FEATURE: Robotics ROI
Investing in Robotics: Making the Case
With the right approach, robotics can turn into an investment that’s going to bring a lot of value and make for a happy business owner, happy employees, and happy customers.
It would be nice if there were a few calculations for every technology you consider adding to your pharmacy that could established a specific return on investment (ROI), tailored to your specific operations. Of course, figuring out the impact of a prospective investment is hardly ever that simple, in part because of the large role the specific circumstances of a given pharmacy play, and in part because technology has both financial and softer operational returns.
« Once Dave Lutz had realistic ROI expectations, he moved forward with installing the RxMedic ADS automation.
Still, as Dave Lutz can attest from his experience with bringing robotics to Rhoads Pharmacy & Gift Shop in Hummelstown, Pa., it is indeed possible to do your homework, plan carefully, and ultimately feel confident that you have a firm grasp on what your investment is all about.
Crunching the Numbers
Lutz’s three-year search for a robot — a search that culminated in 2012 with the purchase of an RxMedic ADS — started less with a financial rationale than with a sense that his pharmacy needed one. “I felt a robot would enhance our operations,” he says. “And I knew that I had to look at ROI, but it wasn’t the main consideration.” As much as anything, the move to install a robot derived from the fact that Lutz sees himself as a progressive thinker who takes great pride in his pharmacy. “I’m constantly on the lookout to upgrade it,” he says. “In fact, I’ve remodeled five times.”
But even if financials weren’t the first consideration, Lutz certainly did take a hard look at numbers as part of his process of assessing ROI. First, he admitted to himself that a robot was not going to print money for him. “I know that a lot of owners want everything covered when they make an investment,” he says. But expecting a technology to pay for itself too quickly is often a major barrier to what can otherwise be an excellent investment.
Once Lutz had set aside unreasonable ROI expectations, he took a conservative approach to financing the purchase of the ADS by putting 20% down out of the pharmacy’s capital and financing the rest. He found himself in a position to act as his own bank, loaning himself the money. ”That works well, if that’s something that you can do,” he says. He depreciated the investment over four years. All this worked out, in his case, so that when the write-off for depreciation and interest are added up, the total deduction comes to about half of what his monthly payment on the machine was.
The question then was, could he find a way to offset the remaining half of his payment? What Lutz did was to sit down and look at pharmacist hours. “I did that because you can hire three technicians for the cost of one pharmacist,” he says, “so if I can cut pharmacist hours, that’s much more efficient than cutting tech hours.” And that’s probably the opposite of how a lot of owners would look at the situation, particularly if it’s the technicians doing the counting and filling at the pharmacy prerobotics, as was the case at Rhoads Pharmacy. “I didn’t want to reduce tech time, because I wanted them to help more in other areas,” explains Lutz.
Lutz never had the goal of completely eliminating a pharmacist position, and in fact there was no need to be so extreme in offsetting the remaining portion of the payment. “All I had to do was eliminate 30 minutes a day, or 15 hours a month, of pharmacist time to get the other 50% of my monthly robotics payment, the part that wasn’t accounted for by the write-offs,” says Lutz. That turned out to be really easy for him to do, by looking for overlap he had in the scheduled pharmacist hours for lunch, peak hours, and other situations.
Assessing the Intangibles
But even after explaining how he handled the numbers, Lutz is quick to circle back to the fact that there are real benefits from robotics that aren’t measured in your accounting ledgers. There’s the PR and customer relations aspect, for starters. “People like Rhoads Pharmacy because we’re progressive and up to date and always improving,” says Lutz. “The robot helps gives us a better ability to deliver the level of service that sets us apart. For instance, it lets us deliver on the promise of wait times no longer than 10 minutes.”
Then there’s the comfort level that the RxMedic ADS brings to the pharmacy staff. “We’ve seen a 100% improvement here,” he says. “This is really easy to see by looking at the pharmacy counter, which is no longer cluttered with big bulk bottles that our technicians used to count out of.” This change is a great example of how robotics saves time and reduces stress at Rhoads Pharmacy. Gone is the need for technicians to bring these bulk bottles to the counting station and then back again to the stock shelves multiple times a day. And gone is the need to count out what Lutz estimates was about 15,000 pills a day by fives. “RxMedic fills 66% of our oral solids,” says Lutz. “So we’re only counting 5,000 pills instead of 15,000. And it accounts for about 50% of our overall prescriptions, when you take into account items that aren’t oral solids.”
