Organizational structures in Information technology startups
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SPECIAL FEATURES DESIGNING ORGANIZATIONAL STRUCTURES
482 AM J HEALTH-SYST PHARM | VOLUME 75 | NUMBER 7 | APRIL 1, 2018
Designing organizational structures: Key thoughts for development
Patricia Killingsworth, B.S.Pharm., Phoenix, AZ.
Lynn Eschenbacher, Pharm.D., M.B.A., FASHP, Ascension, St. Louis, MO.
Address correspondence to Ms. Killingsworth ([email protected]).
This article is part of a special AJHP theme issue on pharmacy practice in multihospital health systems. Contributions to this issue were coordinated by AJHP Editorial Advisory Board member Scott Knoer, M.S., Pharm.D., FASHP; and Senior Director, ASHP Section of Pharmacy Practice Managers, David F. Chen, B.S.Pharm., M.B.A.
Copyright © 2018, American Society of Health-System Pharmacists, Inc. All rights reserved. 1079-2082/18/0401-0482.
DOI 10.2146/ajhp170657
Purpose. Current strategies and concepts to consider in developing a system-level organizational structure for the pharmacy enterprise are discussed.
Summary. There are many different ways to design an organizational structure for the pharmacy enterprise within a health system. The size of the organization, the number of states in which it operates, and the geo- graphic spread and complexity of the pharmacy business lines should be among the key considerations in determining the optimal organizational and decision-making structures for the pharmacy enterprise. The structure needs to support incorporation of the pharmacy leadership (both system- level executives and local leaders) into all strategic planning and discus- sions at the hospital and health-system levels so that they can directly represent the pharmacy enterprise instead of relying on others to develop strategy on their behalf. It is important that leaders of all aspects of the pharmacy enterprise report through the system’s top pharmacy executive, who should be a pharmacist and have a title consistent with those of other leaders reporting at the same organizational level (e.g., chief pharmacy officer).
Conclusion. Pharmacy leaders need to be well positioned within an or- ganization to advocate for the pharmacy enterprise and use all resources to the best of their ability. As the scope and complexity of pharmacy ser- vices grow, it is critical to ensure that leadership of the pharmacy enter- prise is unified under a single pharmacy executive team.
Keywords: health system, leadership, organizational structure, pharma- cist, pharmacy services, strategic direction
Am J Health-Syst Pharm. 2018; 75:482-92
As healthcare continues to devel-op and change, the business and practice of pharmacy are evolving. Hospital and health-system mergers, acquisitions, and expansion into new areas of patient care services have pro- vided the opportunity for the pharma- cy professional to grow in new areas as well. This evolution has resulted in a much larger scope of pharmacy prac- tice, with expanded oversight of non- acute care areas such as ambulatory surgery center operations, retail phar- macy, specialty pharmacy, telephar- macy, mail-order pharmacy, pharma- cy benefit management, population health management, infusion servic-
es, centralized compounding, and re- packaging services. Other expanding areas that require pharmacy oversight include medication safety and quality, compliance and regulatory assurance, drug shortage management, revenue management, patient assistance pro- grams, 340B Drug Pricing Program participation, transitions of care, practice model advancement, and in- vestigational drugs and clinical trials. In some hospitals and health systems, pharmacy leaders are being asked to take on larger roles outside the phar- macy department, including areas such as supply chain, laboratory, and dietary services. With this growth in
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scope and complexity, there is a need for pharmacy executive oversight and new organizational structures to over- see the entire pharmacy enterprise.
Knoer1 provided a summative defi- nition of the pharmacy enterprise— “An integrated system of business units with accountability for clinical and financial outcomes related to medication use across the continuum of care in a health system . . . .”—that speaks to the complexity of pharmacy services due to the large breadth and depth of pharmacy in the current and future environments.
With this complexity, there is a growing need to have a pharmacy executive who is a pharmacist and is responsible for the development and oversight of a multifaceted and expanding pharmacy organizational structure that addresses the addition- al responsibilities and unique needs of the health system. Knoer1 stated, “We must develop a new generation of leaders who operate above the lo- cal hospital level and function in cor- porate positions focused on strategic issues. This pharmacy executive, or chief pharmacy officer (CPO), posi- tion is necessary to lead today’s im- mense and complicated pharmacy enterprise.”
Godwin2 shared his concept re- garding the need for a CPO “who has recognition and organizational parity with the other ‘O’s’ in the hospital” in a 2000 article. The concept of the CPO as representative of the larger scope of a pharmacy executive’s responsi- bilities was further highlighted in the 2016 “ASHP Statement on the Roles and Responsibilities of the Pharmacy Executive,” which outlined qualifica- tions and responsibilities for this type of role.3 The statement emphasized that in addition to being profession- ally competent and legally qualified, the pharmacy executive needs to be “thoroughly knowledgeable about and have experience in hospital pharmacy practice and management,” and it also highly recommended “completion of a pharmacy resident program ac- credited by ASHP, advanced manage-
ment degree (e.g., Masters of Business Administration, Masters of Health Administration), or an administra- tive specialty residency.” What truly differentiates a pharmacy executive from a pharmacy director is a deep understanding of the organization’s operations and “a greater degree of involvement in the organization’s stra- tegic planning and decision-making processes.”
