Labor Cost Visualization at Carescript: An Introductory Data Analytics

Case for Management Accounting

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Introduction

July $18,2019,$ was sure to be another late night for Maria P$$rez$,$ PharmD, MBA. She was

hired two years ago as the pharmacy manager for Carescript, a family$-$owned, independent

pharmacy located in Texas, and tomorrow was the annual shareholders$$ meeting. The family had

charged Dr$.$ P$$rez with controlling the pharmacy$$s labor costs, which had spiraled upward after a

period of growth. The family had given Dr$.$ P$$rez two years to show results, and she had

launched several new initiatives. June$$s labor costs were now finalized, and Dr$.$ P$$rez was

preparing to analyze the data to determine whether her efforts had succeeded. The stakes were

high, as Dr$.$ P$$rez$$s reputation$$and potentially her job$$were on the line. She made another cup

of coffee and reflected on her experiences in her role so far.

Background of Carescript

John Rogers, PharmD, founded Carescript in $1986$ in his hometown of Manor, Texas. At

the time, Manor was a rural community of approximately $1,000$ people. It has since experienced

dramatic population growth, which has mirrored that of the neighboring metropolis Austin. Now

the community is primarily suburban with a population of approximately $19,000.$ After Walmart,

Carescript is the second leading pharmacy in the area. The pharmacy is open from $9$ am to $9$ pm

daily.

As the pharmacy grew, Dr$.$ Rogers hired additional employees, including pharmacists and

pharmacy technicians. Figure $1$ describes each role. A pharmacist must always be present when

the pharmacy is open for legal reasons. To handle the volume of prescriptions and provide fast

customer service, pharmacists are often scheduled alongside one to four technicians. During busy

times, an additional pharmacist might be present. Figure $2$ shows each employee$$s role in

processing prescriptions.

Labor Cost Visualization at Carescript: An Introductory Data Analytics

Case for Management Accounting

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Figure $1$: Job Descriptions

Figure $2$: Prescription Processing

Pharmacy Manager A pharmacist who oversees the day$-$to$-$day operations of the business.

Pharmacist

Dispenses drugs prescribed by physicians. Provides information to

patients about medications and their use. Can perform pharmacy

technician tasks if needed.

Pharmacy

Technician

Works under the supervision of a pharmacist to assist in processing and

dispensing prescriptions. Can perform cashier tasks as needed.

Patient drops off a prescription.

Task can be performed by any pharmacy employee.

Prescription is reviewed for completeness. Insurance and billing

information is processed.

Task can be performed by any pharmacy employee.

Prescription is prepared.

If medication is commercially available, automatic dispensing

machine $($installed two years ago$)$ prepares prescription.

The pharmacist checks the prescription.

Prescription is filed.

Task can be performed by any pharmacy employee.

Patient picks up the prescription.

Task can be performed by any pharmacy employee.

Labor Cost Visualization at Carescript: An Introductory Data Analytics

Case for Management Accounting

$3$

Growth at Carescript accelerated during the $2010$s$.$ Unfortunately, Dr$.$ Rogers

unexpectedly died in early $2012,$ and his two children inherited the business. The children had

not been previously involved and had other careers. Dr$.$ Rogers$$s son attempted to oversee the

pharmacy for several years, but its profit and the family$$s cash flow deteriorated. The family

hired Dr$.$ P$$rez as the pharmacy manager in May $2017.$

Changes at Carescript

Immediately after being hired, Dr$.$ P$$rez$,$ who was an experienced pharmacist, began

analyzing profitability. Approximately $90\%$ of Carescript$$s revenues come from prescription

drugs, and insurance companies largely determined the price$\mathrm{.}1$ Further, as an independent

pharmacy, Carescript had little control over the costs of medications purchased from suppliers.

As a result, Dr$.$ P$$rez realized that she had to control labor costs to restore the pharmacy to

profitability and ensure its continued independence in an increasingly competitive market.

In her talks with her employees, Dr$.$ P$$rez learned that, while the pharmacy experienced

record growth in the $2010$s$,$ Mr$.$ Rogers had struggled to manage its labor force. In particular, he

had struggled with hiring and retaining technicians, especially during busy times. He typically

paid pharmacy technicians between $$16$ to $$20$ per hour but had often paid overtime or resorted

to expensive temporary staffing to fill shifts. Even worse, Dr$.$ P$$rez discovered that Mr$.$ Rogers

had occasionally scheduled pharmacists, who were paid $$67$ to $$75$ per hour, to cover technician

shifts. Due to the wide variation in pay for each type of employee, scheduling dramatically

impacted labor costs.

Dr$.$ P$$rez immediately moved to rein in these costs. She decided that, instead of

scheduling technicians on an as$-$needed basis, she