOT a medication ordering model?

A. Pareto ABC Model

B. Economic Order Quantity Model

C. Perpetual Inventory Model

D. None of the above

D

____________: “improving implementation of evidence-based practices (EBPs)”

implementation science

__________________: targeted spread of information

dissemination

____________: an effort specifically designed to get best practice findings and related products into routine and sustained use via appropriate uptake interventions

implementation

COMMON MEASURES IN IMPLEMENTATION RESEARCH:

1. ____________ “counts and amounts” → raw count of delivery, rates of delivery

2. ____________ “how well performed” → checklist, expert rating, etc

3. ____________ “stick with it or dropped it?” → adoption & fidelity measures over time

4. If we are doing pilot/early work, then also look at … (3) → intervention and strategies

1. adoption

2. fidelity

3. sustainability

4. feasibility, acceptability, satisfaction

ERIC TAXONOMY OF IMPLEMENTATION STRATS

1. Train and educate _________

2. Provide __________

3. Support __________

4. Change __________

5. Utilize _______________

6. Engage __________

7. Develop _____________

8. _____________ to context

9. Use ________ and _______ strategies

1. stakeholders

2. interactive assistance

3. clinicians

4. infrastructure

5. financial strategies

6. consumers

7. stakeholder relationships

8. adapt & tailor

9. evaluative, iterative

PRACTICE TRANSFORMATION

Community-based pharmacies aspire to ________ their practices to care for people over time to meet health care system needs and their communities. Practice transformation is broadly defined as the implementation of _____________ in how a clinical practice operates to better achieve the quadruple aim.

transform, substantive changes

Outer context of implementation science in pharmacy → 3

1. laws/scope

2. politics

3. economics

Inner context of implementation science in pharmacy → 4

1. rel priority

2. local workflows

3. roles of staff

4. organizational structure

1. Change Management Model from the diffusion of innovations theory

The theory categorizes individuals/groups within a system based on their willilingness to adopt the change, following a normal distribution

2. Innovators →

3. Early adopters →

4. Early majority →

5. Late majority →

6. Laggards →

1. macro frame

2. 1st to adopt

3. opinion leaders who help spread to the wider group

4. ppl who adopt before the avg

5. ppl who adopt only after majority does

6. last to adopt/resistant

Change management model from the institute for healthcare improvement model for improvement

local frame

CONSIDERING INNOVATIONS LOCALLY

1. Pros →

2. Cons →

1. compatibility, simplicity, effectiveness

2. trialability, resources, cost

EXAMPLES OF PHARMACY TRANSFORMATIONS → 7

1. Flip the pharmacy

2. POCT

3. pharmacist prescribing & med billing

4. med sync

5. MTM workflow models

6. MTM implementation strategies

7. primary care collaboration

What is the largest pharmacy asset?

inventory

_____________: a financial statement that reports a company’s assets, liabilities, and shareholder’s equity (where inventory resides)

balance sheet

INVENTORY COSTS

1. acquisition →

2. procurement →

3. carrying →

4. stock-out/shortage →

1. paid for product

2. money spent to get the product to us

3. money spent to keep & maintain product

4. cost LOST

3 TYPES OF INVENTORY MANAGEMENT

Type → pros → cons

1. individually physically examine and compare what is on hand vs demand

2. similar to ^ but is performed on a specific interval (eg every Monday)

3. computerized

1. visual → cheaper, better for smaller pharm → error, all staff must know quantities

2. periodic → cheaper, 1-2 ppl → error, most time consuming, longer lag in ordering

3. perpetual → most common & efficient, real-time data, better for larger pharm → most $$$, software errors

Inventory turnover ratio (ITOR) =

COGS / avg invent at cost

average inventory =

(BI + EI) / 2

What does ITOR tell you?

how many times we sell out our inventory / year

PURCHASING OBJECTIVES → 5

right _____

1. product

2. quantity

3. time

4. price

5. vendor

3 TYPES OF STOCKS

1. ____________: regulatory inventory required to fulfill orders

2. ____________: additional inventory needed incase of supply or demand fluctuation

3. ____________: inventory kept on hand because of unexpected future demand or unexpected price increases

1. cycle stock

2. buffer/safety stock

3. anticipatory/speculative stock

__________: the point where it’s reasonably certain that the item will be available on demand “reorder point”

stock depth

__________: the period of time allowed for taking discounts and the date when invoices become payable

dating

TYPES OF DISCOUNTS

1. __________ discounts: based on amount of product ordered, cumulative or noncumulative

2. __________ discounts: offered by suppliers for prompt payment

3. __________ discounts: occurs when multiple discounts are applied simultaneously

1. quantity

2. cash

3. serial

What does “2/10 ROG, net 30” mean?

1. 2% discount

2. 10 = w/in 10d after ROG

3. ROG = receipt of goods

4. net 30 = otherwise, must pay full amount within 30d after ROG

TYPES OF DATING

1. ____________: collected before ordering or delivery

2. ____________: no time period prior to discount or payment due date

3. ____________: invoice is due at a later date

1. prepayment

2. collect on delivery

3. delayed or future