Business Case for Upgrading Pharmacy Capacity in Hospital

This business case proposes the upgradation of the existing pharmacy of the hospital to ensure the appropriate supply of all the requisite medicine to the patients of the hospital. The proposal aims to meet the ever-increasing footprint of the patients in the hospital and increase revenue generation. The benefits include efficiency gains, potential savings/increased costs, and increased revenue potential. The risks include financial risk, delegation levels, procurement, patients, and insurances. The process involves recognising the cost involved, recognising the suppliers, and establishing a committee. The financial considerations include total net cost, cost centre, source of funding, resource requirements, recurrent costs, revenue potential, and cost reduction.

[Region]
Local Health District
[Insert name] Business Case
May 2017
Unnamed LHD Business Case version 2 29/08/2024 pg. 1

Contact details (key contact)
Department:
Name:
Position:
Telephone
Email:
No sections should be deleted, but deemed not applicable insert N/A.
Unnamed LHD Business Case version 2 29/08/2024 pg. 2

Contents
CONTACT DETAILS (KEY CONTACT)------------------------------------------------------------------------2
INTRODUCTION------------------------------------------------------------------------------------------------------4
THE PROPOSAL-----------------------------------------------------------------------------------------------------4
RISKS--------------------------------------------------------------------------------------------------------------------5
PROCESS--------------------------------------------------------------------------------------------------------------5
RESOURCES----------------------------------------------------------------------------------------------------------6
RESOURCE DETAILS----------------------------------------------------------------------------------------------6
REPORTING OF OUTCOMES------------------------------------------------------------------------------------6
FINANCIAL INFORMATION---------------------------------------------------------------------------------------6
OPTIONS----------------------------------------------------------------------------------------------------------------8
INTELLECTUAL PROPERTY-------------------------------------------------------------------------------------8
OTHER IMPLICATIONS--------------------------------------------------------------------------------------------8
IMPLEMENTATION PROCESS-----------------------------------------------------------------------------------8
IMPLEMENTATION PLAN-----------------------------------------------------------------------------------------9
SUPPORTING DOCUMENTATION------------------------------------------------------------------------------9
Sign Off by Executive----------------------------------------------------------------------------------------------- 10
Unnamed LHD Business Case version 2 29/08/2024 pg. 3

Introduction
Outline
The proposal that has been presented for consideration is regarding the up gradation of the existing
pharmacy of the hospital. The main purpose of this is to ensure the appropriate supply of all the requisite
medicine to the patients of the hospital.
Immense value creation will take place in respect of LHD. The reason being that a significant issue
related to the public health is being addressed by the hospital (Todini et al., 2018).
The main reason for the implementation and the commencement of the proposal is that the number of
patients in the last few years have increased dramatically. The present capacity of the pharmacy in
respect of keeping stock of medicine and other related supplies is not adequate for meeting the
demands of the increasing patient numbers (Getzen, 2016).
Background
Provide background information to this business case, in order that the reader can clearly understand
the reasoning and purpose of same. It should look to include an outline of any current processes/costs,
contracts, equipment and impact at the local as well as LHD level, as applicable. Include any date(s)
when any contract expires, as applicable (O'Neill & Ensle, 2015).
Please ensure you demonstrate consultation having been undertaken with relevant departments,
facilities, etc across the LHD and/or other external bodies as appropriate. Also, include any trial/research
information and or experiences from other LHDs in this background information if it is deemed relevant to
the business case.
in the recent times it is observed that the number of patients that are availing the facility of the pharmacy
of the hospital has increased significantly. The present capacity of the pharmacy of the hospital doesn’t
have adequate stock of the medicine to cater to the needs of all the patients effectively and efficiently.
Hence it is immediately required that the capacity of the pharmacy is increased significantly (Wright et
al., 2015).
The proposal has been brought forward after due consultation with the officials of the LHD and the
management of the hospital. All of them have unanimously opined that it is the need of the hour to
improve the present capacity of the pharmacy of the company.
The Proposal
The proposal that has been suggested in this case is that the capacity of the pharmacy has to be
increased immediately. The reason for this is the increase in the amount of patients that the company
was registering in the last few years. Hence the current capacity of the pharmacy has to be increased
significantly to meet up with the growing demand (Wright, 2017).
Aims
The main purpose of rolling out the proposal of increasing the capacity of the pharmacy is to meet the
ever increasing footprint of the patients in the hospital. The revenue that is being generated by the
Unnamed LHD Business Case version 2 29/08/2024 pg. 4

