And then after this, we will have an opportunity for those attending in person to participate in demonstrations of Omnicell Solutions at the Omnicell booth on the Exhibition Hall. We have several of our product managers who will be there, and we believe these demonstrations will provide practical insights in our solutions and value proposal. These demonstrations will not be webcasted. Let me turn it over to Randall.
Thanks, Peter. Well, we're really excited that with this day to come for many years and many hours of input in R and D and the like to get to this point. It is also important as a company that we reorient ourselves to the new opportunities that we have. And so with that, new opportunities, expanded opportunities going from a product to a platform and now to a vision that we see within reach, the new world, the autonomous pharmacy world that we are excited, that the industry is excited about, we're excited about. And internally, the folks inside our organization are ready to drive forward.
So with that, we've kind of reoriented ourselves to generate more excitement within the company and to drive toward this end. And with that, we've developed our new set of purpose, mission and vision. And there's got to be a better way. The only way for us to get to our ultimate vision partners, that's both with our customers and other industry partners. And we need to be committed to the ultimate vision of being the twenty first century's most compelling solutions and automation company to help our customers drive to perfection, drive to zero.
And so this is our new direction and it's got a lot of buzz within the company and outside the company, I believe. But this is our issue. Medication errors continue to take place. Multitude of reasons and burnout is one of the issues. We have a lack of key personnel, particularly experienced technicians, a lack of systems and system integration.
And with that continues to come these errors. Twenty percent to thirty percent of the patients out there still do not pick up their meds. And this is significant if you're trying to execute good health care. And at the end of the day, we don't have enough time to spend with the patient to say, look, we really need you to pick up this med. In fact, we're going to do X, Y and Z to help remind you to make sure it happens, right?
If we can't do that, we're not executing great med management. And the things that I think keep all clinicians worried at night, in the morning, 20 fourseven is adverse drug events. And as every clinician enters the industry and they go through their educational experience, they're thinking, I'm going to be able to use my skill set to help the curative process. I'm going to be able to connect to the patient. I'm going to be able to practice my skills and get people well.
But that first part of the Hippocratic Oath, those four words, first, do no harm, sort of resonates throughout everything I do. It probably has a lot to do with why our systems are as antiquated as they are. The idea of putting on new types of systems is a risk in some way. But we're spending $05,000,000,000,000 on medications in 2018. Shouldn't we be spending some of that to correct some of the issues that we have?
And this is a pharmacy that just some different points in the pharmacy where human beings have to be inserted into the workflows in order to get the whole thing working. And as you insert human beings in these key workflows, it creates errors. It's just a result of not having the integrated automated systems. And it's just not in the four walls of a provider hospital, but it's also anywhere that medication management is practiced, at home, nursing homes, surgery centers, any of those locations or places that we have to think holistically about how we drive to perfection. And I think the two most out front issues that we see every day in the press and our politicians talk about that have real impact, real human cost, if you will, are those related to drug shortages.
It seems like we continue to go through this ebb and flow of drug shortages, which then is related to price increases and drug pricing, which I think creates a lot of discontent in the population and even among clinicians on how are we going to solve this issue. And the opioid crisis has added a whole new layer of regulations, accountability, risk and liabilities onto the system of stressed organizations and stressed people. And when you have stress, you kind of go back and look at how we treated health care. We've done this by adding regulations and then adding administrators to drive those regulations without actually increasing the number of clinicians. And this is a chart from the Labor Bureau of Statistics, which demonstrates from 1970 to 2016 that we've added administrators at 3000% increase of physicians.
And this is no different in pharmacy. And you would think that we would be sort of bolstering up clinicians so that they can practice at the top of their license. But we're doing the opposite. We're burdening them down so that the actual amount of clinical work they do is very small. And
this is some turnover rate information that we have right off our systems. As we credential people onto our systems and people leave institutions and are taking off our systems, it creates a turnover rate. So these are real time or near real time stats off of some of our key customers across the nation. And you can see with pharmacy techs and nurses, for instance, in Texas, it's 27% for both technicians and nurses. So if you're trying to implement some new processes or new policies around opioids, 25% of your staff is changing in and out.
It's hard to execute and not make medication errors. And here is the truth. This is what happens in a provider pharmacy. Only the green part is really clinical work. 75% of the activities inside a clinical pharmacy are nonclinical.
So it's great education, all the experience that clinicians went through do not apply to 75% of the activities. Now interesting enough, this is the second study that was done. There was another one done in 2015. This was done in 2018, exact same results. I mean you think with all the new technologies that we have, the things that have been deployed that this would have
been impacted more. Maybe it had have been 30%. But herein lies the issue. This should be flipped. It should be 70 five-twenty five and eventually should be 90 five-five, right?
It doesn't make sense to have clinicians working in highly paid processes to get people well when they're not really engaged that often with the patient. And that's part of our story. We started the Omnicell eventually with a single product. And the product answered a specific problem, which is how do you move pharmacy from outside of the pharmacy closer to the patient. And that's with the point of care systems.
And that's the standard in the industry today. And we're really excited as we're going to discuss more about that market is being totally renewed, particularly with our XT platform. A lot of excitement in the marketplace, not just from our own customers, but from new customers who have never used Omnicell and deployed it before. But then as we evolved, we moved to a platform. And as we started to put this platform in place started to grow these product lines and invest in them, we quickly understood that the central pharmacy was a fascinating market for us, not to be point solutions, but really to move to the point where everything in the pharmacy was automated, everything was lit up.
And at that point, you could see yourself moving to the autonomous pharmacy. A lot of the workload done in pharmacy can easily be done by the cloud. It's just collecting all the data. And so that's become our stake in the ground. That's where we're pointing our resources.
