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Aesynt |
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September 8, 2014 Issue |
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The Most Powerful Name In Corporate News and Information |
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Integrated Pharmacy Automation Solutions for Hospitals and Health Systems |
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About Aesynt Aesynt continuously advances medication delivery, offering integrated pharmacy automation solutions that help hospitals and health systems to support improved patient outcomes, build stronger businesses and manage ongoing change.
A customer-focused, innovative organization, we provide hospitals and health systems across the U.S. and Canada with high-quality, cost-effective and efficient solutions that safely deliver the right medication closest to the patient. Founded in 1987, acquired by McKesson in 1996, and now owned by Francisco Partners, a technology-focused private equity firm, Aesynt has been a leader in pharmacy automation for more than 25 years. We were the first company to offer a robotic, bar-code based solution for medication dispensing and today boast an integrated, flexible portfolio of solutions to help hospitals and health systems automate medication management.
Aesynt has two locations in western Pennsylvania, just north of Pittsburgh—our headquarters located in Cranberry Woods, which houses our corporate offices and customer support services and our 107,000 square foot Thorn Hill manufacturing facility and Product Solution Center. Our more than 850 employees are dedicated to helping our 1,200+ hospital and health system customers achieve better medication management through pharmacy automation.
Kraig McEwen is Chief Executive Officer of Aesynt Inc., the market leader for integrated automation solutions that that help health systems to improve outcomes, build better businesses and manage change.
Kraig led the successful divestiture of Aesynt from McKesson Corporation. As CEO, Kraig is responsible for all company activities, including sales, manufacturing and engineering, marketing and product development, software development, and operations.
Prior to his appointment with Aesynt, Kraig was the president and CEO of CardiacAssist, Inc., an entrepreneurial medical device company that designs, manufactures, and markets a novel temporary heart assist technology.
Kraig’ medical device experience also spans 10 years with Medrad Inc. as Senior Vice President, responsible for the interventional device division. While at Medrad, Kraig was responsible for building Medrad’s interventional device growth strategy and was instrumental in Medrad’s receipt of two Malcolm Baldrige National Quality awards.
Kraig started his career in the industrial automation market with General Electric Company, where he held several positions of increasing responsibility, including vice president of operations for GE Cisco Inc., and several positions at GE Fanuc in Virginia.
Kraig graduated from the Pennsylvania State University in 1995 with a BS in Finance and International Business. In 1998, while working for General Electric Company, Kraig graduated with corporate honors from the General Electric Financial Management Program. He went on to receive his MBA from the University of Pittsburgh in 2003.
Kraig was the recipient of the 2005 “40 Under 40” Top Executives in Pittsburgh. He serves on several boards, including Lead Director of Cardiac Assist, The Pittsburgh Cultural Trust, the Regional Learning Alliance, and is a past Executive Director of the Board at the St. Margaret Hospital Foundation.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – September 8, 2014
CEOCFO: Mr. McEwen, what is the concept at Aesynt? Mr. McEwen: We design, develop, manufacture and sell medication logistic management systems and software. It is predominantly targeted at healthcare systems across the globe. Regarding a pill for a day, when a pill comes in from a drug wholesaler into a hospital and that pill needs to be packaged and stored and then transported up to the floors. We develop robots and automation equipment to help manage that inventory process. We also develop enterprise software to manage the flow of the information within a hospital and between health systems. And just a few months ago, we purchased a company called Health Robotics, which has moved us into the market-leading position for the automation of the intravenous admixture; IVs. Therefore, we now have a robot that manufactures and compounds IVs for health systems.
CEOCFO: Were you looking for that type of acquisition or was it more opportunistic? Mr. McEwen: We were looking for the opportunity. In the past few years, as healthcare reform began taking hold in the market, we expanded our strategy to take advantage of two core trends: one being that most healthcare systems are going to have to reduce their cost profile by at least twenty percent. The second is an implication of that cost reduction. You are seeing a mass consolidation of hospitals in the United States, where years ago you would have one hospital, but now you have a health system. Therefore, much of our strategy was built towards trying to expand our portfolio to take advantage of the economies of scale possible for these health systems by centralizing their pharmacy services, not within one hospital, but into one health system and then providing the services to multiple hospitals. Along with that trend, the most expensive and most dangerous medications in hospitals are IVs. That is because you are mixing one clear liquid into another clear liquid. Therefore, about sixty percent of harmful medication errors in hospitals occur through errors in IV preparation. We had made it our strategy to move into that space, probably three years ago. The acquisition of Health Robotics provided us with that entry into the IV space.