hospital by way of selling medicine will increase significantly. In addition to that the value that is added in
respect of the patients of the hospital will increase significantly (Verguet et al., 2015). The reason being
that the prescription provided by the doctors must be followed by the patients of the hospitals and the
medicine prescribed by the doctors must be available in the hospital at all times.
Benefits
 Efficiency gains
It is well known that one of the most significant part of any hospital is the pharmacy that is operated by it.
The reason being that if the medicine according to the prescription of the doctor is not available in the
hospital the patient will not be able to effectively and efficiently utilise the treatment that is done by the
doctors. Hence the efficiency with which the treatment of the patient is conducted by the hospital or the
efficiency with which the services are being provided to the patients will improve significantly (Goodchild
et al., 2016).
 Potential savings/increased costs
The hospital will have to incur increased amount of capital expenditure for the purpose of extension of
the capacity of the pharmacy. In addition to that the hospital will have to incur expenditure in respect of
the acquisition of the latest medicine that are available in the market and are also being prescribed by
the doctors of the hospital (Greer, 2015). The hospital will also have to increase the expenditure in
respect of the hiring of new pharmacist and assistant for helping him.
 Term of proposal
The proposal will take a time of around 3-4 months for getting completed. The reason being that after the
construction work related to the extension of the capacity is completed, other amenities like the supply of
electricity, water and waste disposal will also be installed and commenced (Lewis et al., 2016).
 Rebates/revenue potential
After the completion of the proposed extension of the capacity of the pharmacy of the hospital the
revenue of the hospital will increase significantly. The reason for this is that with the increase in the
capacity of the pharmacy the availability of the latest medicine will also increase significantly. This will
result in increase in the sale of the medicine by the hospital and will increase the revenue that is
generated by it in this respect.
 What are the expected benefits of this proposal?
Factor Benefits
Patients The highest amount of benefit will accrue in respect of the patients of the hospital. The
reason for that being that previously the patients of the company were not able to get the
due medicine on time. Because of that timely and effective treatment was not delivered
to them. With the increase capacity of the pharmacy and the increased availability of the
latest and the prescribed medicine the patients will be able to garner all round benefit
from the hospital.
Facility With the increase in the capacity of the pharmacy the portfolio of the facilities that are
Unnamed LHD Business Case version 2 29/08/2024 pg. 5

being provided by the hospital in respect of the patients will improve significantly. This
will result in the overall development of the facility of the hospital.
Clinicians The clinicians of the hospital will be able to better manage the inventor held by them. The
increased space would enable them to rearrange the medicines in the most appropriate
manner. The knowledge base of the clinicians will also improve. The reason being that
with the advent of the new medicines in the inventory of the pharmacy the clinician must
be better equipped with knowledge to deal with the same. They must be aware about the
usage of those drugs along with the place they are kept and the condition in which they
are should be kept or stored in (Millward, 2017).
Other One of the other benefits other than the above mentioned ones in respect fo the
company will be that the reputation of the company will improves significantly because of
the increased availability of medicine. This will ensure that the hospital is able to register
increased customer footprint.
Risks
Risk Issue Severity code as
per MoH Risk
Impact Mitigation Plan Notes
Financial risk The risk is high in
respect of the
financial needs.
The reason being
that the capital
expenditure that is
incurred by the
company will
increase the burden
of repayment of the
amount collected as
loan from outside
by the hospital.
This will
increase the
fixed cost of the
hospital. The
reason being
that the
company will
have to incur
fixed costs such
as rent and
interest
payment.
The hospital must
ensure that it
collects or manages
the large portion of
the capital
requirement by itself.
The reason being
that it will reduce the
financial risk of the
entity.
The lesser the
financial obligation,
the better will be for
the hospital.
Delegation levels The risk is low. The
reason being that
the decision related
to the acquisition
will be done after
the consultation
between the
pharmacist and the
doctors of the
hospital.
The concise
decision taken
by the
pharmacist and
the doctors will
enable the best
way of
procurement of
the medicine.
The communication
must be effective
and efficient.
The better quality of
communication
between the doctors
and the pharmacist
will result in efficient
stock maintenance
by the pharmacy.
Unnamed LHD Business Case version 2 29/08/2024 pg. 6

