Healthcare Value Analysis & Utilization Management Magazine - Volume 5 Issue 2

Volume5/Issue 4/Issue22 Volume

Healthcare

Leading Cost and Quality Strategies for the Healthcare Supply Chain

Magazine

Cost =Value?

Quality Cost Over Quality Equals Value, Or Does It? www.ValueAnalysisMagazine.com

Volume 5/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

1

AHVAP 14th Annual Education Conference & Supplier Showcase

Be Relevant in a Time of Change The 14th Annual Education Conference & Supplier Showcase offers an outstanding program of continuing education, and a great opportunity for Value Analysis professionals to network and exchange ideas.

Included in this Year’s Program • • • • • • • •

New member and New Attendee Reception Supplier Showcase Regional Meetings to keep abreast on what is happening in your regional chapter Stay in touch at the conference with our smart phone app CVAHP Review Course Your future as a Value Analysis Professional Panel discussion led by Jessica Bellew Understand the relationships between supplier and Supply Chain.

Networking with both fellow members, as well as Suppliers

Register or Learn More Today Volume 5/Issue 1

2 WWW.AHVAP.ORG

Healthcare Value Analysis & Utilization Management Magazine

Contents

Healthcare Value Analysis & Utilization Management Magazine Healthcare Value Analysis & Utilization Management Magazine is published quarterly by SVAH Solutions®

4 FROM THE PUBLISHER’S DESK

By Robert T. Yokl

We Don’t Need Everything We Are Buying Now

P.O. Box 939, Skippack, Pa 19474 Phone: 800-220-4274 FAX: 610-489-1073 bobpres@ValueAnalysisMagazine.com

6 FROM THE MANAGING EDITOR’S DESK

By Robert W. Yokl

www.ValueAnalysisMagazine.com ————————————

Editorial Staff

The Triple Aim Ultimate Challenge

Publisher

8 FEATURE ARTICLE

Robert T. Yokl bobpres@ValueAnalysisMagazine.com

By Robert W. Yokl

Cost Over Quality Equals Value, or Does It?

————————————

Managing Editor

12 UTILIZATION ARTICLE

Robert W. Yokl ryokl@ValueAnalysisMagazine.com

By Robert W. Yokl

Why You Need to Stop Wasting Time and Money by Starting a Successful Supply Utilization Management Program Now

————————————

Senior Editor Patricia A. Yokl

16 VALUE ANALYSIS 101

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By Robert T. Yokl

Editor and Graphic Design

Measuring Value in Value Analysis Can Be Easier Than You Think

20 Value Analysis Leadership Interview James Russell, RN-BC, MBA, CVAHP, Value Analysis Program Director, UW Health, WI

30 THE LAST WORD

By Michael Bohon

A Common Mistake Hospitals Make in Their Savings Efforts Volume 5/Issue 2

Danielle K. Miller

Copyright 2017 SVAH Solutions®. All rights reserved. Reproduction, translation, or usage of any part of this work beyond that permitted by Section 107 or 108 of the 1976 United States Copyright Act without permission of the copyright owner is unlawful. For permission, call, fax, or e-mail Robert W. Yokl, Managing Editor. Phone: 800-220-4271 FAX: 610-489-1073 E-Mail: ryokl@valueanalysismagazine.com for approval to reprint, excerpt, or translate articles.

Healthcare Value Analysis & Utilization Management Magazine

3

From the Publisher's Desk

Robert T. Yokl

We Don’t Need Everything We Are Buying Now Robert T. Yokl

The fastest, easiest, and most effective way to save money in value analysis is to stop approving so many products for purchase, since your healthcare organization doesn’t need everything you are buying now. For example, we see healthcare organizations buying 25% more in a quarter than they bought in a previous quarter. Can you think of a reason why this should happen…I can’t!

Furthermore, this binge buying of new products, services, and technologies is unsustainable in our healthcare economy where hospitals are getting less reimbursement every year as opposed to more.

So, what do we do about it?

Your value analysis teams must have rules of engagement to push back on unnecessary and wasteful buying at their hospital, system, or IDN. Here are three ironclad rules to get you started on this journey: 1. 5% Rule: No new product, service, or technology should be purchased if it doesn’t save your healthcare organization at least 5% or improve your outcomes by 5%. This is because the cost of change is about 5%, so you need to save more than 5% just to break even on the change. This is also the cause of most new utilization misalignments due to confusion by your clinical staff over how to implement the new product, service, or technology that was just purchased.

2. Budget Rule: No new product, service, or technology should be purchased unless it has been approved as a line item in your healthcare organization’s budget. This rule will immediately eliminate 80% of your requisitions for any given year, since most of your department heads won’t want to go through the vetting necessary by your organization’s budget department.

3. Guarantee Rule: No new product, service, or technology should be purchased unless the proposed savings is guaranteed by your supplier. No longer can healthcare organizations accept savings claims by their suppliers that never happen! Hold them accountable in writing for every dollar that is proposed to be saved over a specific time. Then ensure that the savings has really happened!

As these rules suggest, saving money in value analysis is not just about evaluating new products, services, and technologies, but slowing the binge buying that most healthcare organizations are experiencing, plus making sure that your suppliers’ projected savings stick over the long-term. You will discover that these three new rules of engagement for your VA teams will go a long way to ensuring that these goals and objectives are realized. Isn’t this what cost containing is all about?

Volume 5/Issue 1

Healthcare Value Analysis & Utilization Management Magazine

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Ignorance is Bliss...Except When It Could Save You an Additional 7% to 15% of Your Supply Budget‌Beyond Price and Standardization If you could click your mouse and find out where ALL of your supply utilization savings opportunities are hiding, that represent 7% to 15% of your total supply budget, wouldn’t you want to know?