That's where we're pointing our customers and our thinking is to how do we get to that end. How do we think about ourselves? How do we get the marketplace excited about moving toward the autonomous farm, not because it's a cool thing, it's because we're not going to survive as a health care system if we don't get that. It's that dire. It is an issue that has to be solved.
And with that, our priorities to drive the company beyond the platform to the Autonomous Pharmacy is embedded in our vision. We have to execute on a fully autonomous pharmacy that drives us to zero. That's embedded in our logo. That's embedded in our vision. That's embedded in how we think about the way we develop products, what products we're going to bring to market.
And what's really exciting is the XT is the point of the spear. Obviously, it's the point that everybody wants to move to the next generation and solve a lot of those issues on the nursing floor. But it quickly moves into, well, how do those drugs get to the systems on the floor where it comes from the pharmacy? And where are most of the pain points in the pharmacy start inside the central pharmacy. And our investments and our product launches and investments into the future have to do with driving the central pharmacy to be a key cog in the wheel to get to the ultimate solution, which is the autonomous pharmacy.
I think we've done exceedingly well over the last twenty eight years as a company to build our market, to build our presence. We're either half the market or near half the market depending on how you define it. And so customers are looking to us as a significant sized vendor to help them solve these problems. And it's just a it's a really exciting time at Omnicell. I say that with all sincerity because we are now on our mission and we can see the light at the end of the tunnel on bringing true solution sets so that circle starts to finally break down and become more green all the way around.
So with that, I have a little video and then I'll turn it over to Scott.
Hospital, certainly not a child. Kids shouldn't be the ones who are getting sick. So right out of the gate, there's sort of a twist of fate in there that seems wrong. Every patient is vital and is important, is special regardless of their age. Pediatric patients, children have
other that. And And
required every time in order to make the medication process as safe as possible.
Well, what does safe mean? It's like who's at risk for getting exposed to the wrong drug? Might I get the patient down the hall's drug or might I get the blue pill that's a little different from the purple pill? People never think that that could ever happen to them.
So every day we evaluate the errors that happen and try to come out with innovative ways that we can reduce those errors from ever affecting another patient.
We have become more information technology intensive and have provided greater oversight of every single step along the way of medication administration.
Autonomous Pharmacy is the pharmacy of the future.
We're going to continue to focus on technology and innovation in a way that makes
person in pharmacy can click on a button and tell them exactly where each dose of medication is.
Historically, we've used Omnicell in pharmacy as a cabinet company, but it's more than that. So implementing robotics and new technologies and how we do and use data that Omnicell can create to make better decisions on the care that we provide.
In a pediatric setting, we can't really give every patient the same tablet or the same IV dose. So 90% of our doses are manipulated. As a system, Texas Children's Hospital, we prepare around 600,000 doses a month.
But studies have shown over a thousand doses, the accuracy for a human is ninety seven percent. That's your option a. Option b is a robot. Over a thousand doses and robots accuracy is
a solution around where we've seen harm or errors occur.
No
one is more invested in the care of that child than the child and his parents. No one is. And we just have the privilege of interfacing with families for a short period of time. Of course, one wants the patients to trust us. Safety is a key element of it.
If we're not safe, nothing else matters here.
To bring those to market. I've only been at Omnicell about eighteen months. And I can honestly say I'm more excited today than I was when I joined. Prior to Omnicell, I spent about a decade as an entrepreneur in health care, and so bring a different set of experiences to the company. What I'd like to talk to you today about is really about how we think about our markets and really about how we think about the products and services that we can bring to market.
So pharmacy or medication management by dollars is the largest portion of health care spend in The U. S. It touches most patients and most care settings. It is an enormous driver of outcomes. But like a lot of areas in health care today, it is beset with issues.
The reality is it is a care delivery model that needs transformation. So how does this industry work today, right? And anyone that's spent time in a hospital or a provider setting understands that today there are lots of humans involved in the medication management process using manual processes with relatively limited automation today and limited tools. And like any human system, that system is going to be very expensive and it's going to generate a lot of errors. And what should this model look like?
This model should be one integrated system, very limited human intervention, perpetually learning and ultimately focused on the outcomes. That's our vision for the autonomous pharmacy. That's the how and the why. So how do we think about our markets? Point of care, we're a market leader today.
We see this market is increasingly an ongoing and increasing opportunity for us. We're working very closely with our large accounts to expand those accounts. We are very early on in our XT replacement cycle. We've booked less than 20% of that opportunity. And so that's creating a lot of ongoing opportunity for us.
So just to pause there, we're very early on in this XT replacement cycle at this point. And the comprehensive portfolio that we have is going to position us well in the future for competitive conversions. Randy pointed out the central pharmacy, and I'm going talk more about this in a page. But we believe this is a near to medium term significant growth opportunity for us. And we're going to market with that with our line of XR2, which you saw in the video, and IV automation as well as a set of analytics and services.
I'll come back to that and talk more in a minute. We also believe that we have in the retail and payer side. It's much earlier on, but we're very excited about the early prospects of our technology enabled service there that's helping providers and payers manage population health from management perspective. Each one of these market verticals in TAMs is inclusive of both the products as well as the services associated with that. So central pharmacy.
So why are we so excited about central pharmacy? Well, look, as you saw in the Texas Children's video, the central pharmacy is a very manual process today. There are lots of humans involved. And that is the beginning of the medication management process from an acute care setting. The problem is, is that it is also, because of those human processes I mentioned, it is also a place where significant errors occur because of those humans, as well as given that drug spend now is the fastest growing expense for hospitals, as well as pharmacy labor remains one of the highest operating expenses, the central pharmacy, given that it's a manual process, it will be almost impossible for a health system to control those costs unless they have visibility and control over the workflows.