Risk Issue Severity code as
per MoH Risk
Impact Mitigation Plan Notes
Procurement The risk is high as
he suppliers have
to be properly
analysed alongwith
the stock
Medicine is very
sensitive itme
and hence in
case of any
default on the
part of the
hospital can
lead to an
adverse effect
on its reputation.
The company must
ensure the
authenticity of the
medicine acquired
and supplier
properly
The quality of the
medicine provided is
very important.
Patients Risk is very low The patients will
be benefitted
Hospital must
ensure the delivery
of the right kind and
quality of medicine.
Satisfaction of he
patients is the most
important objective
of the hospital.
Insurances The hospital will
have to insure the
new pharmacy
The insurance is
important
especially in
event of an
accident.
Cheaper and the
better insurance
package must be
adopted
Proper insurance
will reduce the loss
of the hospital in
case of an accident.
Process
For the purpose of implementation of the same some sequential steps will have to be undertaken. The
first step will be to recognise the cost that is involved. The second step will be to recognise the suppliers
who will be able to provide the right kind of medicine, the third step will be to establish a committee that
will look after the successful implementation and commencement of the proposal (Choonara et al.,
2017). The team will be comprised of doctors and the pharmacist charged with the responsibility of the
new pharmacy.
Resources
Some of the additional requirements for the proposal are as follows:
a) Staff at the pharmacy
b) Lead pharmacist
c) Counter medicine
d) Drugs by prescription.
e) Electricity charges and
f) Water supply.
Unnamed LHD Business Case version 2 29/08/2024 pg. 7

Resource Details
 Training and support
Does this proposal require any training or support to be untaken by staff? Indicate who will provide any
such training and support and who will be the recipients.
The proposal will require training and support to be given to the existing and the new pharmacists who
will be acquired for the extended pharmacy. The reason being that the range of the medicine that is
being provided by the hospital will increase significantly. Due to this the knowledge of the staff needs to
be upgrade. The training will be provided by the doctors of the hospital and the recipients will be the
pharmacist and the attendant (Frenk, 2016).
 FTE requirements and costs
Very few full time employees will be needed. The full tiem employee will mainly be constituted by the
pharmacist of the hospital.
Reporting of outcomes
A committee will be formed comprising of doctors and pharmacist that will take care of the costs that are
being undertaken in respect of the functioning of the pharmacy. The reports and the supporting
documents will be maintained by the pharmacist and the same will be reviewed by the committee every
month.
Financial Information
The financial considerations for this proposal will be required in detail
 Total net cost of this proposal shown as total net cost = total cost minus any revenue
the total cost that is to be incurred for this proposal is equal to $1305075.
 List the Cost Centre(s)
The cost centre that is going to be used for this proposal is the pharmacy that is being operate by the
hospital.
 Source of funding
The sources of the finance of the proposal will include banks, financial institutions and the money that is
received from various charitable trusts and donations from people and entities across the country.
 Resource requirements (Set up)
The set up costs of the new pharmacy will include the costs related to the construction of the
pharmacy and the cost of hiring and employing additional staffs for operating it. Other costs will
include the installation of the connection of electricity, water supply and waste disposal (Kaiser et al.,
2016).
 Recurrent costs
Unnamed LHD Business Case version 2 29/08/2024 pg. 8