With the American Hospital Asso- ciation (AHA) 2016 Trendwatch report noting that more than 3,000 of U.S. hospitals are part of a health system and over 800 hospitals were part of an acquisition or merger during the pe- riod 2011–15,4 the rate of change and complexity of establishing effective and efficient system-level pharmacy organizational structures will only increase.
Executive-level decisions that af- fect the medication management sys- tem are made at a rapid pace, often with profound implications for patient care, patient safety, pharmacy regula-
KEY POINTS • There are many ways to design
an organizational structure for a pharmacy enterprise within a health system.
• Size of the organization, num- ber of states and countries served, geographical spread and complexity of the pharma- cy business lines are key fac- tors in designing the pharmacy enterprise structure.
• Understanding the culture of the health system, diversity of the pharmacy enterprise, business lines it offers, and strategy of the organization is key in developing the optimal pharmacy structure for a given organization.
tory risk, and the health system’s fiscal well being. The aforementioned ASHP statement noted that “complex hospi- tals and health systems benefit from having a pharmacy executive who is responsible for the strategic planning, design, operation and improvement of the organization’s medication man- agement system.”3 The pharmacy ex- ecutive must be properly positioned within an organization to ensure the best use of his or her expertise when making decisions that affect the poli- cies, procedures, and systems that support safe, effective, and efficient medication management.
The results from the most recent ASHP survey regarding multihospital pharmacy organizational structures indicated significant variation in the current state of how pharmacy fits into an overarching health-system or- ganizational structure. The 44 survey respondents listed a total of 20 differ- ent positions to whom top pharmacy executives report, including “vice president of clinical (services),” chief nursing officer (CNO), chief operat- ing officer (COO), chief financial offi- cer (CFO), and “chief executive officer (CEO), support services and supply chain.” The survey results also showed a large variation in pharmacy organi- zational structures. Some structures incorporated regional pharmacy di- rectors, while others did not. Respon- dents described various combinations of solid and matrix reporting lines for pharmacy directors within the phar- macy enterprise structure as well as the hospital and health-system orga- nizational structures. While there are many ways to structure pharmacy ser- vices and incorporate them into a hos- pital or health-system organization, it is extremely important to create a structure that ensures collaboration, accountability, and integration of the entire pharmacy enterprise. Dividing the pharmacy enterprise across mul- tiple departments and multiple lead- ers is a challenging approach to struc- turing that can lead to increased waste of resources, competing pharmacy priorities, fragmentation of patient
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484 AM J HEALTH-SYST PHARM | VOLUME 75 | NUMBER 7 | APRIL 1, 2018
care, missed opportunities to improve pharmacy service levels, and, ulti- mately, increased cost and decreased quality of pharmacy services. It is cru- cial that all high-level managers across the entire pharmacy enterprise report to a pharmacy executive who directly reports to or can influence the C-suite of the health system.
The pharmacy profession is being summoned to develop and provide a diverse portfolio of services that can contribute to cost savings, provide revenue-generating business lines, and improve the patient experience and outcomes in hospitals and health systems. Developing a pharmacy or- ganizational structure with an ap- propriate leadership that is skilled in a wide variety of pharmacy services is a challenge but essential for suc- cessful management of such a diverse portfolio of services. Structures may vary with the type and size of the or- ganization and the services provided; however, there are key considerations to reflect on when determining the structure, which are discussed below.
A unique business model
Pharmacy and medication man- agement processes cross the entire continuum of care between acute and nonacute care while having an impact on the value of healthcare through re- duced admissions and readmissions. Pharmacists are uniquely positioned to interact with patients more often than other providers and, therefore, can drive their organizations toward better results and improved patient care outcomes. Coordination among all facets and business lines of the pharmacy enterprise (e.g., acute care, specialty, retail, infusion centers, phy- sician clinics, ambulatory care) should occur to ensure medication accuracy, adherence, optimization, and synergy across all practice settings. To accom- plish this coordination, it is impera- tive when designing the enterprise structure that the pharmacy leader- ship is incorporated into the design and implementation of the structure at the corporate and local levels, in-
cluding future redesign initiatives. The structure also needs to support the in- corporation of pharmacy leaders into all strategic planning and discussions at the hospital and health-system lev- els so that they can directly represent the pharmacy enterprise instead of re- lying on others to develop strategy on their behalf. The pharmacy executive should identify opportunities to lever- age pharmacists’ expertise to improve quality, safety, the patient care experi- ence, patient access to quality health- care across the continuum of care, and the economic performance of the organization.3
When designing or redesigning a pharmacy organizational structure, the process should begin with assess- ing and determining which pharmacy services are currently offered, which will be offered in the future, and what services that align with the hospital’s and health system’s overall business strategy need to be developed. Staying acutely aware of healthcare trends in published literature such as the AHA Trendwatch report and cultivating a deep understanding of the organiza- tion’s anticipated strategic growth or consolidation of services are essential as the structure is designed.
