This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog. I’m speaking today with Carla Corkern. She is chairman and CEO of Talyst. Carla, thanks for being with me today.
Carla: Hello. Thanks for having me.
David: Tell me a little bit about Talyst. What does the company do?
Carla: Well Talyst is a really interesting company. We have hardware and software solutions. We use the tag line: “Engineering, the safer pharmacy.” So it’s hardware and software systems that work together to allow pharmacies to increase patient safety. We’ve supplied solutions across multiple markets. We are primarily in hospital markets, where we’ve been active for about six years. In the last couple of years we’ve extended that into long term care and to correctional facilities.
David: Tell me about some of these non-traditional places like long-term care and corrections. What does the system look like for a customer and what is Talyst’s role?
Carla: In the non-traditional setting we work with pharmacy to extend their reach. The pharmacy still does the clinical work; making sure the medication that’s prescribed is appropriate for the patients’ condition. But instead of dispensing and actually touching the medication, the medication is dispensed from a packaging machine.
If you’ve gone into any 7-11 store and seen the vitamin packs that have multi dose of what you’re supposed to take that day, it’s just like that, but instead of vitamins it’s medication that’s been prescribed for use for that time and that day. They’re usually printed with the patients’ name and all the medications to be given to the patient as well as sometimes a bar code or a time of delivery to allow the nurse –who is usually the one who is delivering the medication– to do a final check. That’s different than the traditional way of handling it in the settings were they’ll have multiple systems like a blister card or maybe a vial or lots of different things where the nurses will have to handle each pill to prep the patient’s med pack. Because the machine does the preparation and on demand packaging, you have a lot less time used by the nurses as well as a lot less opportunity for error.
David: Is it a totally new system or can people work with their existing pharmacies and existing distributors and so on?
Carla: We actually try to be completely distributor independent, even in our hospitals. We’re one of the few technologies in the pharmaceutical automation business. We work with your existing supplier so it’s really just a new way of dispensing. We put the system in and the people who deliver your drugs still deliver your drugs and the people who manage your patient care still manage your patient care. It’s just a new way of counting pills and sealing them for patient delivery.
David: Is there anybody who gets cut out of the loop, who feels like they’ve lost out when the Talyst system is put in?
Carla: You know we haven’t really found that that’s a problem, although there is one thing that we’re working on right now like that. We’re working on the way that Medicare Part D does reimbursement payments for pharmacies. It creates waste because they prepay 30 days in advance for a prescription and if you’re dispensing on demand, someone may not take an entire 30 days and so for the pharmacies to do proper billing they have to do what’s called post consumption billing. They have to wait to the end of the month and say Carla Corkern only took 15 drugs so we’ll only bill 15. Although that doesn’t really take any money out of the pharmacy’s pocket, it does create a billing issue because they can’t bill until the end of the month instead of the beginning of the month. So we’ve been working with CMS and also talking to some of the regulatory agencies about how the system is really not set up to allow this to be good for the pharmacists. Making this work for everybody is a good goal of Talyst.
David: You mentioned that there is some labor savings and greater efficiency and billing opportunities from the system. I wonder: how does that vary if you’re dealing with a prison compared to a nursing home.
Carla: The savings are actually similar in terms of the whole savings and the actual medication waste savings. What you have in prison systems is they’re all single payer systems. So even if you’re a prisoner who, on the outside would be eligible for Medicare or Medicaid you won’t be able to receive that benefit if you’ve been incarcerated. Neither is your private insurance any good if you’re incarcerated so it is a true, single payer system. Part of what we see in the single payer systems like prisons is that the saving are actually much greater because the payment process is more of a consumption payment. So if the patient only needs 15 pills and the patient is only given the 15 pills, usually the government only pays for 15 pills. The other thing you have in the prison system is you have a lot of movement. You have a lot of patients who are moved around between different facilities or a lot of people who are picked up in a jail system and maybe even released on bail or bond, so you have a lot more waste in that system than you have in long term care where 60% – 70% of your patients are stable on maintenance medication. Now once you get into the federal or state prisons where people are going to be in for a long time their medications seem to be more stable, but in the jail system where people are picked up and bailed out, moved into different levels of care or different levels of security, you have a real problem with medication waste. So an interesting thing that I’ve learned about the prison system since I started working with Talyst is just how much movement there is in the county jail systems.
David: One of the things that’s clear about any business or government in the U.S. is that health care has a big impact, so I’m not surprised that medication costs can be an issue in the prison system. Is it something that they’ve actually recognized as an issue, or is there a lot of education that you have to do to bring people up to speed?
Carla: I think we have to bring people up to speed on the issue, but they usually do understand that they are wasting a lot of medication because a lot of times they have to pay for the wasted medication or to have someone take it away. There is a destruction cost for the medication. We got involved with a prison system out in California that grew out of a hospital relationship that we had with the regional medical center. They were a hospital that used our products and needed to service the county jail and were able to put in our system. They did really good pre and post data for how much it cost in medication before in time and how much it cost them after. They did that because they had to go to their county board of supervisors to justify the expense and they had an ROI that took less than a year, which is amazing considering the price they ended up having to pay. They put 14 systems into 14 different locations, but because they were able to have the highly qualified pharmacy staff at Arrowhead Regional Medical Center work with the medical directors of the prison, they’ve been able to dramatically reduce costs and increase patient care and also free up a lot of nursing time.