So for that reason, or those two reasons, safety and cost, it is now increasingly becoming an imperative for health systems to automate that central pharmacy. We're very excited early on about our early accesses and really the customer outcomes that we're seeing with our XR2 and IV solutions. And you can see Randy pointed out that on the left hand side there, it is 19% to 20% of a pharmacist's time spent on that central pharmacy distribution. And in our early XR2 customers, that number dropped to 5%. So really living up to the outcome of enabling the pharmacist to practice at the top of their license.
Additionally, I'll point out that because these systems are: a, quite complicated and b, ROI focused, we increasingly see this as an opportunity to deliver these as services as opposed to pure capital, which we're very, very excited about. While waiting for the next slide to come up, which I understand there's a delay for, I want to talk a little bit about how we think about our product portfolio. As I mentioned before, we have a line of smart devices. XT or the point of care on the left hand side of this graph, XR2 IV and IV workflow in central pharmacy. We will continue to invest in research in these smart devices to make them more inventory aware so they have more knowledge of the meds that are in them and moving through them.
We intend to make them more modular so that we have increasingly more devices for different care settings inside and outside of the hospital. But we have been and we will continue to invest in developing a single cloud based platform to connect these devices. And like most hardware businesses that are now enabling and connecting those devices to the Internet, we are incredibly excited about the fact that not only does the cloud lower the total cost of ownership for our customers, simply making it easier, faster, and cheaper to install the solutions, but freeze the data so that we can analyze that data and deliver premium subscription services, true technology enabled services that help our customers manage inventory, manage diversion, medication use compliance, population health. This is an incredibly exciting opportunity for us as it is for most hardware IoT businesses today. I'm going to show you in a second a video about how we're envisioning these technology enabled services that not only differentiate our core products in a highly meaningful way, but we also believe represent significant addressable market for us over time.
At the end of the day, the bottom line was we think about technology enabled services or as we think about developing new devices and delivering them as services. We've shifted our thinking to really focus on the customer outcomes. As we think about both what products and services to build, but also how to go to market, we are focused as a company now in thinking about how does that what job is that customer really trying to do and how can we help them achieve that, which is not only driving us to deliver technology enabled services, but also forcing us to think through is there a different way to deliver this service, this product to the market? Can we actually operate it and deliver it better than the customer can do itself? So this has really shifted the thinking for us, which is a really exciting time.
At the end of the day, we believe that we have a highly differentiated offering, primarily for three reasons. One of which, and I can't underscore this enough, is that we now have a comprehensive portfolio of medication management solutions for most providers. And why that's so important is that what's occurred over the last ten years ten years ago, major health systems, everything was best of breed from a vendor strategy. I want the best of this, I want the best of this, and I want the best of this. What's now occurred and come full circle is that what they've come to understand is that managing multiple vendors both from an internal contracting as well as an integration as simply a keeping up with the roadmap has become unbelievably difficult and overwhelming.
So health systems and providers are increasingly looking for one vendor that has a comprehensive portfolio as well as a vision. We have that. That's creating significant differentiation both within our ability to engage our customers with long term agreements, but also we believe positions us well for competitive conversions going forward. Additionally, with such a significant portion of the post and pre and acute care side of the market, as well as the fact of twenty eight years, that is an enormous amount of knowledge and frankly unprecedented the industry that we have about the medication management process. And with the advent of technology enabled services, now we can curate that knowledge and really help our customers drive outcomes in ways that they never could have achieved themselves.
And lastly, and not to be overlooked, bringing a new innovation to market in an enterprise of any type, certainly in a business to business context, is incredibly difficult. Add in health care regulatory compliance and safety issues and bringing a new innovation to market is unbelievably difficult. I cannot underscore enough how important it is that many of these customers we've worked together with for a decade, if not two decades. And that relationship and that trust has gives us the ability to bring innovation to market in a way that a new entrant never could. So this the combination of these three things we believe gives us a significant competitive differentiation in the market.
I'd like to switch gears now and actually show you a vision for our technology enabled services, again, which is a differentiator for us. What I'm going to show you now is a video. It is not these are not services that we're bringing to market in the next twelve months, but they are things that our teams are actively working on today and I expect us to bring to market in the next eighteen to thirty six months. But it should give you a really great sense of how we're thinking about solving the customer problems, how we're combining that knowledge that I mentioned, expertise and software to solve customer problems.
Pharmacy optimization begins with visibility and access to all the data health systems need to make decisions. Omnicell is building out a single login and a single user experience to help health systems easily access critical data from a single dashboard. When a Chief Pharmacy Officer logs in, his dashboard shows an ROI scorecard highlighting efficiency and cost, and it gives him a sense of how his organization is performing against the metrics that matter. A Director of Pharmacy will see a different dashboard, specifically presenting the information that matters most to her. Same for a pharmacist or a pharmacy technician.
Everyone in a busy pharmacy needs visibility to data and from there, access to workflows that let them do their part to help with the overall optimization effort. Here's a specific scenario. Let's talk about drug shortages. Every health system has to deal with these situations where necessary medications become unavailable. And unfortunately, this is happening more frequently now than ever before.
Today, most health systems become aware of a shortage either by ordering the drug and not receiving it or by seeing news online of a widespread shortage from an organization like ASHP. From there, the work begins. Someone has to go dig around to gather data, look at where stockpiles of the drug are across different hospitals, who's prescribing it and what stock areas will be affected first. Then e mails and alerts are sent around the health system, telling people there's a problem and setting up meetings. Committees get together, look at the data, and make some decisions around what the most effective action Then plan is going to someone sends a few more e mails and hopes all the departments and sites figure out what they have to do to execute it.