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800-220-4274 or Healthcare Visit www.Utilizer-Dashboard.com Value Analysis & Utilization Management Magazine

Volume 5/Issue 2

5

From the Managing Editor’s Desk

Robert W. Yokl

The Triple Aim… The Ultimate Challenge Robert W. Yokl

I have a love-hate relationship with the newest mantra of our healthcare supply chain industry which is Cost, Quality, and Outcomes. I love that we have a mantra to work toward and it has been accepted as the “Triple Aim” of our industry. But what I don’t like about it is how vague and unfocused it has become. This leaves the interpretation of these three areas open to just about anything that will fit into the box or fit the bill for the white papers that are issued every so often on this “Triple Aim.” So, what were we doing before this - chop sui?

Before I started working in the healthcare supply chain over 25 years ago I worked for ADP which is and at that time was the largest payroll processor in the country. One month, out of the blue, we got a roll-out of a new program (it was rare that ADP ever did anything fancy) and this program was unique in that it was “Totally Guaranteed Correct Payroll – Or Your Money Back.” They had fancy shirts, buttons, stickers, etc. This was a national roll-out of this program for the sales and customer service team to use to establish more business, and we were excited. But in less than 2 weeks it was canned and totally disappeared. But why?

The Chairman/CEO was away on vacation when this program was conceived and rolled out by the national marketing team at the organization. When he returned and found out about this program, he immediately had the program shut down and his reason was incredibly simple: “Payroll is supposed to be correct every time. It is a given!” Why are we guaranteeing something that we are paid to get correct every time?

How does a story from another industry from a long-time past relate to healthcare? First, what do our patients care about most? Their health, family, and their paychecks (not always in that order). I see a similar parallel in that we are rallying to the “Triple Aim” but that is our job to perform every single day before, during, and after the Triple Aim appeared. As one of my well experienced management engineers used to say when he heard the latest management process/mantra, “We have already been doing this for years, it’s just got another fancy name.” It’s time for the Triple Aim to have a formal process!

As a long-time member of AHRMM, I fully support the lead that they have taken with establishing and maintaining the Cost, Quality, and Outcomes program. But we need more substance, not more sponsors. Perhaps the next step for this mantra is to define a process further or adopt pieces or modules from areas such as Value Analysis with the Functional Approach, Lean Management with Voice of the Customer, Six Sigma with Standard Deviation Reporting, etc. Regardless of my views, the Triple Aim is starting to make its mark on our industry. We now need to clarify further specifics so that supply chain managers can set better goals and benefit further from the program, process, mantra, or whatever it is supposed to really be.

Volume 5/Issue 1

Healthcare Value Analysis & Utilization Management Magazine

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The

RIGHT TOOLS makes all the

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This unique system is built on a powerful reporting engine that has shown countless successes in the real world of supply utilization and value analysis management.

Volume 5/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

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Feature Article

Robert W. Yokl

Cost Over Quality Equals Value, Or Does It? Debunking the Commonly Used Definition of Value Robert W. Yokl, Senior Vice President/COO, SVAH Solutions

Cost =Value?

Quality I cringe every time I sit through a seminar/workshop or read an article that describes value analysis or “value” with the equation of Cost over Quality equals Value. Why do I cringe? Because the equation is using the incredibly subjective term “quality” to try to describe what should be a requirement for a doctor, patient, or end-user customer of your hospital, system, or IDN. Does a doctor ask for a quality instrument for his surgical case? Or does the doctor ask for an instrument that reliably meets their functional requirements/needs exactly? Does getting a best price, standardization, or contract terms matter if the product fails to meet the requirements of the doctor which of course effects your patient outcomes?

We need to better define quality into something more exacting.

Volume 5/Issue 1

Healthcare Value Analysis & Utilization Management Magazine

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Feature Article

Robert W. Yokl

OLD: Cost Over Quality = Value Let’s look at a simple example: A hospital value analysis team performs a study on endoscopes for a capital request for a gastroenterologist. They were able to contract for the highest quality endoscopes and got great terms on the disposables. They did such a great job with the savings they brought about that they were able to buy two additional scopes with the budgeted monies. This appeared to be a win-win for the team and the doctor, which is what we strive for. However, two weeks into utilizing the new endoscopes, the team leader was notified that the doctor was unhappy with the new endoscopes that he requested because the handle grip did not meet his requirements. Basically, he was refusing to use these new endoscopes that he requested from this vendor and wanted all new ones bought ASAP. From a performance and quality standpoint, there was nothing wrong with this product. It performed as it was intended and priced. What was the real issue here? The team and requesting doctor focused on buying the top-of-the-line, most-touted quality product in the vendors product line but the team failed to find out what the doctor’s exact functional requirements were. The doctor required a different angle grip on the endoscopes than this vendor could provide and thus rendered the product unusable to him. The team never validated the actual functional requirements of the doctor for this endoscope. A simple walk-through test of the use of the actual product would have uncovered this before the hospital purchased 16 of them. If you look at the cost/price over quality equation, this should have worked - right? But the functionality of the product did not meet the end customers’ requirements.

NEW: Cost Over Function = Value Larry Miles, the Father of Value Analysis, defines value as follows: “When most people evaluate a product, service, or technology, they only look at the product, service, or technology’s aesthetics and not its reason for being….FUNCTION.” Larry Miles was a Value Engineer who worked for GE during the 1940’s when raw materials’ accessibility and high costs due to World War II forced GE to look for lower cost alternatives to meet their functional requirements. GE was a major manufacturer during, and of course well after, WWII. According to Miles, “Value is the lowest cost that will reliably accomplish a function used.” If you think about products, you should be thinking about function first which will help you better determine quality while improving your standardization, pricing, and utilization overall.

Volume 5/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

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Feature Article

Robert W. Yokl

Is Value Analysis in Healthcare Different from Other Industries?

I know there are many who say that value analysis in industry is different from the healthcare environment, but we are all evaluating products, services, and technologies. Does adding the words clinical or quality to value analysis change the process that you should use to evaluate the products?