When you talk about freeing up nursing time a lot of people think you’re talking about reducing jobs, but in this case the nurses at San Bernardino County are able to be re-tasked into a wound care program. That’s been a huge success for them and has led to better patient health in the San Bernardino County Correctional Facilities. What we find with county governments is that you do some education, but once one of them has gone through this whole study, shown the demographics and what they’ve been able to save, we’ve really seen an outgrowth in that.
A lot of our hospital customers have been really interested in this. Dallas County jail is served by Parkland Hospital, which has been a Talyst customer for four or five years. When they heard about San Bernardino County they said: “Why didn’t you sell us this for our jail?” And we said: “Well, we’d be happy to!” I think what you see is the word gets out. The prison community is actually a pretty small market and everybody is looking at how to provide better care and save money, especially now with county governments being so strapped for finances.
David: I’m sure it varies a lot, but what’s a typical cost of the system for a prison or for a long term care facility?
Carla: We have a lot of different models for that. We find that some of them like to buy capital and some like to rent a system, but they’re usually about $100,000 or $150,000 to put one of the systems in. It can go up to $250,000, but probably not much higher than that. We do have some customers who want to buy capital equipment, but a lot of them take advantage of our leasing program. So as their saving every month, they’re offsetting their medication costs with these payments.
David: What other parts of the business model are there? Are there ongoing or monthly transaction fees?
Carla: We don’t have any transactional fees. We do sell service and support contracts and we also have the packaging systems that we put on site in nursing homes and prisons. There are consumable products. There is a special paper that gets printed on one side that is heat sensitive and you can make a pack and imprint a barcode and patient name right before the dispense. That’s a special product that you have to buy directly from us. So the business model is a piece of hardware equipment and service and support and the consumables product, but we don’t have any transaction fees on our consumable products. We find that customers really don’t like to be nickeled and dimed, so we tried to create all-in-one offerings so you can get all of those things rolled up together into a single payment.
David: I can imagine how that could definitely appeal.
Carla: Although I’d love to figure out how to do a transaction fee, I’m not sure that my customers would really go for that.
David: Probably the consumables approach is the next best thing.
Carla: Right because if you’re servicing 1000 patients versus 2500 people obviously it takes more paper and ribbons.
David: What would be a typical percentage of an institution’s medication needs that you could handle with the system? I imagine it could handle a lot, but there are probably some drugs that are just rarely prescribed and maybe there are some that don’t make sense to have within the system itself or can’t be stored there.
Carla: In the remote dispensing application, we strive to get between 85% and 90% of the medication on site, and we’ve been looking at some ways to extend that. In a hospital we can actually control 100% of the medication and we believe that we can take some of the things that we’ve learned in the hospital market and take over 100% of the medication dispensing in the nursing homes and prisons. So far there is such a benefit in just managing the 85% to 90% in fast moving oral solid medications that our customers see enough benefits moving forward without us providing 100%. In hospitals there is a different system where people are using our Auto Pharm product to manage all of their inventory automatically at the nursing stations on the floor; a little bit more of a complicated model than some of the models that we put out in other markets.
David: You described how there is a big cost savings from using the Talyst system, but I’m wondering beyond that, are there other ways that you would see the company playing into the overall health care reform debate?
Carla: The company has the ability to save Medicare a lot of money in the way that billing is handled. I was describing a little of that before. There are a lot of costs in the Medicare system on taking medication back and making sure that medication is disposed of properly. There are a lot of issues about how to properly dispose of controlled substances. I think a lot of the cost of care can be reduced by on-demand or just-in -time packaging with medication. I wrote a blog about this where we pulled out a fairly conservative number of being able to save $500 million just from reducing the medication waste in part D.
It seems like a huge number to me and to you, but the number of patients who are on Part D who are in long-term care facilities is only about 4% of the Medicare Part D budget! Health care reform has a lot in it to reduce cost and waste in the system, but the system wasn’t really designed to take advantage of that.
So it’s one of those things where there is so much going on right now around the health care reform debate. We have something fairly meaningful to say about electronic health records and tracking the medication all the way from wholesale to the bedside, but we’re really trying to pick one or two issues that we can really attach a monetary value to. There are a lot of different touch points that we could have, but we’ve tried to keep our message fairly clear.
David: That ties into my last question. I notice in reading your bio that your experience is mainly in the high tech and supply chain areas. I’m wondering what your impression is of health care now having been in it for a while.
Carla: Being at Talyst has been so illuminating for me as to how health care has not been able to take advantage of a lot of the things that have happened in technology. I think hospitals and especially long term care systems have just really seen the role of the caregiver not enabled by technology like you’ve seen other jobs enabled by technology. It’s sad because we have very smart people who understand how technology can help their lives and when technology is available they’re able to dramatically increase safety and patient care.
It’s not like some other areas where you don’t have users who are technologically savvy. These are people who have iPhones and Blackberries and understand how to do all this research on their own. They have fairly sophisticated lab equipment but for some reason the industry has just never brought these things to health care.
We’ve really taken a very neutral approach into the market. Whatever your pharmacy is Talyst can come in and help you link those systems together. You go in and take a look at what’s there and then you have to work with the customer to knit everything together into the kind of solution that they would like to provide. It is surprising to me that there are not more technology products focused on that area.
You have a lot of physicians in private practice and small clinics. Once you get into the larger hospitals –some of our customers like the Mayo Clinic and the Cleveland Clinic– you don’t really come into a place where there are strong IT people who are working directly with the health care providers to provide information to them.
David: I’ve been speaking with Carla Corkern. She is chairman and CEO of Talyst. Carla, thanks very much for your time.
Carla: Thank you for having me.August 4, 2009