It can be hard to know if the response plan is really the most appropriate for this health system, especially when other systems are probably putting together their plans at the same time. It's also hard to know whether everyone involved in the plan is actually executing the steps they need to. Now let's talk about how this should work. The Director of Pharmacy should receive a notification telling him that there's an impending shortage that could impact his health system. He didn't have to go look for it or hear about it after the fact.
Omnicell was looking at the data. We've determined there's going to be a drug shortage that will impact him and his patients and we're going to present it in a prioritized manner right inside the single dashboard. From there, he can drill down right into that specific alert about the shortage to research the issue more deeply. All of the information the Director of Pharmacy needs is gathered in one place. He can see the inventory on hand, the average daily usage.
He can see the top providers prescribing the drug and he can see information about possible alternatives. This is all the data he needs to get his head around the context and impact of the shortage. That's the starting point. But the next step is just as important. He needs a workflow to coordinate with other leaders to ensure that everyone gets the same information and can agree on a path forward.
Immediately, he dispatches tasks. Clinical pharmacist needs to investigate alternative medications. Leaders at other hospital sites have to start thinking about the impact on their inventory and how to best reallocate what they have because if everyone starts stockpiling, that actually makes the shortage worse. When the alternatives and the action plan start to come together, he receives back a response telling him everything is ready to go. He clicks to announce to the organization that there's a shortage and that there's an action plan.
E mails go out, people are notified and the unified response plan is ready. The power of analytical insights combined with workflows for staff help to ensure the right decisions are being made to manage the shortage. Let's talk about another very real scenario, a stock out. This is when a cabinet runs out of a medication. Hospitals don't like stockouts any more than they like shortages.
But the difference is that a stockout happens entirely within the hospital and it happens because the analytics and the workflow to prevent it just aren't there. Today, the best way health systems can deal with stockouts is guess at future demand or just carry more expensive inventory than they really need. Here's a better way. A pharmacist is going through her day and sees an alert appear on her phone, telling her a stock out is ninety five percent likely to occur in the next few days. It tells her about which medication it is, exactly where it's located and why it's likely to be a problem.
Digging in further, she can see at the cabinet exactly what's happening with the inventory and what's going to happen. She can see the par level and the reorder point and can understand the balance being struck right now between carrying costs, likelihood of the stock out and what her options are to adjust that balance. Based on the action taken, a few things will happen. Omnicell will automatically begin the process of redistributing inventory across the other XT cabinets in the health system. Central Pharmacy will also be contacted and the XR2 can begin consolidating and searching for the specific doses needed.
Let's take a look at another example. Here's a diversion management scenario. Today, Omnicell has three diversion related products and we're going to consolidate down to one. We're partnering with BlueSight, a best of breed diversion management solution that combines advanced machine learning driven analytics with a closed loop workflow to manage possible cases of diversion. Access to BlueSight is as easy as access to any other part of the Omnicell platform.
Click on the Diversion tab and single sign on takes the user right in. BlueSight provides custom risk scores for each staff member. It provides advanced waste network analytics and it provides drill down capability to understand all of the data driving recommendations. Finally, let's talk about how analytics and workflow can help with another problem, best practice adoption across the health system. Omnicell's XT cabinets, XR2 robots, IV robots, all of our products are designed with industry best practices in mind to help them perform to their fullest.
But we know it's hard for health systems to drive those best practices across all their sites and staff to ensure they're being consistently followed. Soon, Omnicell will provide visibility into not just medications, but also cabinet configurations to help pharmacy leaders understand how well best practices are being followed across their sites and their automation to help health systems drive the changes needed to achieve better outcomes.
So I hope you can see that the combination of a technology enabled service like this with our portfolio of smart devices not only will enable customers to improve safety, lower drug spend, but will also significantly differentiate our offerings and create new opportunity for us. So we're incredibly excited about this direction. I'd like to switch gears briefly and talk through some of the major announcements we've made at this show. First, some of you may know about our Performance Center. The vision of Performance Center is that Omnicell hires a team of experts with expertise in inventory, diversion, safety, etcetera.
They analyze customer data and they deliver insights back to the customer as a service, as a premium subscription service that that customer can act on. We are doubling down on Omnicell's Performance Center. But we are going to combine Performance Center, those experts, with further investments in predictive analytics and AI as well as with workflow, much of which you just saw very similar to what you just saw in that video. But the combination of these three elements, software, knowledge, and work combined is a technology enabled service that we believe can significantly help health systems and providers of all types improve inventory, diversion, medication use analytics, safety, compliance, population health. So we've announced that this enhanced performance center, we are renaming Omnicell One.
Omnicell One will combine not only the experts in performance center, but also advanced AI as well as workflow and analytics into one premium subscription service offering that initially is focused on helping health systems manage inventory and diversion. To that end, as we mentioned in the video before, partnered with KitCheck's BlueSight product specifically, which is a best in class AI closed loop diversion management software. That will be accessible to customers through their Omnicell One subscription as solution to diversion. We believe that by partnering, we can give our customers a comprehensive solution, which is the most important thing to us, and diversion needs to be part of that comprehensive solution. So this is great way for us to bring to market very quickly that solution for our customers.
And lastly, we've announced the addition of a premium implementation service available to our customers, which we call professional services. Not unlike other large IT vendors of all types, the reality is that our customers have gotten much bigger and much more complicated. Our products and solutions have gotten much more sophisticated. The projects themselves have gotten much, much bigger. And so there's really three problems that we're trying to solve with the implementations.