No matter what you are evaluating, whether it be the endomechanical instruments in healthcare or windows for a skyscraper, the common thread is that they all have functional requirements first and then you attack the cost aspects (price, standardization, sourcing, etc.) once you have defined your exact products and/or services to meet your requirements. We can use the same principles and practices to perform a VA study on a clinical product as we could on an office supply. The same goes for a clinical service as compared to a non-clinical service; the services must meet functional requirements or we don’t buy them at all.

Quality Equals Function and Function Equals Quality It is obvious that my problem with the Value Equation is with the word quality and the subjective nature of how we define quality in the healthcare supply chain world. If you replace the word quality with function, then you can clearly define the use of a product, service, or technology. What does this customer require, what does that customer require, etc.? If we reliably meet our customers’ exact requirements with the products available to use in our contract and GPO portfolios at the lowest acceptable costs, then I guarantee that you will meet your quality goals exactly as well. With exacting functions, we don’t overshoot or undershoot the mark. We hit it exactly for our internal and external customers.

If we are using value analysis to solve a quality issue with a product, then more than likely the product is not meeting a functional requirement and thus creating a quality or reliability issue. We then need to find an alternative product that meets a more exacting requirement and/or added required feature that was not selected or available in the previous product.

Don’t Underestimate the Power of Value Analysis for Your Organization Value analysis is an incredible process that, if used correctly, can help you navigate the crazy world of the products, services, and technologies of the healthcare supply chain. The principles of value analysis are universal, just like the principles of Lean, Six Sigma, and other continuous improvement systems and methods. By steering clear of subjective terms such as quality and focusing more on the aspects of products that you can clearly define like function, you will gain a whole new level of success with your cost and value creation for your organizations.

Volume 5/Issue 1

Healthcare Value Analysis & Utilization Management Magazine

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What is Value Analysis?....It’s All About Perspective

Learn How to Get More Value Out of VA at the Value Analysis Academy Website Coming Soon Healthcare at www.ValueAnalysisMag.com/Academy Value Analysis & Utilization Management Magazine

Volume 5/Issue 2

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Utilization Management

Robert W. Yokl

Why You Need to Stop Wasting Time and Money

by Starting a Successful Supply Utilization Management Program Now

Do you believe that Group Purchasing Organizations (GPOs) save big dollars for hospitals, systems, and IDNs across the country? That is a crazy question to ask but believe it or not, 20 years ago there were many organizations that did not belong to a single group purchasing organization let alone committing 60% to 85% of their volume to GPOs as we see today. Why did organizations not believe in GPOs and the savings they could bring about? It comes down to the maturity of the GPO organizations and more importantly, the commitment of hospitals, systems, and IDNs to the use of GPOs as their avenue to gain the best prices. But with any “new thing� it takes time for its adoption as a best practice. It would be silly to think that a hospital, system, or IDN would not belong to a GPO today, but it took over 20 years to get to where we are now.

Volume 5/Issue 1

Healthcare Value Analysis & Utilization Management Magazine

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Utilization Management

Robert W. Yokl

At One Time GPOs Were Highly Doubted as the Next Big Savings Vehicle Interestingly, I just read a new report from the Healthcare Supply Chain Association today on the Value of Group Purchasing Organizations and it listed three main valid points that illustrated how GPOs save money, promote standardization, and keep prices down in our supply chain industry. It took over 30 years to get to this point and even now we are seeing more GPOs being formed, mostly on the regional level, to better improve upon the value of the national GPOs. It takes time to adopt the “new next best thing.”

25 Years Ago, Value Analysis Was Obscure, Misunderstood, and Questionable You can draw the same parallel to back when I started in the healthcare supply chain over 25 years ago; value analysis (VA) was the big question mark in the minds of many Directors of Supply Chain.

Does VA really save any type of substantial money for the organization and can it help sustain our bottom line? Of course, if you ask that same question today you get a no brainer answer of, absolutely! Yet, we fought the uphill battles as a value analysis training, consulting, and solutions provider for many years. What was this uphill battle about? It was about adopting the belief that the concept of value analysis would pay off for the organizations and to what degree.

Just like GPOs, value analysis as a primary quality and savings methodology and teaming process is finally getting its due credit and is being universally implemented (or has been implemented) in just about every hospital, system, and IDN throughout the country.

There is even a Value Analysis Association (AHVAP) that has been around since 2003 (14 years!).

Value Analysis, deployed systematically with a disciplined approach, works to reduce costs and improve quality. However, it is still growing, just like GPOs.

You Don’t Have to Wait 20 Years to Gain the Benefits of SUM Today Now, we move on to Supply Utilization Management (SUM) which is the next progression of value analysis and supply chain quality and savings performance. What is the goal of SUM? SUM’s primary goal is to create a system to measure, manage, and control the consumption, demand, and utilization of supplies based on a baseline volume centric system. This is not just one price or tracking the items from past VA Projects or just surgery products/instruments, but to track and alert you to potential risks to your bottom line and/or quality.

Volume 5/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

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Utilization Management

Robert W. Yokl

SUM is based on the fact that hospitals are volume-oriented through and through. If patient volume (there are multitudes of volume areas and related supplies) is up, we use more supplies. If patient volume is down, then we should use less supplies. But what if volume is down or at normal levels and the consumption is up? Is this going to continue to hurt the bottom line? Was it a one-off instance or a systemic problem we must deal with sooner rather than later? How do we know this is happening on the organizational, departmental, or procedural level? If it is happening on just product X or category Y, how do we know where else it is happening in the over 5k to 25K worth of products at our organization? SUM is not a one-time event or one look back at a VA project or contract implementation. It is a system that enhances contracting, value analysis, and quality of patient care (gives more time back to nurses to take care of patients) because it provides a new level of intelligence into the supply chain department.

SUM Will Give You a New Level of Intelligence for Contracting and VA Programs Take all of your products and use the 80/20 rule to assign a major metric to each major and minor category; in turn, you track EVERY category of product, service, and technology. Then, have it alert you to increases in cost per volume baseline metric (endoscopy case, patient day, etc.) by category or by product within category. If we use custom packs as an example, you would not need to review all the packs, you would only review the packs that were running over baseline as compared to their specific case volume. You would then be alerted to this and your team would only spend the time on five to ten packs and not on fifty. Most importantly, SUM is perpetual so the alerts could be weekly, monthly, quarterly, etc. The good news is that you would now have alerts and be proactive on utilization instead of reactive or not active at all.