Each service needs to be assessed as a business line to address its unique challenges and opportunities for suc- cess. For example, managing an acute care pharmacy department is very different from managing a special- ty pharmacy and requires different goals, metrics, operational designs, and staffing requirements. Differ- ent leadership knowledge and skills for management of various business lines should also be considered. With the potential for a variety of com- binations whereby some pharmacy services are cost centers and others are revenue generating, with a mix of not-for-profit and for-profit business models, a more robust organizational structure headed by high-performing leaders with the expertise to manage a diverse portfolio of pharmacy services is essential. It is important to have a clearly defined and communicated
strategy for each business line in order to ensure that the strategy is devel- oped with input from and collabora- tion among individual facilities. It is also critical to have a single strategic plan for all pharmacy services and for senior executive leaders external to pharmacy, as well as the entire phar- macy enterprise team, to be aware of, support, and be able to articulate the strategy. Once the strategy has been developed, it should be reviewed on a regular basis to ensure that it is still applicable and contemporary. If the strategy and direction are not followed by each facility, resource use will not be aligned and the value of services will be reduced.
Considerations when building the structure
With the diverse types of hospitals and health systems in operation and the even greater diversity of patient services they provide, there are many considerations that need to be ad- dressed when developing the appro- priate organizational structure. One important element is to have a phar- macist executive with the ability to influence the direction of pharmacy services placed at the top of the phar- macy organizational chart. The phar- macy executive should be included in the most senior-level discussions to ensure leadership in strategic direc- tion. Depending on the size and com- plexity of the organization, the phar- macy executive could be the leader for multiple facilities, an entire health system, or an individual facility.
A key enabler of success for the top pharmacy executive is his or her integration into the executive team of the organization. There are many methods to accomplish this integra- tion. Ideally, the pharmacy executive should be located in the same physical location and have routine meetings with the overall health-system senior executive leadership. The pharmacy executive should also provide routine updates to the different teams within the health system’s senior leadership. The pharmacy executive should have
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a title that is consistent with those of other executives at the organizational level (e.g., CPO), as a title can be a key determinant of who gets invited to leadership discussions, and he or she should report directly to the organi- zation’s principal executive (e.g., the CEO). Perhaps most important, the pharmacy executive should always be environmentally scanning, listen- ing, and interacting with other orga- nizational leaders in order to identify changes that might affect pharmacy operations and be positioned to influ- ence those changes.
The quality and timeliness of in- formation exchange improve signifi- cantly when the pharmacy leadership reports directly to the principal execu- tive rather than through multiple lay- ers of management.3 “Managing up” is essential to ensure that the needs of the pharmacy enterprise are clearly known, that the value of the enterprise is effectively communicated, and that the pharmacy executive is aware and included when senior executives are making decisions about the direction of the overall organization.
One additional item to consider is this: Should the pharmacy enterprise be a standalone business unit within the healthcare system? Several corpo- rate pharmacy structures have recent-
ly been created in the form of limited liability corporations (LLCs). Creating a pharmacy business as an LLC al- lows it to leverage contracting and sell pharmacy services to other organiza- tions while minimizing financial and legal risks to the entire organization. This model is still fairly unusual but something worth exploring.
Several other characteristics of the organization need to be assessed when designing or implementing a health-system pharmacy structure. Key questions include the following:
• Is the health system a holding com-
pany versus an operating company?
• How large is the organization in
terms of number of facilities, types of
facilities, number of states served, and
geographic spread?
• Does the culture support transforma-
tional or incremental change?
• Does the organization value having a
pharmacy enterprise structured as a
discrete business unit?
• How will the pharmacy structure be
paid for and demonstrate a return on
investment?
These are only a few elements to be considered when developing a struc- ture that will support the business of pharmacy in a healthcare system, but
they are among the most important ones; 3 are discussed in detail below.
Holding company versus op- erating company. Structure, strat- egy, and decision rights are very dif- ferent in a holding company versus an operating company. A traditional holding company model is “based on asset acquisition and brand exten- sion,” with little focus on efficiency.5 We have seen this frequently in non- profit healthcare systems that are expanding and growing their market share through mergers, acquisitions, and other management agreements. Executive office functions are often integrated while local operations are minimally affected and strategy, de- cision rights, and local operations remain within the purview of local organizations. In a traditional hold- ing company model, the mission and cultural aspects override the need for significant gains in efficiency.
In contrast, an operating compa- ny’s predominant goal is to “increase efficiency and reduce cost across the organization.”5 Within health systems there is also the mission to improve the quality and the process of patient care across the care continuum. In an operating company model, strategy, decision rights, and accountability are more “top-down.”
