From Inventory to Insight--Rethinking Medication Management for Clinical and Operational Performance

In this episode, Randall Lipps Founder, Chairman, President, and CEO of Omnicell, discusses from inventory to insight, rethinking medication management for clinical and operational performance. Highlights of this episode include: How to reduce costs within medication management How system wide visibility can change decision making for health system leaders Centralized medication distribution and automation AI-driven analytics Efficiency and caregiver support How to drive enterprise-wide cost optimization Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome Randall Lipps. Randy is the founder, chairman, president, and CEO of Omnicell, a company transforming pharmacy care delivery with a comprehensive portfolio of medication management solutions. Inspired by inefficiencies he observed during his daughter’s birth and his experience in airline operations, he founded Omnicell in 1992, growing it into a publicly traded company in 2001 that now serves healthcare systems worldwide. Recognized for his industry leadership, he was elected to the Bellwether League Hall of Fame in 2014 and has served on the American Nurses Foundation Board of Trustees. Randy and his wife, Kathy, actively support a range of charitable endeavors, while Omnicell fosters volunteerism and charitable initiatives through its Omnicell Cares program. He holds bachelor’s degrees in economics and business administration from Southern Methodist University. In this episode, we’re discussing, from inventory to insight, rethinking medication management for clinical and operational performance. Welcome, and thank you for joining us, Randy. Randall Lipps: Well, Kelly, thank you so much for having me here today. It’s always fun to talk about the numbers, especially with folks who are thinking about the numbers all the time. Kelly: Yeah, exactly. Well, let’s go ahead and jump in. So, Randy, as I read your bio, you don’t have a healthcare background initially, so what drove you into healthcare from the airline industry? It must be an interesting story there. [laughter] Randy: Yeah, when I got out of school, I went to work for the airlines, and the airlines had a ton of numbers, kind of like healthcare, I guess. And it had some of the same profile: it had a lot of employees in order to run an airline, a lot of capital, and a lot of regulation, things you will also find in healthcare. And in order for us to survive in the airline industry – at that time, it was American Airlines – we had to lower our cost. There was no other mandate other than to lower our cost, and we had to do that by eliminating work that we didn’t really have to do, minimizing the necessary work, centralizing it so that we could then really get a good perspective on it, and then eventually automating it. As I experienced healthcare through my own daughter’s long-term stay in a hospital, I realized there were some of the same opportunities that existed in the airline that there is in healthcare, so some Stanford students and I launched a venture to go find out ways to make things more efficient and easier, particularly for nurses and pharmacies to do their jobs with less cost. I mean, what was ingrained with that thought process when I entered the airline is it’s great to think about soft costs, but you’ve got to save hard dollars when you come up with new technology and new automation, and so that’s always been on the front of my mind in the way I think and we move the company forward. Kelly: I love that story. I mean, it’s just so interesting that you’re kind of sharing those commonalities between two industries that we wouldn’t think have anything in common but seemingly do. With U.S. healthcare spending nearing $5 trillion, where do hospitals have the biggest untapped opportunity to reduce costs within medication management? Randy: Well, that is a great question, and medication management is really the– it’s a tale of two cities, right? One, it’s the cost side, particularly on inpatient, and the other side, of course, is the revenue opportunity or the earnings opportunity that you have with the outpatient side. And so, a good organization must take advantage of both of those, so let me just cover those. On the inpatient side where everything is a cost, it’s really important to eliminate unnecessary work. And this is clearly seen as you see the consolidation of providers and hospitals and sites, that there’s duplicate work done at these sites. So, first step, eliminate unnecessary work, and then minimize the necessary work. The things that you have to do, be sure that you don’t do– that you do them, but that you don’t exaggerate them. And here’s the key. And many of these organizations have already figured this out. You then centralize it. You bring that critical work that you’ve minimized into a central location. There you have the expertise, you have the enterprise mindset, and you can make better decisions because you’re not looking at an individual basis, but as an enterprise, and then you create standards and roll those out. And then of course, the final step is after you centralize, you automate. Then now you’re automating the processes that you centralize and really understand well. And we begin to see this happen with these consolidated service centers where hospitals with 20, 30, 40, 50 hospitals move their medication management process to a central site that’s automated, reducing headcount and processes at individual locations so that the deliveries can be done once a day at these sites through technology like ours, automated dispensing, and really reduce the burden and the need to run full out pharmacies at every location. This is a huge savings in terms of inventory cost, huge savings in terms of people cost, and probably more importantly, it allows you to execute to a standard. Everybody’s running the same way and reducing the variance by which you run, and it can be measured. And so that opportunity is there. We’re starting to see the industry take more steps on that side, and it’s a game changer. The amount of savings we’ve seen in some cases has been a third of the total cost of onsite inventory, reduction in over half of wasted products, the reduction of shortages, which takes people and time to cover are reduced because you’re now managing those shortages from a central location. It’s just been a beautiful thing to watch and makes a lot of sense. But it’s a strategic move. It’s an investment, but it has very hard returns. And it is a scalable way to grow as well as you acquire more assets, whether they’re inpatient or outpatient. Servicing them from a centrally consolidated service center makes a lot of sense, and makes the scaling and tracking of those costs, and understanding what those costs will be as you scale, easy to understand. Now the same thing is somewhat true on specialty. Today, we have crossed the threshold. Over half the drug spend in the United States now is specialty pharmacy. And 25% of that drug spend– as we go into ’26 and ’27, 25% of that specialty drug spend will be spent on outpatient infusion centers. In other words, a provider has to execute the delivery of that medication management. And if that’s true, then that’s an opportunity for these hospital and providers to gain and garner lots of revenue. You have to be an expert in those types of infusion outpatient situations. They’re new drugs, new protocols. They’re not easy to ontake. You have to get alignment with the manufacturer and the payer to do those, but those represent significant revenue and earnings opportunities for all systems and optimizing that. A lot of systems do have those, but the amount of influx of new opportunities in the next even 24 months is significant, and you don’t want to miss out on those because it’s revenue that should be in your P&L because they’re your patients, they’re passing through your hands, and it just makes sense for you to manage those specialty drugs. Now, on the other side of, of course, the specialty drug management is the 340B. We continue to see a lot of changes, or small changes, in 340B and reimbursement, and you’ve got to keep up with those 340B changes are, but it is still a profitable program that you need to be executing in your institutions. And many of the institutions we see are doing a great job executing the 340B program, but there’s still another 10 or 20% they’re missing out on just because of the changes and the dynamic nature of these 340B reimbursements. So, you’ve got to be able to take advantage of the outpatient specialty pharmacy and outpatient mail order pharmacy opportunities, and you’ve got to be able to consolidate in the inpatient area in order to automate and centralize and minimize and eliminate the workload so that it turns out to be a beautiful picture. Now, what we’re starting to see is that in some situations, institutions are putting their outpatient pharmacy and their inpatient pharmacy in the consolidation center together. In other words, they’re utilizing the space to both manage inpatient and outpatient. And one area that has been sort of poorly managed is clinics or ambulatory care sites, which are under the responsibility of the provider pharmacy in many cases, but there hasn’t been the tools or the technology to manage medication management out at these distant spaces that use a few drugs, maybe expensive, but don’t use a lot of drugs. And with the new technologies that we have and that are in the marketplace, suddenly these become part of th...