What Finance Actually Wants in a Consolidated Service Center Business Case
A pharmacy executive whose health system had just opened a consolidated service center described the reaction in finance: “We just opened our consolidated services center this month, and finance is shocked that we had to buy a couple million dollars extra in drugs.”
At CPES, the Council of Pharmacy Executives and Suppliers, senior pharmacy executives named building the business case as the main barrier to centralizing. The comment above came at MUIA, the Med Use Intelligence and Automation track within CPES. Tecsys presented at both events in Nashville this October, and the discussions pointed to three questions a proposal must answer: where the returns come from, how much capital the transition requires and how performance will be measured after launch.
The savings that finance will count
CPES executives drew a sharp line between “real cash” and cost avoidance. One explained why: “Cost avoidance is a one-time thing, because then it’s already in the run rate.” Reducing existing spend lowers the run rate, while avoiding a future cost leaves today’s spend where it is.
One executive whose system already operates a consolidated model said it began with purchasing and “NDC standardization across the health system,” which became the biggest value driver. Another, who does not yet have a consolidated service center, said their organization would be interested in low unit of measure repackaging “if I can get enough of the ROI to be able to do it.”
Capital sits in satellite locations too. Executives described staff at those sites holding expensive drugs out of fear of a stockout. That stock ties up money, so a model has to quantify its value, how much can come out and the replenishment needed to keep it out.
Purchasing efficiencies and repackaging can reduce operating costs, while pulling excess stock out of satellites frees working capital. Both strengthen the case but affect finances differently, so the model should keep them separate.
The costs that finance will examine
The opening purchase comes first. A new facility can require inventory on its shelves before stock at the sites is redistributed or reduced, so a credible case shows the working capital required, separates one-time from recurring costs and shows when savings arrive.
Labor belongs in the case too. CPES executives described reallocating staff after centralizing as one of the more difficult parts, because the buyers at each site had worn multiple hats, so savings do not always equal an eliminated position. A strong case separates real reductions in labor expense from avoided hiring and from capacity redirected to other work.
Scrutiny from finance continues after approval. MUIA attendees described being “caught flat-footed at the end of the month” and wanted mid-month financial data to address problems “before it gets too late.” A business case that names the indicators finance will track after go-live, each with a starting baseline, lets the pharmacy team report progress while there is still time to adjust.
The case works best when it starts from the health system’s own numbers. One CPES executive asked for a partner: “I want you guys to help me develop that business case. I’ll give you what my inventory is, but this is the value add that we think we could do.” Finance is not the only reviewer. CPES executives said a strong return on investment case also needs early buy-in from IT, compliance and legal.
Pharmacy leaders can benchmark current operations first. Tecsys’ playbook, How Leading Health Systems Are Operating Pharmacy at Scale, includes a maturity model, five priorities for action, a readiness self-assessment and a 90-day action plan.