Figure 1. Example of executive structure with regional executives. Notes: A 503B pharmacy is a sterile compounding pharmacy regulated under section 503B of the federal Food, Drug, and Cosmetic Act; 340B refers to the 340B Drug Pric- ing Program. CPO = chief pharmacy officer, VP = vice president.
Pharmacy director
Retail pharmacy manager
Clinic pharmacy manager
Pharmacy director
Retail pharmacy manager
503B pharmacy manager
Supply chain director
Specialty pharmacy director
340B coordinator
CPO or VP of pharmacy
VP or senior regional director
VP or senior regional director
VP or senior regional director
SPECIAL FEATURES DESIGNING ORGANIZATIONAL STRUCTURES
486 AM J HEALTH-SYST PHARM | VOLUME 75 | NUMBER 7 | APRIL 1, 2018
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The structure of a holding compa- ny can be flatter, with a large span of control, more matrix reporting lines, and less accountability, whereas an operating company may have many more layers of leadership and mixed reporting lines, with top-down deci- sion rights and increased account- ability. Both structures have their challenges and strengths, and it is im- portant to understand and consider the differences when developing the pharmacy organizational structure.
Span of control. The size and complexity of the health system will influence its span of control. Some health systems are located within multiple states or countries, have more than 10 acute care facilities, and include a handful of other busi- ness units (e.g., a same-day surgery unit; physician clinics; retail, spe- cialty, mail-order, and ambulatory care pharmacy units; supply manage- ment, compounding, and repackag- ing operations). For this type of large, complex health system, a regional pharmacy executive model should be considered. Incorporating regional pharmacy executives will allow for operational oversight and deployment of strategic initiatives in a common, expeditious, and accountable man- ner. The structure should include a method by which all pharmacy lead- ers (e.g., those in charge of acute care, retail, and specialty pharmacy opera- tions) report to a regional or system- level executive and the regional ex- ecutives have reporting lines leading to the overall system pharmacy execu- tive. This structure will ensure success and accountability of expectations for pharmacy operations. Two examples of pharmacy structures in which re- gional executives report to a system pharmacy executive are provided in Figures 1 and 2.
In contrast, many U.S. health sys- tems are made up of 10 or fewer hos- pitals and may include other business units that are in close proximity within a single state. Smaller health systems that have a tight geographic spread may not need a regional model in
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order to achieve the desired span of control and accountability. A human resources recommendation that has been shared is that “leader of lead- ers” positions should have no more than 5–10 leaders who report directly to them. By following this recommen- dation, a smaller health system may not need a regional model for span of control and accountability; it will most likely need vice president– or senior director–level pharmacy lead- erships over each business line that report to the overall system pharmacy executive. An example of an executive structure without regional executives is provided in Figure 3.
Budgeting and paying for the structure. Consider how to design both operating and capital budgets for the pharmacy organizational structure. The pharmacy organizational structure will influence decisions regarding how to best pay for the expense. Some key considerations regarding operational budgeting can be clarified by asking the following questions:
• Will all members of the pharmacy
leadership be employees of a pharma-
cy business unit, will they be employ-
ees of the facilities, or will the structure
involve a combination of both types of
relationships?
• If pharmacy leaders are employees of
a pharmacy business unit, will their
salaries and overhead be allocated out
to the facilities or be handled as a cost
center by the organization?
• If pharmacy overhead is allocated,
will only those hospitals receiving
assistance from certain individuals or
specific services be charged for their
time?
• Will the cost be shared across all hos-
pitals? If so, will the allocated amounts
be the same for all facilities, or will
there be a percentage allocation based
on a denominator (e.g., bed count,
number of admissions)?
• If pharmacy leaders are employees
of hospitals that support multiple
facilities, how will their salaries and
overhead be calculated and the cost
shared?
• Will there be cost savings or revenue
generated with the new organizational
structure, and how will those benefits
be tracked?
• Will the revenue and cost be held
within a for-profit pharmacy business
unit, or is there an established sharing-
of-cost-and-revenue model?
• How will the pharmaceutical budget,
as well as travel and other individual
facility or business unit expenses, be
approved and oversight and account-
ability achieved?
It is important to understand how other centralized departments of the health system (e.g., supply chain, in- formation technology, security, labo- ratory services, legal, marketing and communications) are billing for their services to determine acceptable pay- ment structures.
There may also be an opportunity to streamline and manage the capital budget differently from a system-level process. Questions to consider in- clude the following:
• How will capital budgeting for system-
wide pharmacy projects be managed?
• Will capital be decided at each hos-
pital, or will the pharmacy enterprise
control the capital along with corpo-
rate finance and allocate it out to the
facilities?