One of which is simply the program management, the herding of the cats of all of that complexity. That is more sophisticated now. Number two is that to truly install these products, particularly some of our newer emerging products like XR2 and the central pharmacy automation, requires significant changes to the customer's workflow, so that process reengineering. And lastly, processes, the change management involved in that is significant. And so we've partnered with Huron Consulting, who's an expert in these areas, that enables us to bring this enhanced service to our customers, which we see as a really compelling solution to both ours and the customer's problem.
So we're very, very excited about this. Next, I'd like to bring up Jennifer Tryon, who is the leader of the Autonomous Pharmacy Advisory Board, which is an industry group that we're very proud to partner with that is defining the future of the autonomous pharmacy and the direction of the pharmacy. So with that, I'll hand off to Jennifer.
Scott, really appreciate it. Good morning everyone and thank you for having me. I work at Wake Forest Baptist Health. We are a health system located out of Winston Salem, North Carolina and growing toward the Western parts of North Carolina with a merger recently being announced with one of the health health care partners out of Charlotte.
So soon we may be a 50 hospital health system. Our particular health system has an academic a large academic medical center for community hospitals, a large outpatient space from retail to lots of ambulatory practices, pharmacists seeing patients on an ongoing basis, but also moving very quickly into the value based world and into from fee for service to value based contracts. We're an Omnicell partner and I was very delighted when I received the call to have the opportunity to chair the Autonomous Pharmacy Advisory Board because this is one of the first times first time in my career where I've been a part of something that is so transformative from a healthcare model perspective. We're dealing with many of the challenges, all of the challenges actually that have been listed today. And when you're trying to find solutions, so often we need to redeploy our team members and our people.
And it's difficult to do that when you're linked to central pharmacy into the automation that exists today. So I'm here to share with you a little bit about the journey that we've been on as an Autonomous Pharmacy Advisory Board and the progress that we've made so far in helping us get from where we're at today to the fully autonomous pharmacy. I'd like to share a little bit about my teammates. This is the Autonomous Pharmacy Advisory Board. What you will notice here is that it's a there's a lot of diversity on the team.
Diversity. Our patient populations vary from pediatrics to a lot of the population health management profiles. We have everything from academia to leadership, lots of experience with what the medication distribution process looks like. And so a very large representation here across the board. As we have started our process, we have began the discussion around how to measure total and incremental success today toward the future as it relates to risk areas.
So what you're going to see here are many of the areas where we struggle today which is providing information around how safe our practices are, how efficient our systems are and our people are. We are one of the most highly, if not the most highly regulated profession in healthcare today. Many of those regulations necessary enable to tell more to tell our story about how safe we are and how efficient we are. And then we're constantly looking at how we can get the financial information to inform our models of care today and this is a difficult endeavor for us just based on what metrics are available. The intent here has been to align with the metrics committee.
We've been working toward two mainstream or two work streams. One is to identify the major metrics that need to exist across the industry. And the second I'll be talking about here in just a second which is a multilevel framework. The metrics committee has aligned under these four major areas to say what information can be available to us so that we can not only determine how well we're performing according to our internal benchmarks as we're trying to drive to zero safety events and trying to drive to a better performance state, but also how can we cross benchmark across the industry to find out where the centers of excellence are so we can learn from one another and get better in this space. And so this has been work that has been underway with our team as we have started to inform these different categories.
This is a space while you would say surely a lot of this information is available today, it actually is not. As regulated as our industry is, it's very labor intensive to obtain data and to obtain benchmarks that are consistent across the industry. The second work stream for us has been through developing the Autonomous Pharmacy Framework. And so what you're going to see here is probably familiar to you from the autonomous vehicle or from the electronic medical record adoption as we get closer to what the past state was and what the future state will be with vehicle, there's a pathway to get there, an incremental stepwise approach to having the fully autonomous vehicle. And so looking at these models, this is the model that we approach or we implemented to approach our framework toward the autonomous pharmacy vision.
And that's what you're seeing here is I'm sorry. That's what you're seeing here are the incremental steps that we started to take based on safety, efficiency, compliance, financial and people. We have these are our first step towards the metrics that we're looking to implement for autonomous pharmacy. We hope to innovate these or to inform these more as we get more information out of our systems as they exist today. But then also using these metrics to help inform our incremental progress toward the fully autonomous pharmacy vision is going to be what we're hoping to achieve.
I've described the first four elements here, but the fifth element which is the people element is one of the autonomous pharmacy. When you think about the burnout rate from our team members at Wake Forest Baptist Health, we have a 30% turnover with our technician workforce. This is the workforce who is largely linked to running the technology and there is a satisfaction level from our technicians with applying more of the cognitive functions that they're trained to apply, but they're actually linked more often to the technology that we have in place. And so one of the things that we look to measure through our metrics are the manner in which we can utilize our people to be more patient facing and less linked to some of the manual steps that happen that could be automated in our systems today. We're very pleased that we can share this with you.
This is the Autonomous Pharmacy Framework that was published that has recently been published. This has been a lot of the work from our team toward how we can assess where we're at today and where we'd like to go towards achieving the fully autonomous pharmacy vision. You'll see this is a five step process. Level one is where there isn't much automation in place from a health system perspective. And then Level five doesn't yet exist, but this is where we're looking to move toward which is the fully autonomous pharmacy.
