Susan McBryar, a certified pharmacy technician with the Erlanger Pharmacy, fills patients prescriptions while in the Erlanger Hospital Pharmacy on Oct., 12, 2016. 
Donna Bourdon
Britt Tabor is the chief financial advisor for the Erlanger board of trustees.
Erlanger Health System, which entered the retail pharmacy business more than two decades ago by acquiring the former Moore & King Pharmacy, plans to sell its four retail pharmacy locations to CVS on Saturday, if hospital trustees approve the sale.
CVS will pay Erlanger and its for-profit subsidiary ContinuCare HealthServices Inc. a total of $10 million to take over Erlanger Pharmacies Inc. under a sales agreement endorsed Monday night by Erlanger's budget and finance committee.
Under the proposed deal, CVS will convert Erlanger's retail pharmacies at the Medical Mall on Third Street and the Dodson Avenue in East Chattanooga to CVS drug stores, starting this weekend. Erlanger will shut down its retail pharmacies at Erlanger East and Erlanger North, but CVS will handle patient and employee prescription needs at drug stores it operates near each of those Erlanger hospitals.
Britt Tabor, chief financial officer for Erlanger, said the sale "is a win-win for everyone" since it will provide extra funds for Erlanger while continuing both patient drug price discounts under the federal 340B drug pricing program and employee drug price discounts under the hospital's employee benefit plan. The federal drug price discounts for safety-net hospitals like Erlanger under the 340B program allow Erlanger to buy drugs at up to a $5.5 million annual discount and then pass those savings along to the retail pharmacies to fill prescriptions for Erlanger patients, Tabor said.
"This allows better access for our patients and our employees (since CVS stores are open more hours and in more locations) and we'll still have critical locations at our main campus and at the health center," Tabor told trustees Monday night.
The sale of Erlanger Pharmacies will not affect pharmacy and drug operations for inpatient operations, but it will net ContinuCare $8.5 million in pre-tax payments. Erlanger hospital also will get $500,000 in exchange for the hospital agreeing not to open its own retail pharmacy. Another $1 million is going for drug inventories.
Donna Bourdon, president of ContinuCare, said CVS submitted the best proposal to buy Erlanger's retail pharmacies and the drug store chain is equipped to have the purchasing power and processes needed to handle Erlanger's patient drug discount program with even more convenience for those needing prescription drugs.
Bourdon said 41 employees work in Erlanger's four retail pharmacies and most of those are expected to get jobs with CVS or other jobs at Erlanger.
The sale of the retail pharmacy business by Erlanger will come at the start of another fiscal year that hospital officials project will again be one of the fastest growing for any hospital in Tennessee. Erlanger is projecting that hospital revenues, which have already jumped 51 percent in the past four years, will grow another 10 percent to a record $976.6 million in the fiscal year that begins Saturday. Patient charges are projected to rise 4.9 percent in the next year at Erlanger, but patient volume and medical treatments are forecast to go up even more.
"We're the only hospital in Tennessee I am aware of that is projecting a 10 percent increase in inpatient revenues," Erlanger Trustee Phil Smartt said.
Erlanger is benefiting by the expansion of its Erlanger East hospital in East Brainerd, the expansion of its Heart and Lung Institute, and the growth of business from the entire region, including many critical care patients transported to Erlanger on one of the helicopters that are a part of Erlanger Life Force.
Erlanger expects to top $1 billion in revenues in fiscal 2018, hospital president Kevin Spiegel said.
"Our budget for next year continues to make investments in the infrastructure of Erlanger so we can enhance our medical procedures for our community," Spiegel said.
By November, Erlanger expects to complete installation of the $100 million Epic software system to rid the hospital of paper records and put all of Erlanger's myriad of computer programs into one big network. The finished product, called eChart, should boost hospital productivity and the accuracy of patient information, although the conversion is taking a decade to complete and extra staff and time during the transition.
"It's on time and on budget and I think has really gone extraordinarily well," Spiegel said of the change to the Epic system.
But the cost of the conversion is projected to limit Erlanger's bottom line profit in fiscal 2018 to only $5 million, or 1.42 percent of the total budget, Spiegel said.
Erlanger's full board of trustees will vote on the fiscal 2018 budget and sale of its retail pharmacy business at their meeting Thursday night.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.