One method of capital budgeting is for the pharmacy executive leadership team to determine priorities for the year, work with the corporate strategy and finance teams to identify key proj- ects, and allocate funds to individual facilities according to the overall stra- tegic direction. Allocating and distrib- uting capital funds centrally allow for better overall project control, includ- ing creation of an overarching project team with a project timeline and stan- dards; development of subject matter experts to help implement the project and maintain expertise once the proj- ect is completed; improved oversight of project funds, with standards and accountability for the expenses; im- plementation of a well-designed sys-
temwide communication plan; and application of lessons learned to con- tinue to improve the project along the way and through completion. There are many benefits to this type of fund- ing; however, it can take longer to get funding approval and implement large-scale projects across an entire enterprise.
Another budgeting method is to develop an overall strategy but rely on each individual facility to secure capi- tal and operational funds separately. This method can be more challenging to implement consistently if individu- al facilities do not receive funding and therefore cannot follow the strategic direction; it also relies on each hospi- tal to manage the overall project, in- cluding several of the key items listed above.
Considerations in determining the best model for change and accountability
It is also important to consider how best to design an organizational structure that will allow the pharmacy enterprise to develop, implement, and sustain change with appropriate con- trols and accountability across the or- ganization. Key questions include the following:
• Should pharmacist full-time equiva-
lents (FTEs) be listed on a single
budget of a central team or at the local
(facility) level?
• Should the pharmacy leaders of each
facility report to the local executive
leadership directly or to the most
senior pharmacy executive directly?
• Should there be indirect (i.e, “dotted-
line”) reporting to the local executive
leadership or to the most senior phar-
macy executive?
• Should all pharmacy-related services
(e.g., ambulatory care, retail, infusion
centers) report through the pharmacy
leadership?
• What is the span of control for the
senior pharmacy leader and the indi-
vidual facility leaderships?
• Are direct relationships required in
order to enforce change?
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488 AM J HEALTH-SYST PHARM | VOLUME 75 | NUMBER 7 | APRIL 1, 2018
• Can a matrix model or “influencer”
model be used to implement change?
• Are there roles and responsibilities that
can be performed at a regional level to
achieve efficiencies and optimization
while still ensuring high quality (e.g.,
medication safety, informatics, drug
information)?
Aligning goals of the model and designing organizational structure
When establishing an effective or- ganizational structure, it is important to keep in mind the need for account- ability. Direct reporting lines provide a stronger view into and ability to change services, whereas matrix re- porting lines require different skills to successfully lead through influence, collaborating for change and develop- ing strong relationships with matrix leaders and other key members of the leadership team.
Critical decisions include whether a pharmacy director reports directly to a member of the executive phar- macy team or to the local facility leadership, with a dotted reporting line to a regional pharmacy leader, vice president of pharmacy services, or system pharmacy executive (e.g., CPO). Direct reporting lines provide for strong relationships and collabo- ration and safeguard alignment and accountability to systemwide phar- macy services. Regardless of which
reporting line structure is chosen, it is essential for the health-system phar- macy executive to develop a strong relationship with the members of the health-system C-suite, a relation- ship whereby C-suite members see the value of the pharmacy executive, feel confident that they understand the business of pharmacy in the health system, can trust pharmacy executives to manage the business of pharmacy, and be comfortable to reach out if there are issues that need their attention. In return, the phar- macy executive needs to be seen as a trusted colleague who can reach out and ask C-suite members for honest feedback, buy-in, and support when needed. In addition, at the local level pharmacy leaders should form rela- tionships with C-suite members to develop trust and establish them- selves as the pharmacy experts.
To ensure alignment, develop- ing and sharing the vision, mission, and strategy of pharmacy are criti- cal. Pharmacy leaders across all busi- ness lines need to know, be able to articulate, and share on a regular ba- sis where the pharmacy enterprise is going and what it takes to get there. This message needs to be consistent horizontally and vertically, and it is important to create an environment that supports and provides the oppor- tunity for frequent sharing of pharma- cy strategy with the local hospital and
health-system senior executive teams. A robust pharmacy structure can help develop, align, share, and integrate pharmacy’s vision, mission, and strat- egy across the organization. The phar- macy executive should be responsible for the entire pharmacy enterprise, which incorporates all services relat- ed to medication management (e.g., acute care, retail, infusion therapy, specialty, compounding, repackaging, supply chain). The local pharmacy leader should meet with his or her C-suite at least monthly to share the pharmacy vision, mission, and strat- egy for all services and to provide cur- rent operational status updates. The system pharmacy executive and team can help to provide talking points and a consistent message for the lo- cal pharmacy leader to bring forward and for the local pharmacy leader to augment according to local needs. Key performance indicators (KPIs) should be identified to hold the system phar- macy executive, as well as the local- level pharmacy leaders, accountable for improving the overall value of pharmacy services. The KPIs should be reviewed with the system C-suite and the local C-suite on a routine ba- sis. Expectations and metrics need to be established to ensure that the local pharmacy leader is interfacing with the local C-suite on a regular basis. In addition, the system pharmacy ex- ecutive should communicate with the
Figure 3. Example of executive structure without regional executives. CPO = chief pharmacy officer, VP = vice president.