This may also help you track the real results of any price, value analysis, or cost savings as your baseline (not benchmark, your baseline) cost per volume metric should go down if your savings are implemented effectively. If it does not go down then you will be alerted to revisit the change.

It’s Time to Start Thinking About SUM Today Just like GPOs and Value Analysis integration to your supply chain (which more than likely took you years to accept and feel good about), SUM is that next realm that you need to start thinking about, not tomorrow, but today. Why? Because it will help you uncover the last 7% to 15% of untouched savings opportunities that have nothing to do with price or standardization and can fuel your value analysis agenda with the biggest savings and quality opportunities based on your own real data. So you can wait 20 years or start saving time, big money and make your job easier with SUM today.

Volume 5/Issue 1

Healthcare Value Analysis & Utilization Management Magazine

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Listen online at http:/www.svahsolutions.com/podcasts/ Or Find Us On ITunes Volume 5/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

15

Value Analysis 101

Robert T. Yokl

Measuring Value in Value Analysis Can Be Easier Than You Think

Price can be measured quickly, but value measurements take some time.

Yet, that’s what value analysis is all about: Measuring the value of the products, services, and technologies you are buying compared to the marketplace. If done correctly, this is where you can save a ton of money.

If You Don’t Have Another Measurement, You Default to Price Hundreds of values analysis practitioners’ decisions are made daily based on just one factor - price.

This is because value analysis practitioners don’t believe they can easily measure the value of their products, services, and technologies they are buying by any other measurement. However, this is a myth that needs to be put to rest so value analysis practitioners can benefit from the true value of value analysis. By doing so, value analysis practitioners will open up a whole new world of savings for their healthcare organization. Remember, price is the lowest cost element in the value analysis equation.

Volume 5/Issue 1

Healthcare Value Analysis & Utilization Management Magazine

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Value Analysis 101

Robert T. Yokl

In Its Simplest Terms Value Analysis is the Study of Function and the Search for Lower Cost Alternatives A value analysis study of a new or currently employed product, service, or technology starts with these five key questions: 1. What is the primary function of the product, service, or technology? A primary function is what a product, service, or technology does, without which the product, service, or technology would be useless. For instance, a vacuum cleaner cleans surfaces and a syringe injects fluids.

If these products didn’t meet this basic criterion they would be considered useless.

2. What are the secondary functions of the product, service, or technology? In addition to its primary function, a product, service, or technology could have secondary functions, such as, a vacuum cleaner could clean drapes and a syringe could prevent sticks.

These functions may or may not be desirable. This is one of the decisions that your VA team along with their customers should make in their evaluation of these products.

3. What are the aesthetic functions or features of the product, service, or technology? All products, services, and technologies have aesthetic functions or features (i.e., nice to have, but not necessary to perform our primary or secondary functions). The only question a value analysis practitioner should be asking is, do we absolutely, positively need them?

4. What is the lifecycle cost (not price) of the product, service, or technology? We all know the price of a proposed or current product, service, or technology, but do we know its lifecycle cost? This is the cost you need to know to make an informed buying decision. A commodity could differ in its lifecycle cost by as much as 15%, 25%, or even 35%.

5. What else would perform the job equally or better at a lower cost? Now that you have decided on the functions and features of the product, service, or technology being studied, what else would do the job equally or better at a lower cost? This is where your comparison shopping comes in. You match your ideal functions and features compared to the lifecycle cost being offered by other vendors’ products. This isn’t bidding, but evaluation!

Volume 5/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

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Value Analysis 101

Robert T. Yokl

These five questions form the nucleus of any value analysis study. If you can honestly have answered these questions then you have successfully performed a value analysis study. Just as important, you have measured the value of what you are doing now compared to the marketplace and probably found a lower cost alternative. That should be our goal - to search for the best value products, services, and technologies.

Measuring Value in Value Analysis Can be Simpler Than You Think There you have it! We have just outlined a system to measure the value, beyond price, of any product, service, or technology you would consider buying. It starts with knowing what your customers want (e.g., functions and features), as opposed to evaluating products, services, and technologies by their descriptions and manufacturers’ numbers that have been provided to you by their requesters.

Once we can isolate your requesters’ ideal functions and features through the value analysis technique, you can then unemotionally measure the value of the offering against the marketplace and not be swayed by vendors’ claims, pending discounts, or future rebates. In the final analysis, if VA is performed scientifically, it reduces your decision down to the bare facts. Isn’t that what you are looking for?

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19

Leadership Interview

Value Analysis Leadership Interview James Russell, RN-BC, MBA, CVAHP, Value Analysis Program Director, UW Health, WI

James Russell, RN-BC, MBA, CVAHP, is the Value Analysis Program Director at UW Health (the University of Wisconsin). Jim has 3 decades of nursing experience; a third in critical care, another third in psychiatry, and the last 10 years in healthcare value analysis.

He’s been in both staff and leadership positions

in

healthcare

the

for-profit,

sector, as well

community

as in several

Academic Medical Centers. Jim has published dozens of articles on value analysis and nursing leadership, and speaks

regularly at national conferences.

(SVAH) Could you tell us a little about your professional history and how you got into healthcare value analysis?

I have been a Registered Nurse since 1988. I’ve spent about a third of my career in critical care and a third in psychiatry (as a staff nurse and manager/director in both areas). The last 10 years has been in value analysis, mostly in the academic world (Virginia Commonwealth University, University of Florida, and currently in my new role at the University of Wisconsin).

