An Activity Based Management study of LTC service provision in community pharmacy

New Zealand has undergone a period of previously unprecedented change to the community pharmacy sector. A new funding model was implemented in 2012 with the goal of rewarding pharmacists for patient contact and clinical input, rather than solely for the number of medicines dispensed. The change has been immensely challenging for pharmacy, as they have coped with funding and service model changes. The new funding model saw the introduction of the Long Term Conditions (LTC) pharmacy service. The LTC service is designed for people with complex health and medicines management needs and medicine adherence issues. Patients in the LTC service receive more frequent dispensing, along with adherence reminders and increased pharmacist support. The pharmacy receives a monthly fee for this additional work, and is required to complete ongoing and time consuming paperwork. There is a lack of awareness about the actual cost to pharmacy of providing the LTC service as there is an absence of any studies that have attempted to define the resources needed to deliver the service and the activities that drive these costs. The aim of this report is to define the actual cost to pharmacy of delivering the LTC service through the lens of Activity Based Management (ABM), and define cost drivers using a time driven activity based costing system (TDABC). Research Method: Primary data was collected through a semi-structured survey and 18 responses were elicited from participating pharmacies. TDABC was employed to estimate the cost of providing the LTC service. Findings: Results indicate that the monthly payment of $20.80 per LTC patient registered is insufficient to cover ongoing costs. In addition to ongoing monthly costs, pharmacies incur one-off costs to initiate a new patient into the LTC service. One off costs show a positive relationship with ongoing costs and wide variation is observed for costs between pharmacies. The major cost driver was identified as pharmacist time. Recommendations: Future studies should examine the processual variations in pharmacies with low-cost and high cost profiles with the aim of providing pharmacists with more efficient options for delivering the service. Greater utilisation of software through automation of patient eligibility and administrative tasks could help free up pharmacist time.