There are recurrent costs that are going to be incurred by the hospital. These costs are to be incurred in
respect of the implementation and commencement of the extension of the pharmacy includes electricity
supply, water supply and the salary that is paid to the pharmacist of the pharmacy of the hospital.
 Identify revenue potential
Are there any opportunities for revenue from this proposal? Has the option for revenue been discussed
with NBMLHD Strategic Revenue?
The possibility of revenue generation is immense as the availability of the medicine will increase with the
hospital. This will result in increased sale of the same and result in higher revenue generation on the part
of the company (Dalton & Holland, 2017).
 Cost reduction
In the current case the hospital will be able to reduce the cost that is incurred by it in respect of stock
out cost. This means that the loss that is beared by it due to non-availability of the requisite stock in
the pharmacy of the hospital (Dalton & Holland, 2017).
 What are the proposed costs over the life of this proposal?
Insert a spreadsheet (labelled as attachment two) listing all the full life cycle costs of this proposal
including any disposal implications.
There are several costs that are going to be incurred by the entity including depreciation, electricity and
the salary of the staff etc.
 Offset costs and other factors
Compared the current process and costs with the new proposed process and costs in the table below -
as applicable
Current process
Existing
process step
1
Action step
2
Action step
3
Action step
4
Action step
5
Action step
6
The patient
visits the
doctor
Prescription
regarding
normal
medicine is
prescribed
The same is
submitted to
pharmacy
The
pharmacist
checks for
availability
If available
the same is
provided to
the patient
The record of
the same is
inserted in
the system.
New process
New Process
step 1
Action
Step 2
Action
Step 3
Action
Step 4
Other steps Other steps
Specialised
prescription is
made for
The record is
maintained
regarding the
On a given
date the
medicine is
An
intimidation is
sent to the
Unnamed LHD Business Case version 2 29/08/2024 pg. 9

monthly
patients.
patients
monthly quota
of medicine.
packed and
kept ready for
collection by
the customer
patient and
the same is
delivered to
him on
affirmation.
Options
What are the options for this proposal? List the implications if status quo was continued followed by the
most preferred option first, followed by subsequent and less favoured options. Eg best method to
achieve a value for money outcome
Options List implications List net cost
position
Comments
Keep operating the
existing pharmacy
This will increase the
rush of the customer
Regular cost will
reduce but will
incur huge stock
out cost
Not good for the future viability
of the hospital.
Operate two new
counters for emergency
patient and patient who
require monthly quota
of medicine.
This will reduce the
rush of the customer as
the medicine that is
supplied by the
pharmacy will be
segregated into
specialized
departments.
The cost incurred
in respect of the
stock out cost will
reduce
significantly but
cost of operation
will increase.
Most significant option.
Open counter for the
emergency patient only
This will reduce the rush
to some extent.
The cost of
operation will
increase slightly.
Good for the optimization of
operation of the pharmacy of
the hospital.
Open another same
type of existing
pharmacy
This will not be able to
reduce the rush
appropriately.
Cost of operation
will remain
unaffected
Immaterial.
Any other options
Unnamed LHD Business Case version 2 29/08/2024 pg. 10

Intellectual Property
No intellectual property is being acquired under this proposal.
Other implications
The hospital must ensure that proper tender is made applicable for the purpose of selection of the
supplier of the medicine to the hospital.
Implementation Process
.
Option No. Benefit Risk Comments
1 Construct a
new pharmacy
from the scratch.
This will be as
per the
requirement of
the hospital
The time and money required
will be very high.
Suitable as per the
current demand
2 Buy a new
area for the
pharmacy
Time of
construction will
be saved
Proper location may not be
found near to the hospital.
Not very suitable.
Implementation Plan
What are the steps that need to be undertaken to achieve the rollout of this business case? It needs to
include the full life cycle of the process/procurement implementation being proposed. It should also
consider whether a policy or procedure needs to be written or updated? Undertake a tender process as
applicable. Contract management plan needs to be developed as applicable
ACTION PROPOSED
DATE
PROPOSED
OUTCOME OR
COMMENT
FOLLOW-UP RESPONSIBILITY
First action required Date Name of responsible
officer(s)
The ascertainment of
the costs required
1-01-2018 The various items
that are going to
contribute to costs
are identified
Efforts made to
reduce the same
Cost manager
The identification of
supplier
3-01-18 The supplier is
identified with the
proof of his
authenticity
The order is
placed
Pharmacist
Unnamed LHD Business Case version 2 29/08/2024 pg. 11