I got into value analysis by accident! I was the nurse manager of a critical care department in a large community hospital (in the for-profit world). I served on some advisory boards at the corporate level and an opening came up to Volume 5/Issue 1

represent the entire company on the nursing advisory council at their group purchasing organization (GPO). A wonderful person named America Sherwood (to whom I will be forever grateful) pointed at me and said, “Make that guy do it!” I didn’t know what a GPO was.

Perhaps she saw something I didn’t know about, or maybe she just got lucky, but it led down the value analysis path that I’m on today. I was an okay ICU nurse and a pretty good psych nurse, but I’m better at this than either of them by far.

Value analysis fits my personality traits to a “T”.

I am a concrete thinker (as opposed to abstract) and need data before I can have an opinion. I hate it when people form an opinion and then try to find data to support it. In personality terms, I’m an ISTJ (Myers-Briggs).

Healthcare Value Analysis & Utilization Management Magazine

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Leadership Interview

James Russell

A “Logistician” (16personalities.com). I am about results and transparency. If you’ve ever thought, “Don’t tell me about the labor pains, show me the baby,” you understand. I appreciate the need for marketing and salesmanship; I just don’t want to do it. I want the data to speak for itself. Value analysis is all about data, logic, and substance over style. It just fits.

(SVAH) Who are some of your greatest influences in the value analysis and supply chain world, and why?

I am extremely grateful to the folks who helped me along. When I got into this full-time in 2008, I was at VCU and attended an orientation at the University HealthSystem Consortium offices in Chicago. It was a full week of learning from experts, such as Cindy Abel, Karen Latimer, and Jen Davies. They were exemplary (and very patient with me). Not only did I learn how GPOs work, but I learned some valuable project management techniques and facilitator tricks.

“Facilitator” is one of my favorite words. I used to introduce myself that way and say, “It means I have no responsibilities whatsoever…you all do the work and you all get the credit…I just facilitate.” It’s not quite accurate, but it’s fun to say.

As conference-goers will attest, one of the best things about this role is networking with folks that know more than me about value analysis (which isn’t all that hard). I’ve had the pleasure of learning from experts in the field like: Barbara Strain (University of Virginia), Lorra Miracle (University of Kentucky), Mike DeMasi (Stony Brook), Cathy Michalek (University of Michigan), Sally Lee (UC Davis-retired), Susan Newsom and Sylvia Trejo-Sheu (LA County/ Volume 5/Issue 2

USC), Kamy Lereet (University of Colorado), Kathy Jobson (SUNY Upstate), Joan Stelling (University of Alabama-Birmingham–retired), and Rosemary Linacre (Emory). These are just of few of the dozens of folks who’ve patiently walked me through the learning process, helped me avoid pitfalls, and reminded me that they “told me so” when I ignored their advice. Value Analysis folks seem to be particularly adept at sarcasm, excluding myself of course.

(SVAH) Where do you see healthcare

value analysis going over the next 3-5 years as far as scope and direction?

I have been annoying my peers about this for a while now. As healthcare changes (somewhat more rapidly now than we’re used to), we are uniquely qualified to bring our skills to bear beyond traditional supply chain foci. I would submit that value analysis should be a part of the discussion/decision-making body for anything that involves a contract, whether that be a new exam glove, a new MRI machine, a new laundry service, a new (yet another) Information Technology consultant, or the recruitment of a new physician. We’re actually a pretty easy box to check, but it can be glaring when we’re skipped. Here are a couple of real examples (but certainly not at any of my hospitals!):

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Volume 5/Issue 1

Healthcare Value Analysis & Utilization Management Magazine

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Leadership Interview

James Russell

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A hospital has Vendor A for the Radiology equipment (MRIs, CT scanners, etc.). They recruit a new Chair of Radiology who says, “I only use Vendor B.” The hospital replaces all of their perfectly good equipment to satisfy this powerful physician they are wooing. Two years later, the radiologist decides to move on to another facility and the hospital recruits a new chair. Guess what he “simply has to have”? You guessed it…Vendor A. I’m not saying Value Analysis can prevent inefficient decisions from being made, but we can certainly point out their incongruity with a facility’s mission statement well before the dotted line is signed.

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A new spine surgeon arrives at his first scheduled case in the Operating Room, looks at the implants that are open and ready for him to use and says, “I can’t use items from Vendor X, I only use Vendor Y.” When a knowledgeable OR person informs the new guy that the hospital has a 90% commitment to Vendor X, the response is, “Not anymore, if you want me doing surgery here.” Again, it’s too late for Value Analysis to do much at the end of this fiasco. Give us 15 minutes on the phone with the doc during the recruiting process. If he’s unwilling to bend on his preferences, perhaps the chair needs to recruit another physician, or the new guy needs to sway his new colleagues to Vendor Y. Either way, the incongruity will be discovered well before a patient is under anesthesia.

Again, these are real examples that have directly affected patient care and/or a facility’s finances that could have been avoided by bringing in an Volume 5/Issue 2

objective eye. You’ll notice that both involve physicians. This leads me to a rant…Physician Preference Items (PPI). This terminology has to go away. If we have to keep the acronym, change it to Patient Preference Items. It’s not really about a patient’s preference, but what works best for their particular circumstances, but that’s close enough. We make decisions all of the time based upon the specific needs of patients, from determining whether to do surgery in an inpatient or outpatient setting, or deciding which medication to prescribe, or even how many bells and whistles an implantable device should have (demand matching). Why wouldn’t we base our preferences on patient needs, rather than physician desires? Physicians are human.

They are as susceptible to the influence of a charming vendor representative as the rest of us.

Who doesn’t like to go to a fancy restaurant and be seen with an especially attractive “date”?

However, this can lead to biased decisionmaking…especially when spending someone else’s money (at least for now, where most physician practice plans are separate from the hospital’s finances). Examining a decision with an objective eye is never a bad thing, as long as you’re prepared to hear what the data shows.

This brings me to my last rant…evidence-based practice. The concept of using quality, published, peer-reviewed “evidence” to guide decisionmaking goes hand-in-glove with value analysis. I have never met a clinical expert who didn’t “value” the concept…at least for other people.