The intent here is that we would in 2020 we will be publishing an evaluation for our team members or for health systems across The United States and internationally as well to be able to assess where they fall along the framework, to be able to assess where they are currently existing and what opportunities they might have. It will also give more information about what the benefits will be as they move from one level to the next. And so this is the framework that is also based on you'll see at the bottom there those five risk areas listed below. So as the intent is to move from left to right as you move toward the autonomous pharmacy vision, you start to pick up more safety benefits, more regulatory benefits, people benefits, so on and so forth. So with that, we have recently published a white paper.
And so these are available we have these available for you today. This gives a lot more information about the Autonomous Pharmacy Framework and why it exists, the rationale methodology that goes into this. And we have now since gone to a call to action to our colleagues to really to get more input and involvement to revolutionizing the backbone for the autonomous pharmacy. As Randy mentioned, we are moving towards zero medication dispensing errors. We've talked about medication dispensing errors for a long time since I've been in the profession and this is the first time that we have the opportunity to really evaluate this, get information about where we exist towards this goal.
And this is why we exist from a pharmacy perspective. Medication waste is another area where we lack information. There's a lot of waste in our systems. We are still solving for missing medications, waste within our systems that we can report. And today this isn't an area that we're able to inform.
And so this will be an area moving forward that will have more information. The human touch points is significant in our area. We know that we will not be getting a lot of additional people to be able to solve for the new healthcare models as they start to move more into the ambulatory space and into the places where patients are needing us to come to them rather than patients coming into the brick and mortar of the hospitals. We're needing our teammates to be in those models to have more of those patient facing interactions. And so with pharmacy as we automate more of the systems, we'll be able to free up people so that they can be in more direct patient facing roles.
We're also looking at pharmacist time spent on clinical activities. When you look at the administrative burden of pharmacists spent checking products that could be automated rather than working with patients to help educate and inform their medication profiles and optimize their medications. This will allow us to redeploy our patients our pharmacists into more of those direct patient facing roles. We're looking for more data and inventory visibility. What you'll hear from my colleagues across the country is help me have the data to do my job better.
Help get me the information the time I need it rather than having to go in and find it for myself or learn sometime later that there's a problem when I could have done something about it sooner. And so having access to real time actionable data and the visibility into that will be very important. The autonomous pharmacy platform in this space allows us to all be looking at similar data but in different aspects. So a technician for example may look at information related to the safety of an IV robot and how they can improve an IV production at the moment. Whereas myself as a Chief Pharmacy Officer, I would be looking at the monthly roll up of how the return on investment for our technology might be yielding positively for us or some of the business analytics, for example, for how we run our different businesses and classes of trade.
And the last element here is the regulatory compliance element and we keep increasing regulation. Many of these regulations without evidence to support them. They're well intended. They're intended to improve safety for our patients and we want to comply with those. But we like to also be able to show the evidence for our performance as it relates to many of these standards and not spend unnecessary administrative time trying to pull that information where we could instead be spending more time with our patients.
So with that, I appreciate the time with you and I'll turn back over to Peter.
Thank you, Jennifer. It's great to see the industry movement towards the autonomous pharmacy as we work together. So earlier this morning we talked about the company's purpose, strategy, our priorities and innovation and the approach to solve the significant challenges that faces pharmacy today. To summarize our opportunity, we believe there are significant challenges in pharmacy that drive the demand for our solutions and that represent large market opportunities. We believe we have a strong portfolio of solutions today that deliver meaningful outcomes for our customers.
The innovation investments, we're driving the vision of the Autonomous Pharmacy and further growth. We are already seeing adoption from health systems partnering with us via long term sole source partnership agreements. On the right side, you can see the consistent historical revenue growth that Omnicell has delivered over the years. This is a testament of our strategy, and we expect to continue to deliver strong revenue growth in the future. In this section, we'll focus on the company's financial strategy, our long term framework and drivers to continue to deliver long term financial shareholder value.
First, we believe that our solution strategy, our go to market approach and long term financial model supports sustainable, long term organic revenue growth. Second, we are committing to increasing our non GAAP long term operating margin goal, and we'll talk about it more in a minute. And thirdly, we believe that we can continue to deliver strong cash flow performance in the future years while we invest in market leading medication management automation solutions and in the infrastructure that supports the growth of the business. Looking back at the last several quarters, on average, we've delivered double digit organic revenue growth. Looking at our market and growth assumptions in our long term financial model, we expect to continue to grow revenue organically at a double digit rate.
This is based on the strategies, priorities and technologies and innovation we discussed earlier this morning. The three areas of focus for growth that we see are point of care solutions, central pharmacy and retail institutional and payers. First, as a market leader in point of care solutions, we expect continued strong growth in this area, first, from expansion of the use of our solutions in our large installed customer base. We also expect strong growth from prior generation replacements or upgrades. We are early on in the upgrade cycle.
As of the third quarter of twenty nineteen, 18% of our installed base with prior generations automated dispensing cabinets have booked upgrades to the XT Series. We have significant growth opportunity here, first in bookings and then followed by revenue. We felt it was important like we did in the G4 grid cycle to give analysts and investors insights into how far we are in the replacement of grid cycle. And we will provide an update on this metric every quarter. Thirdly, we see growth from competitive aversions and market share gains that we talked about earlier this morning.
We also see growth from innovation and service solutions. Overall, we believe that this part of the business will grow with a CAGR of around 10% over the next five years. As we talked about this morning, central pharmacy is the next significant opportunity to digitize and automate pharmacy for health systems to get to the next level of outcomes for patients and for the health system itself. For central pharmacy solutions, we expect growth from first upgrades of prior generation robots for oral solids in our installed base, specifically the RobotRx robots. Secondly, carousel to robot replacements thirdly, greenfield opportunity to tackle the challenges in central pharmacy we discussed earlier.