ACTION PROPOSED
DATE
PROPOSED
OUTCOME OR
COMMENT
FOLLOW-UP RESPONSIBILITY
Construction begins 6-01-18 The construction
will get completed
in 4 moths time.
The funds
required for it is
managed
Committee that has
been set up.
Supporting documentation
Attached is my supporting documentation in relation to this business case. These can include links to
any directives, research, policies, survey/questionnaire and/or financial documents.
Project owner:
(insert name)
Signature: Date:
Sign Off by Executive
Insert line manager:
(insert name)
Signature: Date:
General Manager /Director:
(insert name)
Signature: Date:
Director Finance Business
Information:
(insert name)
Signature: Date:
Chief Executive Officer
NBMLHD:
(insert name)
Signature: Date:
Unnamed LHD Business Case version 2 29/08/2024 pg. 12

Attachment 1 Process flow chart for NBMLHD (use a spreadsheet as required outlining
each action and the steps required to complete the action)
Unnamed LHD Business Case version 2 29/08/2024 pg. 13
Searching for the supplier who is capable of providing authentic and specialised medicine at the right
time to the hospital.
Establishment of the committee comprised of doctors and pharmacists who will overlook and monitor
the process of construction of the new dispensary
Commencement of the construction of the new pharmacy and with extended stock capacity.

Attachment 2 Financial report – total life costs for the proposal
Unnamed LHD Business Case version 2 29/08/2024 pg. 14

Referencing
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and leadership development in health systems: lessons from a district finance team in South
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Dalton, C. M., & Holland, S. B. (2017). Why Do Firms Use Insurance to Fund Worker Health Benefits?
The Role of Corporate Finance. Journal of Risk and Insurance.
Frenk, J. (2016). Finance and governance: Critical challenges for the next who director-general.
Getzen, T. E. (2016). A stairway to health finance built with books by Louis Gapenski. Journal of Health
Care Finance, 43(2).
Goodchild, M., Perucic, A. M., & Nargis, N. (2016). Modelling the impact of raising tobacco taxes on
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Greer, S. L. (2015). Reflecting on'The 2010 US health care reform: approaching and avoiding how other
countries finance health care'. Health Economics, Policy and Law, 10(4), 473.
Kaiser, K., Bredenkamp, C., & Iglesias, R. (2016). Sin Tax Reform in the Philippines: Transforming
Public Finance, Health, and Governance for More Inclusive Development. Directions in
Development—Countries and Regions. Washington, DC: World Bank. Available at:
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Millward, R. (2017). Urban government, finance and public health in Victorian Britain. In Urban
Governance (pp. 47-68). Routledge.
Unnamed LHD Business Case version 2 29/08/2024 pg. 15

O'Neill, B., & Ensle, K. (2015). Personal Health and Finance Quiz&58; A Tool for Outreach, Research,
and Evaluation. Journal of Human Sciences and Extension, 3(1), 149-149.
Todini, N., Hammett, T. M., & Fryatt, B. (2018). Integrating HIV/AIDS in Vietnam's Social Health
Insurance Scheme: Experience and Lessons from the Health Finance and Governance Project,
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Verguet, S., Laxminarayan, R., & Jamison, D. T. (2015). Universal public finance of tuberculosis
treatment in India: an extended cost‐effectiveness analysis. Health economics, 24(3), 318-332.
Wright, J. (2017). The link between provider payment and quality of maternal health services: a
framework and literature review.
Wright, J., Bhuwanee, K., Patel, F., Holtz, J., van Bastelaer, T., & Eichler, R. (2017). Financing of
universal health coverage and family planning: a multi-regional landscape study and analysis of
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Unnamed LHD Business Case version 2 29/08/2024 pg. 16