CEOCFO: The logistics sound daunting. What are some of the common areas that you address? What might be some of the challenges that people like myself would not even think of that need to be taken into account? Mr. McEwen: We probably process three and a half to four billion medications a year in a health system. Therefore, if you are the average hospital and patients are moving in and out of the hospital very frequently and the average patient may have five to seven medications a day, that is thousands of pills and liquids that are moving through a hospital, that all needs to be processed through software. At its basic level, what seems very easy, but making sure that the right medications gets to the right patients in the right locations, is a very common problem in a health system. Our technology helps to ensure that through a closed loop barcode system. Therefore, when a medication comes in the back door of a hospital it gets bar coded. We have a common software interface, so that all of our automation technology sits on one software platform. Then that software platform integrates into a multitude of health information systems within hospitals. A physician orders a medication and it is processed through the health information systems into our software. We pick that medication and it gets off to the nursing floor and ultimately to the patient. All the patient sees is that the nurse scans a barcode on their wrist and scans the barcode on the medication and magically they get the right medication. However, there is a lot going on in the background to ensure that happens. As a result, it is an incredibly safe process now for a healthcare system.
CEOCFO: Are they always scanning the barcode on your wrist before they give you a pill? Mr. McEwen: They should be! And if they are not you should be asking why not. Regarding IVs, you have a pharmacy technician that is typically paid somewhere between ten and twelve dollars an hour and they are processing and compounding multiple IVs. They are mixing four or five clear liquids together and then the current safety check is a pharmacist just looking to make sure that is accurate and that is going straight off to the patient. That is why we have been so focused on automating the IV compounding process, where we are able to assure that every compound going into that IV is the right compound and is the right composition and amount.
CEOCFO: What is the competitive landscape? Mr. McEwen: What characterizes our traditional business is central pharmacy automation, like our ROBOT-Rx product, and automation outside the central pharmacy, which are medication dispensing cabinets that reside on the patient floors. Both of these are very mature technologies offered through just a handful of competitors in the United States. We are the clear market leader in all of the central pharmacy technology and have been for twenty years. In Europe and Asia, where they process medications differently, there is a different group of providers.
To maintain our global leadership position, we have really taken a strategy of moving into new spaces where you can take dramatic costs out of the healthcare system. Therefore, the two big investment areas where we have expanded our portfolio are the IV space with robotics, and we are the global leaders in that space. Although there is other competition, there really is not any competition that has the extent of automation and safety profile that we do. In addition to that, IVs are the most expensive medication to a hospital, so the cost savings are dramatic for health systems that adopt our IV robot, not only for the safety element, but also through the reduction of waste. Therefore, that is a very compelling offering. Then the second area that we have moved into is medication enterprise software for inventory management across the health system. We are the first to market with that type of an offering. That solution links all of the automation, whether it is our automation or any of our competitors – something that most industries have done for twenty years, but has never before been possible in hospitals. Therefore, if you are a health system CFO and you want to see what your medication inventory was at your twenty five your hospitals, you cannot do that today without our solution. If you wanted to say “Hospital A has too much inventory on hand, so I am going to move to hospital B,” you cannot do that. Or, “I do not need to have packaging services at twenty three hospitals, I am going to move it all over to one location and distribute to the other hospitals.” You need our software to do that. We think that is a very compelling offering. We always try to simplify it and say that our vision is to perfect medication management for health systems. However, to do that today, if you look at an average health system or even if you look at our total healthcare system, about ten percent of their costs are pharmacy and medication. Our view is that we have to be able to help them take twenty or thirty percent of that cost structure out for a health system to be able to remain profitable under health care reform.
CEOCFO: Are your initial customers hospitals that you are doing business with now? Mr. McEwen: Yes. Our primary customers are health systems. We have about eighteen hundred health systems around the world that are our customers. We see a gradual expansion of that beyond traditional health systems and into alternative care settings of clinics, long term care and outpatient settings. Our belief and view in the way we design products now is that more and more patients will be treated out of the hospital and therefore medications will follow them to those locations, which makes the logistics management process all the more complicated. Therefore, we see that gradual expansion.
CEOCFO: What have you been finding so far with the IV situation? Mr. McEwen: IV has been dramatic growth and global growth. We have historically been a North American based business because McKesson is a one hundred and twenty billion dollar business and about one hundred seventeen hundred and eighteen million of that, historically, has been in North America. With the acquisition of Health Robotics, we have seen an uptake across the globe – Europe, Asia and the Middle East as well. Therefore, it is by far our fastest growing product offering.