We also see growth from innovation and new service solutions, including professional services that we announced this week and also from as a service offerings. Overall, we believe that this part of the business will grow with a CAGR of around 17% over the next five years. For our retail and institutional pharmacy and payer solutions, we expect future and continued revenue growth from growth in population health solutions, including software solutions, adherence packaging and automation secondly, growth from innovation and service offerings and services. Overall, we believe that this part of the business will grow with a CAGR of around 10% over the next five years. In total, we're estimating the revenue CAGR to be between 1012% organically.
The estimated revenue growth in these two areas is supported by estimated large TAMs that we walked through earlier today. And they are often anchored by long term partnerships with large health systems, retail pharmacy chains and payers in our customer base. So in total, we are now estimating the organic revenue CAGR of between 1012% from 2019 to 2024. This is an update, an increase from the prior long term financial framework of 8% to 12% organic revenue growth. Let's now move to long term non GAAP operating margin profitability.
From an estimated baseline in 2019 of approximately 15% non GAAP operating margin, we now expect and we believe we can grow to a 2024 non GAAP operating margin goal of approximately 18%. This is an update, an increase from the prior long term financial framework target of 15% non GAAP operating margin. Let's now look at the drivers. We expect the drivers of the non GAAP operating margin increase and expansion to come from, first, economies of scale, both in supply chain and growth of operating expense below the rate of revenue growth or also called operating expense leverage. We expect benefits from our long term partnerships.
We expect savings from manufacturing. And we also expect efficiencies and process improvements. Now looking at the investments and offsets, of course, we are investing in innovation that we talked about earlier, given the large market opportunities and growth that we see. We are investing also in customer success and we're investing in infrastructure investments to support the growth and scaling of the business. To summarize our objective, we're balancing near term execution with our long term vision and creation of long term shareholder value.
We have set a goal here of organic revenue goal of $1,450,000,000 to $1,550,000,000 by 2024. This represents a CAGR, five year CAGR between 1012%. From an operating leverage perspective, we've set a goal for 2024 of a non GAAP operating margin of around 18%. And we are committed to deliver strong free cash flow. We have set a goal of free cash flow conversion between 90110% of GAAP net income for every year.
Lastly, strategic acquisitions remain part of the strategy and will evaluate strategic and financial fit. Now let's move to Q and A.
Peter, thanks for all the color and Randy for all the information today. A couple of questions for you, Peter. In the growth, can you talk about the current mix of revenues coming from each of the three segments? And number two, the visibility you have, obviously, the point of care solutions XT gives you the biggest visibility, I think. Can you talk about the visibility in the other two segments as well?
Yes. So we don't call them segments. We call them areas of growth. So point of care, really strong leadership there, really good growth from expansion as customers expand. XT upgrade cycle, yes, important as well.
What we said before is that the point of care part of our business is the majority of the business, so more than 50%, So we have a really solid good base for central pharmacy also. We do have a installed base from med carousel perspective, prior generation oral solids, robots, that opportunities for upgrades as well. So there's a good sized business there also.
Okay. One question for you, Randy. When I guess looking forward to the fully automated pharmacy model, how much I guess there are five levels that Jennifer talked about. What level can you get to right now with the current products that you have? And any, I guess, direction you can say, hey, we get to level five in the next five years, six years or any timelines that you can provide?
I can't really commit to that, but I would say it's with insight. And I think most people operate today and Jen, Tryon would probably confirm this around two between two and three. And if you had our systems totally implemented as they were today, you could probably get to maybe over three or something of that nature. But pretty soon, as Scott demonstrated with some of the technologies that we'll be deploying in the future, but we haven't deployed or I guess I have to say we don't know for sure if we'll deploy, but they look like that. That will really start to hit the pain points very quickly.
And just I'd like to use the autonomous car that Jen and the Advisory Board came up with because you can even say that Tesla car today, it has some levels of autonomy and it's helpful, right? You know that if you have it on automated drive, well, guess until the other day, but you know that when you have it on automated, there are fewer accidents. Why does Elon Musk want to go into insurance? Because he knows exactly that their cars are driven safer. Now is it fully autonomous?
No, but it's down the road. And so what the Advisory Board has really done for us is given us the roadmap. And it's also which is really, really important, it's prepared the market for the mindset that this is what they should expect. And so it's not just Omnicell putting the stake in the ground. It's probably more importantly the industry is putting the stake in the ground.
Because as I think you could feel Jen's pain as she was discussing all the issues that they can address without moving toward the autonomous pharmacies. The only way to address some of these issues that can get that circle more green.
Thanks a lot, Randy.
Hi.
As you think about autonomous pharmacy and sort of the change in the sort of focus or the evolution of the business model, What have you done in the sales organization to make that strategy a reality? Has it been cross training more people, bringing in different skill sets? And then I have one follow-up.
So Scott and his team has done a terrific job of really having a dedicated team that focuses on the central pharmacy that works with our other staff to understand make sure they understand that. And as we have been over the past couple of years talking about these bigger platform sales, they always include these pharmacy central products as part usually they include these pharmacy central products. So we know these customers, even if they don't buy them day one, they're getting ready to. And so we see the pipeline developing for those. And a lot of times they want to take care of their XT conversion rates because that's the easiest thing to do.
But in many cases, they want to do it all. And so I think the important piece is there's a big hunger in the industry to automate these problems because they just don't even have the people. You can't find the experienced technicians to just do these things manually. And so there's a real hunger to solve this problem with getting these pharmacy central pieces resolved. Now the other thing I just want to state is that the autonomous pharmacy is actually somewhat of a limiting term because we are also talking about automation from a pharmacy all the way to the patient's bedside to the home, other places.