CPO or VP of pharmacy
VP or senior director of pharmacy
VP or senior director of pharmacy
VP or senior director of pharmacy
Pharmacy directors Retail managers Pharmacy advocatesPharmacy buyers
VP or senior director of pharmacy
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overall health-system C-suite and the local C-suite on a regular basis.
For each pharmacy service and the facilities they touch, standardizing the organizational structure will allow for deployment of initiatives across the health system in a consistent manner. There may need to be some modifications in the structure due to facility size and type (e.g., critical ac- cess hospital versus academic medi- cal center), but the services provided today and in the future must be con- sidered to determine what resources and roles are required. Variation may also be required due to state licens- ing and regulatory differences as well as regional variation. For instance, if the majority of hospitals, retail phar- macies, or ambulatory care services are in a specific operating region or part of the country—or even a differ- ent country—it might be necessary to have some organizational differences to accommodate for practice varia- tions, patient population variations, regulatory differences, or the sheer size and scope of services. Also, how to best group facilities together for lo- cal, regional, and system leadership and oversight must be considered. Just because an academic medical center is in the same area as all of the critical access hospitals does not mean they all need to be grouped into 1 region. It might make more sense if all critical access hospitals that are geographically spread are considered to constitute a distinct operating re- gion. Other considerations for group- ing of regions include pharmacy budget, overall number of facilities, number of FTEs, geography, loca- tion, and variety of pharmacy servic- es (e.g., infusion centers, retail, mail order, compounding, repackaging). Within each local facility and busi- ness line, the characteristics of phar- macy leadership required to success- fully provide the value of pharmacy must be decided. Should there be a director at each facility? What num- ber of managers and supervisors are required at the facilities to manage pharmacy services?
There may be an opportunity to re- gionalize some roles and responsibili- ties; that will allow for standardization of services and setting a clear direc- tion to maximize value. Designating a national or centralized leader for spe- cific pharmacy services or business lines should be considered to develop strategy and best practices, coordi- nate and communicate deployment of strategy and best practices, ensure im- plementation through holding indi- vidual facilities accountable, serve as a resource for questions and provid- ing expertise, and advocate on behalf of the service. Areas to consider might include 340B program participation, medication safety, regulatory com- pliance, contracting and purchasing, drug information, informatics, retail pharmacy, specialty pharmacy, acute care, and ambulatory care. There will still need to be resources locally at the facilities to fulfill the day-to-day tactical and patient care responsibili- ties, but augmenting with centralized leaders can improve the overall value. In addition, some of these roles might be optimized or shared across several facilities, resulting in both national or centralized leadership and regional leadership, with tactical and day-to- day functions managed by individual facilities (depending on the size and scope of the organization).
Leaders of the different phar- macy services or business lines at all levels will need to coordinate across the pharmacy enterprise to receive and collaboratively work toward the strategic goals of the pharmacy or- ganization. Building a community for collaboration across the phar- macy enterprise that includes shar- ing ideas, prioritizing work to align with pharmacy and system strategies, and establishing processes for discus- sion and a standard methodology for decision rights and communication of decisions, along with local imple- mentation and accountability, is es- sential to achieve desired intended outcomes and strategic goals. These reporting relationships can be repre- sented by a dotted line, but it is im-
portant to collaborate as a community to achieve the desired objectives for the organization.
Reviewing each service or business line to determine what is needed for day-to-day operations, as well as set- ting a clear strategy, will help to deter- mine the best organizational structure. The goal is to develop clear direction with consistent roles and responsi- bilities locally (i.e., within each facility) and across the entire health system.
Organizational and departmental cultures
Organizational structure consid- erations can be guided by the health system’s culture. How familiar with and knowledgeable of the value of the phar- macy enterprise is the highest-ranking health-system executive team? How well does the C-suite understand the pharmacy enterprise’s positive im- pacts on quality, safety, regulatory, compliance, and patient outcomes? Some hospitals and health systems fully comprehend the contribution of the pharmacy enterprise and under- stand all the positive impacts, while others may see pharmacy only as a cost center and not fully appreciate or understand how medication manage- ment can improve the care of patients and address the escalating hyperinfla- tion of medication pricing through ne- gotiations and utilization initiatives. It is critical for pharmacy executives to be included in the organization’s C-suite team and for the pharma- cy leadership team to have a voice within the organization and at hos- pital C-suite meetings. Whether the top pharmacy executive is called the CPO or has another title, it is critical for that person to have parity, visibil- ity, support, and a voice at the highest level of the organization to represent pharmacy services. The pharmacy executive should participate in regu- larly scheduled meetings with other healthcare executives (e.g., CEO, COO, CFO, chief clinical officer, chief medi- cal officer [CMO], CNO) and engage in regular, direct communication with the health-system leadership and
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board of directors about medication management system performance.3
Pharmacy is a strong contributor to the value equation of quality plus service over cost and how to manage the best overall value. When design- ing an organizational structure, it is important to consider how to best position pharmacy to provide the opportunity to unleash and leverage the most value and be most success- ful in providing high-quality care to patients. The pharmacy enterprise is unique because it provides clinical, operational, and business functions; this creates some confusion about where pharmacy leaders should re- port in the overall structure.