« Rhoads Pharmacy technician Deb Matinchek works at the ADS. “The robot helps gives us a better ability to deliver the level of service that sets us apart. For instance, it lets us deliver on the promise of wait times no longer than 10 minutes,” says Lutz.
Being Both Penny and Pound Wise
But Lutz realized early on that simply shifting the bulk of the counting volume and filling load to the robot isn’t enough to really see a return on your investment. You have to be careful that you don’t turn around and simply spend the time saved on maintaining and replenishing your new technology. “I went to see three different robots when I was in the market,” Lutz says. “And I took two technicians with me, including my lead tech, to look. My lead tech is a really sharp lady, so she pulled aside the techs in charge of the robot at the stores we visited and had candid conversations with them. At one site we visited, where they’d had their robot for about three or four months, the tech told her that she was spending pretty much all her time keeping the robot full.”
In another case Lutz visited a pharmacy where there was a basket of bulk containers sitting out on the counter, and these were the drugs that needed to go in the robot. “The thing is, these were small bottles, 100’s,” he says. This was a pharmacy that had invested in robotics but not in changing its approach to inventory. “The result was that they were refilling each cell every day or two,” says Lutz. “I realized that we wanted to fill a cell no more than once a week.”
Analyze, Measure, Rationalize
These experiences led Lutz to apply a rigorous logic to stocking his ADS. “We have 256 cells,” he says, “but you don’t want that many drugs in the robot. There’s no reason to put something in the robot that you only fill six times a month.” Lutz ran reports from his QS/1 NRx system to identify his fastest movers, which is a pretty common step taken in deciding what to stock in a robot. But then he went a step further. He measured how much space different pills take up by extrapolating from how many a given-sized vial holds. For example, he found out that he could fit 2,000 Ativan in a standard ADS cell, but that there are bigger pills for which he’d want to use double cells in order to keep the replenishment frequency down to his target level. This scientific approach meant that Lutz went with a lot of double cells and only around 220 medications stocked in the robot.
He keeps the cost of the inventory in the robot down by filling it with around 90% generics, with the rest highvolume brands. “Even then I had to be willing to commit to a higher level of inventory investment to start with,” he says. “But then it levels out and that all goes away in about three months, and you are back to the inventory you were carrying to begin with. Initially, you do need to spend some extra to get that robot filled up.”
Don’t Count If You Don’t Have to
And when it does come time to refill a cell, Lutz remains dedicated to his rational approach. “My goal is to buy all the medications that are going into the ADS in the stock bottle [size] closest to our goal amount for filling the cell,” he says. For example, if a cell holds 900 pills of a drug, then Lutz wants to buy a 1,000-count bulk bottle so that he can use a tabletop counter to pull out just 100 pills, and dump the rest in. As Lutz points out, a 5,000-count bulk bottle may be cheaper in terms of its purchase cost, but ultimately require more handling and precounting for filling the robotics. “Particularly when you are talking about generics, a 5,000-count bottle may end up costing you more than a 1,000-count bottle because it’s taking up too much of your staff ’s time,” he says. “It’s our goal always to replenish the ADS with as little extra counting as possible. Why should we want to count during replenishment the very same pills that we’re then going to have the robot count to dispense?”
« Rhoads Pharmacy & Gift Shop in Hummelstown, Pa. The RxMedic ADS is visible to the customer, at back right.
Dollars and Sense
In the end, Lutz is perfectly comfortable with the fact that the return on his investment in robotics comes from two sources. “I can see from the numbers how I’m getting my investment covered,” he says, “but just as important, I can also see how we have more time for critical clinical activities like MTM and our med sync adherence program. I knew there’d be these soft benefits beforehand, but they’ve really exceeded my expectations.” With the right approach you can find that robotics is an investment that’s going to bring a lot of value and make for a happy business owner, happy employees, and happy customers. CT
Will Lockwood is a senior editor at ComputerTalk. He can be reached at email@example.com.
An ROI Checklist
1. Look at your financing options:
2. Look for ways to adjust your spend in other areas to further offset the investment.
3. Don’t spend the time the robotics saves in counting on maintaining the robotics.
4. Be ready to take a hard look at your inventory.