Unfortunately, I’ve also met many who think they’re exempt. These can be fantastically bright people, with doctorates that focus on the value of

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Leadership Interview

James Russell

evidence, who simply can’t apply the same rigor to their own projects. True value analysis is letting the data lead you where it will, using it to illuminate your decisions, even if you decide to ignore it…at least you know you’ve done so. I’ve had clinical experts tell me things like, “I know the evidence shows that having silver-coated Foley catheters isn’t any more effective than uncoated ones…but I want to have them anyway.” I submit (frequently) that you wouldn’t make decisions this way with your own household finances. You don’t buy the undercoating protection on a new car…because it’s a waste of money. You don’t buy a protection plan on a new toaster…the store will sell you one if you want one, but you aren’t interested. You make decisions based on evidence, which includes factors like your bank balance. Do it at work, too!

(SVAH) In many of your articles and presentations, you have focused on supply utilization management as it relates to value analysis. Why do you think that is so important to healthcare value analysis professionals today?

Utilization is the “Holy Grail” of what we do.

When giving presentations about my role, I

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always include a slide with an iceberg, showing the visible portion above the waterline as cost savings based upon price negotiations and the submerged portion being utilization. Here’s a favorite example of mine: •

A Strategic Sourcing Analyst (or whatever you call your contracting experts) negotiates a new deal on pulse oximetry, saving $0.25 on each disposable sensor purchased. Your hospital buys 150,000 of these things a year.

That’s a lot of quarters! (Specifically, $37,500 in direct cost savings…nice!)

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A Value Analysis Facilitator examines the clinical practice patterns of the use of disposable pulse oximetry (utilization) and finds that the Emergency Room places one on every patient who comes into Triage.

That’s 50,000 patients annually. Upon further investigation, only half of those patients get admitted to the hospital. That’s 25,000 patients who are going home soon.

Do they really need an $8.00 disposable pulse oximetry sensor? How about clipping on a reusable probe and taking it off after the nurse gets a reading? If the patient is going to be admitted and needs a disposable probe, they can get one “in the back” when they’re placed in a room. That’s a savings of $8.00 25,000 times! $175,000. Buy some reusable probes and cables…spend $10,000. You’re still saving a significant amount of money, and you’re not negatively effecting patient care or making your clinicians work any harder. Fun stuff!

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Leadership Interview

James Russell

That’s the power of utilization. It’s not what we pay for a widget, but: • • • • • •

• •

Who uses it?

Where do they use it?

Why do they use it?

What do other people use? We’re not special!

Can they use three instead of four?

Can it be reprocessed?

Does it have to be disposable?

Etc.

fine.

•

We had a truly exemplary human being come to the hospital and tell her story. Karen Daley. At the time, Karen was the president of the American Nurses Association. She told her story to every nurse we could put in front of her (including large crowds). Look her up on YouTube and you’ll find her advocating for safe clinical practice by telling her personal story of experiencing a needle stick herself…then sero-converting to being HIV and Hepatitis C positive. She tells this story frequently and when she does, there isn’t a dry eye in the house. It’s powerful, humbling, and directly impacts the practice of any nurse that listens. She does this to advocate for safe nursing practice and to hold employers accountable for providing safe work environments. Simply said, she’s a hero.

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Clinicians became willing to try a new product. One that was designed in such a way that it removed the needle stick potential.

After a six-month education process (you try teaching 2,000 nurses learning to drive a stick shift when they’re used to an automatic) went live. It’s been five years now. Zero needle sticks from Hubers. That’s 30 nurses who haven’t gotten stuck.

(SVAH) Could you give us an example of a study that you are most proud of and the elements of value analysis that attributed to your success on the study/analysis?

I use this one all the time, because it’s not a huge cost savings, but it shows the value of having clinical input in the value analysis process. I did a project on Huber needles (used with implanted portacaths for venous access in very ill patients, such as those needing chemotherapy). Every project has a goal. Sometimes, it’s to save money, sometimes it’s to improve clinical quality. In this project, the goal was to decrease needle sticks for nursing staff. This project makes an excellent presentation (and I usually devote about 20 minutes to it). The cliff-notes version is this: •

Baseline data: Six needle sticks annually.

20,000 incidents of accessing portacaths (with Huber needles). That’s a 0.0003 rate.

It’s not quite six-sigma, but it’s not bad either.

•

Clinicians didn’t want to change. TWWADI (“The Way We’ve Always Done It”) was just Volume 5/Issue 2

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Leadership Interview •

James Russell

It cost the facility $8,000 more in supply costs annually to get the new product.

Preventing six needle sticks a year may not sound like a lot, but as a nurse who’s had one and spent a lot of time worrying about what would happen if my lab tests came back positive…six is a huge number.

I think this project shows the power of value analysis. The impact can be enormous. In the example above, you can attempt to quantify the impact by adding up the savings of not having to test six nurses a year for bloodborne pathogens, providing prophylactic medications, and potentially increasing Worker’s Compensation rates should one of those six sero-convert. You can also address the “soft” costs of the nurse’s anxiety and outright fear that she came to work to help people and may have suffered a life altering illness because of it. What’s it worth to avoid that? If you’re one of the six…it’s a lot. This was a long and somewhat difficult project…but the Return On Investment (ROI) was (and still is) powerful and rewarding.

(SVAH) If you had to give any advice to those who are entering the value analysis world, what would it be?

I’d say this is an exciting time to be in the field.

Healthcare reform has a lot of folks scrambling to secure a foothold in the changing environment. Value Analysis is uniquely suited to navigate the new paradigms and flex with the changes. When I interviewed for my current role, I said to one of the Chiefs, “Your facility makes a significant annual profit…my job is to analyze practice variation and point it out…that annoys people. Why do you want me here?” He Volume 5/Issue 1

smiled and said, “With the changing landscape, we may not be as profitable forever, and even if we are, wouldn’t we want to be efficient?” Good answer.