CEOCFO: Is it easy to get a foot in the door? Mr. McEwen: We have been in the market for quite a few years and as a McKesson entity, folks knew us well. Our strategy and the way we get in the door now, is by showing them that we can solve very real problems for them in the IV space or inventory management. We explain, “We can take 30 percent of your cash investment in inventory out in a year.” CFOs will listen to that. The IV portfolio is a huge focus for the national government right now, as they just passed a sweeping legislation in January around trying to curtail and contain the outsourcing of IVs by health systems. This is because there were meningitis outbreaks across the US about two years ago, so they put regulations in place to make it substantively more expensive for health systems to do that. We can also walk in and say, “Do you realize we can eliminate your need to outsource IVs and cut your costs by sixty percent on IVs and put you in compliance with USP 800?” Those are really meaningful cost reductions in the IV world. In a hospital, about twenty percent of your volume is IVs, but eighty percent of your expense is IV. The average healthcare system in the US has about two percent profitability, so if they do nothing else under health care reform and you look at the shift in payer mix, the average health care system will have to take out about twenty percent of their cost structure to just remain at two percent profitability. Ten percent of your expenses are in pharmacy and medications. That is a compelling argument. Therefore, we do not have a hard time getting in the door with our solutions.
CEOCFO: What is involved in implementation? Mr. McEwen: Implementing multiple hardware and software solutions is a fairly complex process. If you are implementing one of our traditional oral solid robots or our IV robot, as an example, with our enterprise software system Insyte, that could be a multi month implementation. That is because you are not just implementing the electro mechanical systems. The real implementation and complexity for a health care system is the integration of all of the IT systems. The demands that are on the healthcare system, healthcare IT groups in the hospitals right now; they are still trying to comply with what is called meaningful use. Therefore, the integration of all the software is the complexity that we think we have a real skill set in.
CEOCFO: How do you keep up, not only with changing healthcare requirements and maybe changing medication practices, but changing technology on all of the systems with which you are integrating? Mr. McEwen: That is an important question! It is actually one of the reasons that we took the business private from McKesson. If you look at the healthcare landscape, there are really three primary health information system layers: McKesson, Epic and Cerner. Our technology integrates with all of those players to varying degrees. We are the first to market with a common platform so that all of our pieces of automation share one common platform in one database. Therefore, that makes the integration easier, because there is only one piece of software on our end to integrate. That was a core part of our strategy. The other piece is the interface engine technology that we use and invest a lot of money to keep very current. That is so that every change one of the health information systems companies makes – and they make many – but does not impact the healthcare system dramatically. The other is actually commercial relationships. That is because, for integration of those information systems to work you need three parts. You need us, you need the healthcare systems IT group and you need the Epics, the Cerners and the McKessons. One of our rationales for divesting is that we always had deep integration with McKesson, but McKesson’s software competitors viewed us as McKesson. Our view is that we need to be ubiquitous and essentially, Switzerland across those primary players. Therefore, much of our rationale was to enable us to strengthen our commercial relationships with those players as well.
CEOCFO: What is the key, as CEO, to handling all of the moving parts of the business? Mr. McEwen: I do not think it is necessarily different for this business verses any other. I think there are three or four things. One is that I am blessed to have a very capable leadership team. Two is we have a very clear strategy and vision. Everyone in this company knows that we are trying to perfect medication management. We have five elements to our strategy that shows how to do it. Third is that we are a huge supporter of and very passionate about the balanced score card methodology for running a business. We measure success through our balanced score card. We have a very disciplined operating process for keeping the organization focused on the score card and the annual priorities to deliver the score card results. The key to it is very simple strategy. It is making sure that you have a good operating model that takes the ambiguity out of the moving parts. While there are many things going on in our operations every day, there are four or five things that we absolutely have to get right. Lastly, most of the management team has a ton of experience with the Malcolm Baldrige methodology. Therefore, we are big continued improvement folks. That has been in our DNA as a company. That includes all of our core value creating cross functional processes across the organization. For example implementation, which touches many processes. We have a closed loop improvement process in place for every value creation process. We have what we call functional reviews that happen twice a year. Every one of those processes have to have a set of internal metrics to see whether we are getting better year over year and a set of external third party bench marks. This is where we try to measure ourselves against best in class in those areas whether it is call center or sales or our product development process. I think the real key to our success is the culture and the employees. We are very fortunate in the region that we are in. We are a Pittsburgh based company and always have been. I would call ourselves a blue collar technology company. That is because the employees are incredibly dedicated. We have extremely long tenure and are quite focused on the vision, so they make our job pretty darn easy! I would be remiss if I did not highlight our employee base as the real core to the success of this company. It always has been and probably always will be. |
“To maintain our global leadership position, we have really taken a strategy of moving into new spaces where you can take dramatic costs out of the healthcare system.” - Kraig McEwen
Aesynt 500 Cranberry Woods Drive Cranberry Township, PA 16066 724-741-8000
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Kraig
McEwen