They could report through the operations, clinical, or supply chain organization structure, and each re- porting structure has benefits and considerations. If reporting to a fi- nance or operations executive (e.g., CFO, COO), pharmacy leaders have more of an opportunity to gain sup- port for funding of programs and ini- tiatives; however, there is a much clos- er review of the finances and bottom line. As a leader reporting to finance or operations, it is important to com- municate the analysis and numbers as well as the patient care impact to en- sure that both aspects are considered in decisions. When pharmacy leaders report through the clinical side (e.g., to a CMO, CNO, or chief clinical offi- cer), there is more support for advanc- ing frontline pharmaceutical care to the patients and putting patients first but, possibly, greater challenges in getting funding or movement forward for systemwide programs or more op- erationally oriented initiatives. When reporting to the clinical side, it is im- portant for the pharmacy executive to know how to navigate the organi- zation to take action on the strategic plan and gain funding and support to successfully implement all that has been developed and designed. Report- ing through the supply chain side may not allow the pharmacy leader to con- vey all the strategic opportunities for clinical patient care, safety, and qual-
ity impacts as well as all the regulatory and compliance requirements. When communicating with a supply chain leader, it is important to communi- cate the business opportunities while ensuring that the overall continuum of care is considered, including how pharmacy fits into each aspect to add value in ways beyond financial ben- efit. There may be pharmacy services that do not directly produce a financial benefit but, as part of the larger health system, can lead to overall reduced ad- missions or readmissions and, thus, yield indirect financial benefit.
Another consideration of organi- zational structure is how to ensure alignment with the pharmacy enter- prise’s strategic plan and account- ability across the health system. What model would best support develop- ment of strategic direction? How can this direction be communicated and implemented and then each phar- macy service be held accountable for the outcomes related to the strategy? There are many methods of achiev- ing these outcomes, including direct and dotted-line reporting and vertical or horizontal models. The develop- ment of the strategic direction can be achieved through different methods and should be consistent with the cul- ture of the organization. One method is to include team members from different facilities whose actions are facilitated by the corporate or central- ized pharmacy team; this allows for collaboration and input from the front line as well as leadership direction and guidance. Another method is for the corporate or centralized pharmacy team to develop and communicate the strategic direction to the facilities; this method allows for the central team to set the direction that it determines is of most value to the organization. Af- ter developing the strategic direction, it is important to hold the pharmacy team members accountable and set clear expectations through develop- ment of KPIs and a dashboard. The KPIs can be displayed for each indi- vidual facility, with data aggregated by regional area or by facilities of like
size or type, and then rolled up for re- porting the performance of the entire pharmacy enterprise.
Appropriate KPIs for each business line will need to be developed and in- cluded in the dashboard. Examples of KPIs include revenue cycle manage- ment, financial metrics (budgeted versus actual and variances), contract compliance (formulary versus non- formulary), regulatory and compli- ance (vis-à-vis, for example, require- ments of United States Pharmacopeia chapters 797 and 800 and controlled substances regulations), medication safety, practice model advancement, pharmacy technician optimization, inventory management, retail phar- macy prescription volume, and dis- charge prescription capture rate.
Additional considerations or ques- tions to ask in determining the phar- macy enterprise organizational struc- ture include the following:
• The composition of the entities within
the health system
• The unique characteristics of the indi-
vidual facilities that need to be taken
into consideration (e.g., are there any
academic medical centers?)
• Is it a faith-based organization?
• Is it a for-profit or nonprofit
organization?
• Are the physicians employed by the
health system or are they community-
based practitioners?
• Is the organization involved in teach-
ing medical and pharmacy residents?
• Is research performed?
• Are pharmacists or entities within
the system affiliated with a school of
pharmacy?
• What is the geographic area that the
health system covers?
• Are the individual facilities in clusters
or independently located?
• Are there any critical access or sole
community hospitals within the
system?
• Does the system include physician
clinics, urgent care clinics, or skilled
nursing facilities?
• Are there retail or specialty pharmacies
in the system?
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• Does the pharmacy operation have
mail-order capabilities?
• Is there centralized compounding and
repackaging?
In an academic medical center, the structure and leadership must support blending of the teaching, research, patient care, and business aspects of pharmacy practice to en- sure that the best value is provided. If the pharmacy executive is leading in a for-profit organization, he or she needs to support and develop the pharmacy model within the business model and lean processes of the or- ganization. The structure and lead- ership in a faith-based organization make it important to communicate how the pharmacy enterprise can serve the organization’s mission and patients and the communities in which it operates and contribute to the growth and financial stability of the organization.