Another tidbit would be you read everything you can find on healthcare value analysis. The AHVAP website is a good place to start. If you already work in a hospital, find out if there are value analysis meetings and ask to join. Be a sponge. Learn all you can. If you’re a clinician, look around in your own areas for incidents of practice variation, whether it involves supplies or not. Variation isn’t necessarily bad, as long as it’s explainable in clear terms. I once analyzed our back surgeons and found one had costs that were way out of whack with the average. Upon investigation, I found that he did all of the scoliosis and spinal tumor cases. Okay. His variation makes sense. He isn’t doing a two-level cervical fusion.

Be assertive. The old days of jumping up to give a physician your chair are long past us. Optimal patient care requires a team that works together.

Good folks understand that. If someone questions your rationale for an action, do you get defensive? If you based your decision on evidence, I bet you don’t. Here’s a silly way to explain it:

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Leadership Interview •

James Russell

When I was practicing as a critical care nurse, I had another nurse come over to me and say, “I’m the kind of person who wants others to point it out when they notice I’ve made a mistake. Are you that kind of person?” I sort of stammered, “Uh-huh.”

“Good,” she said, “Let me show you where you screwed up.”

Evidence-based practice is defensible, transparent, and very teachable. It demonstrates a dedication to patient care and clinician safety.

Value analysis should never have to work against these concepts. They go together in every way.

(SVAH) You are a member of the Association of Healthcare Value Analysis Professionals and also a Certified Value Analysis Healthcare Professional. Why do you think it is significant to be part of this group and be certified in your field?

AHVAP is a young professional organization representing a young profession. It’s a great opportunity to get involved with the folks who started this field. There is a wealth of knowledge and experience waiting to be tapped; all you have to do is ask. Go to a conference, read a blog, and if it doesn’t excite you, you’ll know it pretty quickly. If you find yourself thinking, “Wow, that’s so cool. Look how much garbage they kept out of their landfill,” or, “Neat, they figured out how to stop losing money on a powerful procedure that provides so much good (Cochlear Implants), so they can keep doing it,” or, “Look at that. They saved money by getting a more expensive product because their utilization decreased (exam gloves that don’t tear). How

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cool,” then you might just be one of us!

Certification is a great way to trumpet your expertise, whatever your field. It lends credibility to your arguments and shows that you’re interested in learning. In my past, I was a Nurse Manager and I can remember encouraging my nurses to further their education and get certified. Most understood that it was a nice feather in their cap, but occasionally I had a few who would say, “I already know all I need to know.” Is that the nurse you want to take care of your mother or your father?

To wrap up, I absolutely love what I do. I get to use my clinical knowledge, apply data and evidence, and show an ROI that benefits my workplace, the people who come here for care, and those who provide that care. How great is that? I also get to network with folks who are incredibly knowledgeable and very willing to share their lessons learned, so I can avoid their mistakes (or not). Lastly, I get to do a job that uses my natural tendencies (concrete, mathoriented, data-geeky guy) to improve things around me. Notice I say “get to,” not “have to.” I can remember “having” to go to work, not “getting” to. When you find the right fit, it’s almost a crime to get paid to do it.. Almost.

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Volume 5/Issue 2

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The Last Word

Michael Bohon

A Common Mistake Hospitals Make in Their Savings Efforts Michael Bohon, CPSM, C.P.M., CMRP, Managing Director of HealthCare Solutions Bureau

Decisions, Decisions You, as the supply chain leader for your hospital organization, have been tasked with reducing the expenses under your control dramatically. Where to start? We’re not talking about 2 – 3%. The C-suite is looking for big numbers. The pressure is on.

At a meeting with your team the idea of doing a GPO (Group Purchasing Organization) assessment has been raised. After all, you have not considered this option in a number of years, but how do you pull off this complex venture? You consider the options. You can bring in some consultants to handle the process for you or you can DIY (Do It Yourself). Of course, you will first consider the second option for following reasons: • • •

You have all the data.

You are familiar with your current GPO. Your organization will not be anxious to approve the expense of hiring outsiders.

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HEALTHCARE SOLUTIONS BUREAU HealthCare Solutions Bureau’s Seminars and Webinars (At Your Convenience) The HealthCare Solutions Bureau’s Seminars and Webinars is a compilation of instructional programs presented by HealthCare Solutions Bureau (HCSB) that are designed to provide supply chain professionals the tools and guidance they need to excel in their work.

Learn More About the Programs

They include detailed training in the art/science of negotiation based To access details of the seminars on the studies of the Harvard Program on Negotiation and the 40+ offered, please click here years of experience of the instructor, Michael Bohon, CPSM, C.P.M., CMRP and training on the fundamentals of inventory manTo access details of the webinars agement.

offered, please click here

These programs offer learning and insight that will assist an individual to further the progress on his/her career path or show To access the bio of the leadership skills by managing improvements in his/her organizations.

instructor, Michael Bohon, CPSM, C.P.M., CMRP, please click here

Seminars can be arranged to meet your schedule at a location of your choosing. Different formats for the timing of the sessions are listed on the links below.

To access information regarding

past history of HCSB's educational Webinars can be subscribed to individually or in groups (to reduce programs, please click here the cost) including those that are part of a series. Once the fee for the subscription has been remitted to HCSB the subscriber will be provide a link to the webinar(s). They are then able to watch the programs as many times as they wish in a 30 (or 60) day period. They can be viewed at any time by as many people as they wish. The link can only be used by members of the organization that have subscribed to their selection of programs.

Costs are determined by the number of programs in the subscription and the length of time they are available to the subscriber. They are calculated with the limited education budgets available in hospitals having been taken into account.

To obtain information on our customized pricing, please contact HCSB at Volume 5/Issue 2 Healthcare Value Analysis Utilization Management Magazine 31 bohon@hcsbureau.com or&520-904-1192.

The Last Word

Michael Bohon

The downsides of this plan are: • • • • •

You may have never done this before.

The process takes a considerable amount of time, one thing your staff does not possess.