So it's not just don't think of the autonomous pharmacy as being limited by the four walls in a provider network. It's everything that takes to deliver drugs in an automated way with a real time understanding of where they are.
And the follow-up is when you think about revenue number that you provided for 2024, is there a certain sort of mix between, say, hardware versus software and services or if you want to call it tech enabled services that Well, you should think
I think it's going to be without being specific, it leans more toward the as a service and services. And Scott alluded to it in his presentation, the point of care systems have been around forever, twenty, thirty years. And so you deploy that, a nurse knows how to use one, people in the pharmacy kind of know how to manage them. But you deploy robots that mix drugs and manage inventory even though it's automated, it takes a different skill set. And so we see ourselves having to be on-site with at least some key experts to help those things run at peak levels.
And so we will and as well as having services that are from afar helping to manage those. And we've already seen that with the stats with the two types of IV robots we sell. We sell them as capital and we sell them as a service where we run them on-site for people to get much better results in terms of production and safety and compliance when we assist and run those on-site versus just having a customer do that. And it works the same way with XR2 and future products. So those services bring additional revenues, reoccurring revenues.
And I think they also, in a way, drive a premium, I think, for the value for the customer.
Thanks. Gene Mannheimer with Dougherty. Just three questions. Peter, the operating margin improvement that you're talking about over the next five years, is that should we think about that as linear, say 50 bps annually?
It should be fairly gradual over Okay. The
in that segment, the retail, institutional and payer category, the 10%, what do you see as the fastest grower of those three items in there?
Within that, we see good growth from population health services and
solutions. Okay,
great. And just a little more on the partnering strategy with KitCheck on diversion. I mean you have Pandora that you bought a long time ago. You had some other analytics that you were building out. It seems like you're abandoning the in house development in favor of going outside to partner.
What's the rationale there?
Thanks.
Yes. No, I wouldn't say abandoning. The current products, number one of which is we have three diversion products as a result of the acquisition. So we need to consolidate that down to one. Those tools today are really good reporting tools and analytics tools.
We have not invested over the last couple of years in the machine learning to automate diversion. And so diversion is a total it's a necessary portion of the solution, but it's a very small addressable market. And so when we did the sort of calculus in our heads, hey, is this are we going to invest in our existing products around machine learning and closed loop to catch up relative to the addressable market, we felt partnering would help us bring a total solution to the customer, which differentiates the rest of our offerings and yet didn't require a lot of spend to capture what was ultimately a non needle moving market. Hope, if that answered your question.
There. Matt Hewitt from Craig Hallum. Last time you provided a midterm update, you were able to give a different type of breakdown. That was how much of the growth was going to come from the upgrade cycle versus the med adherence versus international. Are you still able to provide that in your 10% to 12% growth?
Yes. The growth environment is a little bit different now. That was many years ago. I think we can help a little bit on the guides on international. So international, what we see and what we've estimated in the model here is that international is roughly the same proportion of the total business as it is today.
So roughly 10%, so we expect international to grow. That's kind of the similar growth rates as well. And then net adherence, of course, the packaging and the list of cards, etcetera, and automation is included in that third growth category as well. And then, of course, from an upgrade and replacement cycle perspective of prior generations for automated dispensing cabinet, we've committed to providing every single quarter where we are in that cycle. So we're at 18% so far through the September 2019 as far as bookings.
So that might help you with estimating as well.
All right. And then the adjusted operating margin target that you set and you gave us the two different breakdowns and where you expect that to come from. Gross margins, as you shift to more software over the next five years and going forward, how should those trend? I would think with the software, that should be trending higher as well.
Well, what we said in the past on gross margins is that over time, we expect a modest increase over time. Remember also that we believe and we see it already at our customer base that we will increasingly also have as a service offerings, right? And those initially will comment somewhat lower So there's a mix element there too. So there are no more questions.
Any questions? No. Okay. Thanks guys. Well, thanks for the questions.
And you can see that I think it's important that Omnicell, to the investment community, really see that we've more reoriented the direction of our company and we're driving toward really a fully automated system that really answers all the pain points pharmacies have. And that's really invigorated our company and our folks inside the company to really say how do we put things forward that are going to drive to zero. And some of those things are not technologies, but they're services. I think it's important to note that it means deploying experts and doing some of this workload for our customers because it just makes better sense. And with the sort of rebucketizing of our growth markets and breaking those down, you can see a fantastic opportunity, not just with the natural expansion of our customers, which is quite significant, along with the replacement markets and the new places that we can drive our systems to.
Central Pharmacy, we're really excited to about because it is really the base level, the first step of the autonomous pharmacy is you've got to get central pharmacy moving in a much more automated fashion. And I think our reputation in the marketplace, our position in the market, the fact that people want to buy from a single vendor with complete systems is really sets us apart. And I think it's been important, I think, to be as transparent as we can be about what our growth is, where we're going. We've got good double digit growth organically ahead. And we shouldn't forget acquisitions.
It's not that we're not going to have acquisitions. It's just we didn't want to include that and muddy the growth rates. We wanted to be really clear on this. And so acquisitions that may make sense anywhere in those growth areas, but population health is one that might be one that we could focus on because it's still small for us and acquisitions probably make sense there. And then expanding our margins for the first time in many years, going above the 15% level, I think, is really important.
So with that, I'll thank everybody in the room and everybody online for joining us today and look forward to continuing to report out as we move forward over the next years on these metrics and how well we're living up to our commitments. Thanks very much for joining us today.