Human resources decisions, talent development, and succession planning
Depending on the pharmacy model and structure (e.g., whether there are dotted or solid reporting lines, whether pharmacy leaders report locally or to the corporate executive leadership team), human resources decisions may need to be made. Key questions include the following:
• Who is responsible for hiring and per-
forming evaluations of the pharmacy
leadership team and pharmacy staff at
the health-system and facility levels?
• If there are matrix leadership roles,
what is the involvement of these lead-
ers in hiring, performance evalua-
tions, performance improvement, and
terminations?
• For hospital-level pharmacy directors
who report directly into a corporate
structure, who determines their per-
formance and pays for salary and (if
applicable) bonuses?
• If there is a difference of opinion
between the matrix and solid-line
leaders, how is it to be resolved?
It is imperative that this structure is well thought out, reporting lines are clear, and accountability and decision rights are understood by all parties.
Once the pharmacy structure has been established, an assessment of the current talent that is available in the organization to grow and sup- port pharmacy services should occur. Clearly understanding the technical requirements for the positions along with the organizational culture will help to find the best candidates for the positions. It is also important to consider the internal talent that is available and the need to bring in ex- ternal expertise. Many organizations are bringing in expertise from outside pharmacy or healthcare to acquire fresh ideas and new talents.
Developing a high-functioning leadership team with expertise in many different pharmacy services provides a basis for managing and growing pharmacy services into the future. Does the team need skills from areas outside pharmacy? Does the team need expertise in finance, human resources, information tech- nology, or other areas? If so, should these resources be added directly to the pharmacy team or does it make more sense to partner for or outsource these resources? The pharmacy execu- tive should consider including team members who are not pharmacists or pharmacy technicians to augment the team with other areas of expertise to provide the infrastructure and depth to successfully address the opportuni- ties and challenges, plan for current and future states, and ensure that the pharmacy enterprise is leading rather than falling behind in making needed changes.
After the overall structure is deter- mined along with the individual facil- ity’s organizational structure, there could be reliance on the local leaders to complete the organizational struc- ture alignment. The corporate team could either conduct all the hiring or hire at a certain level and then allow those leaders to carry out the rest of the hiring. In either scenario, the sys-
temwide pharmacy executive team should be involved in hiring pharma- cy leaders above a specified threshold of responsibility.
Creation of a role at the system lev- el to identify the competencies need- ed to advance the practice of pharma- cy, develop the educational programs, and deploy this education should be considered. In addition, the system role could collaborate with schools of pharmacy and ensure strong resi- dency programs that adhere to ASHP goals and objectives.
Ongoing development of the team will be necessary to ensure that it is able to achieve value and contribute to the mission and vision of pharmacy. Local and corporate leaders will need to be successful in many areas, in- cluding collaboration with senior ex- ecutives, leadership of the pharmacy enterprise, and collaboration with the medical staff. Well-planned education and development will be required to grow, develop, recruit, and retain top talent. In addition, this development will contribute to succession plan- ning to ensure an ongoing structural soundness and the continued growth and sound leadership of the pharmacy enterprise.
Precepting pharmacy students and conducting pharmacy residencies col- lectively serve as a feeder for succes- sion planning and growing and de- veloping talent. Pharmacy executives should consider starting a residency in health-system pharmacy administra- tion as a pipeline for future managers and leaders. It is important to not only ensure talent in the current situation but also to plan for the future and en- sure that the leaders of the future will continue to elevate medication man- agement and provide high-quality and safe care for all patients.
With a robust succession plan and as the pharmacy executive team matures over time, recruiting and replacement of system-level and hospital-level leaders will become less challenging. As the pharmacy en- terprise expands into new areas, the ability to scout and develop leader-
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ship talent to fill new leadership roles creates a career ladder and a culture that allows talent to stay and grow within the organization. Being able to identify and grow leaders and devel- oping them through internal and ex- ternal leadership will create the bench strength that is needed to sustain a high-performing pharmacy leader- ship structure to meet future needs.
Conclusion
Pharmacy leaders need to be well positioned within an organization to advocate for the pharmacy enterprise and use all resources to the best of their ability. As the scope and com- plexity of pharmacy services grow, it is critical to ensure that leadership of the pharmacy enterprise is unified under a single pharmacy executive team.
Disclosures The authors have declared no potential conflicts of interest.
Previous affiliations At the time of writing, Ms. Killingsworth was affiliated with Banner Health, Phoenix, AZ.
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2. Godwin HN. Achieving best practices in health-system pharmacy: eliminat- ing the ‘practice gap’. Am J Health-Syst Pharm. 2000; 57:2212-3.
3. American Society of Health-System Pharmacists. ASHP statement on the roles and responsibilities of the pharmacy executive. Am J Health-Syst Pharm. 2016; 73:329-32.
4. TrendWatch chartbook 2016: trends affecting hospitals and health systems. Washington, DC: American Hospital Association; 2016.
5. Fahsholtz K. Holding vs operating model—what’s the difference? (March 12, 2014). www.actionforbetterhealth- care.com/holding-vs-operating-mod- el-whats-difference/ (accessed 2017 Dec 22).
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