You are unaware of how to accurately and objectively complete a “market basket” study that compares the available pricing of numerous GPOs. The GPO world has recently changed significantly and what you were used to may not be the case anymore.

You may end up with a decision that is not in your best interests.

War Stories I could provide an endless supply of DIY stories that ended badly. Instead, I will provide just a few.

In the first case, two hospital systems were in the process of merging their seven hospitals. They decided to complete a comparative study of their separate GPOs to consolidate to one. They decided such an effort would not be that difficult and they had good people who would be able to handle it. Ten weeks later, the team that had been assigned the task of the analysis was still in a state of chaos with documents and spreadsheets flying through the air at the large meeting at which a final decision was to be made. Yes, the two systems had brought all their key executives and management to a meeting on neutral territory. After a number of delays, the two CEOs turned to the supply chain analysts and asked for their final determination. With no final resolution of the question in hand, they simply said, “It’s a toss-up!” I was the Purchasing Manager for one of the systems and knew that statement was not necessarily the real case, but it was an answer and one was needed immediately. The executives made their decision and patted each other on the back. One year later the merger came apart and one hospital immediately returned to their original GPO. In the second case, twelve hospitals in a relatively small region had a loosely-based alliance. They were generally dissatisfied with their current GPO relationship and approached me to discuss my conducting a study to provide data and information for a decision. After a lengthy discussion, they

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The Last Word

Michael Bohon

announced they were going to do it themselves. They apparently thought that they had gleaned enough information that they didn’t need outside help. Six months later I contacted them and heard their story. They had split into two factions; those favoring the incumbent and those focused on a relationship with a new GPO. The battle between them became very contentious, especially after one side accused the other of doctoring the numbers to make their choice look better. The last I heard of them they went in different directions and I can find no mention of what was their former alliance on the Internet.

I will forgo the details of all the hospital systems that have come to third-party consultants saying, “We thought we could do it ourselves, but what a mess! Can you help us by doing what we should have let you do in the first place?”

Get the idea?

Bigger Is Not Necessarily Better In case you have not experienced this fact, let me share with you that all third-party consultant groups are not equal. I am sure you are shocked at this revelation. One of the most common misconceptions is that the bigger they are, the better they are. Not true! In the case of the bigname groups, GPO assessments may only be a very (!) small part of their business and they use people who have a varying amount of experience in this area. They also often have a greater focus on billable hours rather than the outcome of the work.

There are a few consulting groups who have a strong background in this type of work and have been able to provide accurate and objective findings that enable their client to make the best decision for their future. When seeking third party help you should ask them for at least three references and inquire as to the results of the projects.

Also, make certain that you are aware of, understand, and agree with their methodology.

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The Last Word

Michael Bohon

Another Way of Doing It It is a generally known and accepted fact that 60 to 70% (or more) of the hospitals that go through a GPO assessment process inevitably stay with their incumbent GPO. The most common reason given is that it was just easier that way. So, what was the purpose and why the expense if that was the probable outcome?

Another possibility is a “GPO Optimization” option. This process allows a third party to mediate your relationship with your current GPO to determine if additional benefits and savings can be achieved. If handled correctly, this method can produce good results at a fraction of the cost and minimize the effect on your organization and staff’s workload. Most consultant groups do not offer this alternative as it limits their billable hours.

Remember, Value/Supply teams and committees have to deal with the fallout of changing GPOs in the form of 1, 2 or 3 years of contract conversions, in-servicing and value justifying thousands of product changes.

Final Thought Think before you leap into the deep morass of a GPO assessment project. Remember, Value/Supply teams and committees have to deal with the fallout of changing GPOs in the form of 1, 2 or 3 years of contract conversions, in-servicing and value justifying thousands of product changes.

Michael Bohon, CPSM, C.P.M., CMRP is the Managing Director of HealthCare Solutions Bureau. For more information on HSCB’s supply chain educational programs contact bohon@hcsbureau.com.

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Finally, A Proven System That Engages Clinical Department Leaders to Save Money in Supply Utilization Why Do Clinical Departments Need Only Clinical Departments Can More Proof Than Just Total Spend? Control Their Clinical Departmental Supply Utilization Supply and Value Analysis Managers have been challenged with providing evidence to show where clinical departments’ supply utilization is running over.

Normally, when the utilization overrun is brought to the clinical department managers’ attention in the form of spend totals, their first reaction is that patient volumes or acuity was high for the period. That is where the conversation usually ends and that is where huge dollars are tied up in your hospital’s supply chain. How do we provide the proof clinical departments need when it comes to supply utilization?

Clinical Departments Are Not Cost Management Averse Clinical departments are not cost management averse.

On the contrary, they will help manage utilization costs but require solid evidence when it comes to their major and minor product category overspends. Supply and Value Analysis Managers have been able to keep costs low for many years with various value analysis and contracting strategies but there comes a time when the clinical departments must learn where they need to do better.

Clinical departments have traditionally managed the supplies that are used for care on their patients but they have been doing this without a solid reporting system to tell them where they can do better based on patient volumes and acuity. With a system in place, clinical departments can now visualize all of their major supply categories and make the necessary adjustments which in turn will save big dollars (11% to 23% supply utilization savings per clinical department) for the hospital.

$3.8 Million for 350-Bed Hospital Recently, a 350-bed hospital reported clinical departmental savings of over $3.8 million. Why so much savings? Because they had never taken the utilization reporting to the departmental level and thus the savings were low-hanging fruit when it was brought to the clinical department leaders’ attention. Clinical Department Utilization Manager software made it easy to pinpoint the exact category in the exact nursing unit and the exact product(s) that were causing the overspend. Prior to this, they did not have any idea where to look or how to prove the savings to the clinical department leaders.

•

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•

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Sign Up for A FREE Test Drive Today of the Clinical Department Utilization System

www.ClinicalSupplyUtilization.com A Software-As-A-Service brought to you by SVAH Solutions, Skippack, Pennsylvania Volume 5/Issue 2

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