Why reduced opening hours doesn’t mean reduced revenue
In this second part of a series of articles on the topic of pharmacy opening hours in England, our co-founder Kevin Murphy shares his recent experiences of reducing the opening hours at two branches within the Wellbeing Pharmacies group.
The team expected to lose customers and items, but experienced the opposite. Item/customer numbers are up by 2% at one branch and 17% at the other. Retail sales grew by 8.1% and 12.7%. The fact the team had already invested in 24/7 automated prescription collection at a number of branches helped greatly.
Standard hours pharmacy contracts
By way of a brief background, over 90% of NHS community pharmacies in England are commonly referred to “standard hours” pharmacy contracts. These have either been awarded via control of market entry processes first implemented in the 1980’s or were in existence before this system was put in place.
This type of NHS contract pays pharmacies to open a minimum of 40 “core hours” per week among various other core contractual requirements. For many this means core hours of 9am-5pm or 6pm Monday to Friday.
Historically most pharmacies have chosen to open more than the minimum core hours to maintain local competitiveness and access, but this was based on there being enough meat on the NHS funding bone to pay for this. These extra hours are called supplementary hours, and they can be changed with as little as 5 weeks notice.
Core hours on the other hand have historically been very difficult to change as the NHS have to consent and often require evidence that it will not impact local patients….something very difficult to evidence.
Given the 30% real terms decline in NHS funding and sharply increasing costs in recent years, many of these pharmacies have understandably been questioning the viability of opening these extra hours, many of which are at weekends in the face of locum rate demands of £50-£60 per hour in many areas.
This is something we struggled with in our own pharmacy group where we had several branches with supplementary hours on a Saturday. Staffing costs were in the region of £300 for just 4 hours and a lot of management time and stress went into securing locum cover. We worked out that we need to be generating a minimum £1000 turnover in those four hours just to break even. We asked ourselves, what is the point?
Up until now prioritising customer access has always taken priority on the assumption we would lose business if we reduced hours. That fear has kept us essentially providing more than the minimum needed for contractual compliance.
The harsh reality
The harsh reality dawning on many pharmacy operators now is, if the NHS are only willing to pay for 40 hours of service provision, why are we providing more than that? In England, fixed fees such as establishment payments and practice payments are a thing of the past, and this year even the “Transitional payments” system has been replaced by a new, lower flat fee alongside a reduced quality payments scheme.
All of these changes have already driven hundreds of pharmacies to close permanently and we did not want to follow in their footsteps so we looked at what we could do short of full closure.
Use of MedPoint
Fortunately we had already invested in 24/7 automated prescription collection at a number of our branches and had built up the number of patients using this facility. This, along with hearing positive feedback from peers that had already reduced hours gave us the confidence to trial a Saturday closure at two branches to see how it impacted the business, for good and bad. We were surprised with the results.
What we thought would happen:
We assumed a lot of grumbles from patients and a loss of up to a few hundred items per month. We felt this was an acceptable risk for the necessary cost savings involved. We also assumed our retail sales would take a hit with four hours less trading per week.
What actually happened:
5 months later, we were pleased to see not only did we not lose items/customers, but our item numbers have actually grown year-on-year by 2% at one branch and 17% at the other!
Surprisingly, our retail sales grew in the same period by 8.1% and 12.7% in each branch respectively. So our fears of loss in sales were unfounded.
The reduced hours have generated a reduction in overheads of almost £16000 annually per pharmacy, which for these branches could make the difference between being loss-making and profitable this year. Our staff are more than happy to no longer have to work weekends too.
One consequential benefit we had not considered was in the increasingly difficult task of recruiting & retaining staff, especially pharmacists. One of the pull factors for leaving community pharmacy for other roles in primary care networks and GP practices is the allure of a 9am-5pm Monday to Friday work pattern. It has long been expected in community pharmacy that you work some weekends, so doing away with Saturdays has helped us even the playing field somewhat and was a definite factor in attracting a high-quality pharmacist to one of our branches recently.
Get in touch
Hopefully sharing our experiences will help other pharmacy operators in a similar situation and provide some reassurance that the sky won’t fall in if they adjust their opening hours. Feel free to get in touch with me if you wanted to have a more in-depth chat about any of the above.
In the next & final article in this three-part series we will focus on the less spoken about regulatory changes that could enable standard hours pharmacies to more easily alter their core hours.
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