Healthcare Value Analysis & Utilization Management Magazine - Spring 2013

Healthcare Insights, Best Practices and Advanced Strategies You Can Use To Up Your Value Analysis Game

Reduce, Control and Eliminate Unnecessary Utilization Practices

Value Analysis Training is the Magic Bullet that focuses the light on Big Savings!

Spring 2013 Published

Spring 2013 ISSUE

Magazine Featured In This Issue:

Also In This Is-

==========================================================================================================

Page 8—Strategic Value Analysis Planning sue:

Page 15—Value Analysis Team Leadership Page 18— Breakthrough Savings on Demand

Featured In This Issue: ==========================================================================================================

Page 9—Value Analysis Begins & Ends with Training Page 18—How to Avoid Group Think Page 32— The Missing Link in Supply Expense Management

Analysis Magazine

by Strategic Value Healthcare AnalysisValue in Healthcare—www.StrategicVA.com

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Capture More Savings Than Just Price Fiscal 2013 is the year to bank on a solution that can propel more of your supply chain savings under management control, and put the “strategy” back into your strategic supply chain efforts. Utilizer® Dashboard is selected by more chief financial officers and supply chain leaders to: 

Augment existing supply analytical suite’s investments to fill the big gaps.



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

Tackle complex spend areas (i.e., utilization and demand management) with advanced value analysis analytics capabilities.

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Healthcare Value Analysis Magazine

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contents

Healthcare Value Analysis Magazine Healthcare Value Analysis Magazine is published quarterly

by Strategic Value Analysis® in Healthcare P.O. Box 939, Skippack, Pa 19474 Phone: 800-220-4274

VA Begins *9 W/Training

FAX: 610-489-1073 bobpres@ValueAnalysisMagazine.com

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

Editorial Staff Publisher Robert T. Yokl bobpres@ValueAnalysisMagazine.com

Diversity *18 is Key

9 Value Analysis Begins & Ends With

————————————

Training: How to build a foundation for reaching even higher levels of savings.

Managing Editor

18 How to Avoid Group Think: Why

ryokl@ValueAnalysisMagazine.com

you need to diversify your VA team’s membership to energize your team’s performance.

————————————

32 The Missing Link in Supply Expense Management: Techniques to ensure you have all of your supply expense management bases covered.

35 What You Can’t See Could Hurt

The Missing Link *28

Spring 2013

You: Covering all of your supply expense bases in real time.

38 Good Evidence —The Missing Link: How do you determine what is good clinical evidence vs. bad evidence?

Healthcare Value Analysis Magazine

Robert W. Yokl

Senior Editor Patricia A. Yokl ————————————

Editor Danielle DeShong Copyright 2012 Strategic Value Analysis® in Healthcare. 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 email 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.

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From the Publisher's Desk

If You Think Training is Costly, Just Think of the Cost of Not Training Your VA Teams Robert T. Yokl

I can’t count the times I have seen value analysis teams waste time, money, and resources because they haven’t received advanced trained in value analysis strategies, tactics, and techniques. Instead of taking less than 90-days to complete their value analysis projects they sometimes take years, if they ever get their projects finished. They ignore savings opportunities because they believe they are too hard to investigate or implement, or they are uncomfortable challenging their clinicians’ bad behavior, habits, and practices. Thereby, costing their healthcare organizations millions of dollars annually in lost, ignored or discarded opportunities. It doesn’t need to be this way!

Fully developed, trained, and motivated value analysis teams are like “savings machines”. You couldn’t stop their savings from flowing, even if you tried! This is because they have acquired the appropriate skill sets through training to make their VA job easy, productive, and profitable. We train our clients’ value analysis teams to use our 6-Step Value Analysis Funneling process that ensures that their value analysis team members approach each and every value analysis study the same way. That’s why they complete 97% of their VA project on time, within the budget, and within 90-days!

When you consider that a one hour meeting of your value analysis team costs your hospital about $500 dollars, you want them to be as productive and profitable as possible. This cost doesn’t even consider the time (3, 7 or even 11 hours) it takes for your team members to investigate new products or revisit existing products that have utilization misalignments, failures or anomalies in your spend.

So if you think training is costly, just think of the cost of not training your value analysis teams: A cost in time, a cost in inefficiency, a cost in productivity, a cost in lost opportunities. Can you really ignore that training is the answer to most or all of your value analysis challenges? I know from personal experience that training is the “magic bullet” for your value analysis success.

Robert T. Yokl can be reached by phone (800-220-4274) or by e-mail at bopres@StrategicVA.com with your questions, comments or counter-points to his editorials. Or, anything else that peaks your interest in this issue.

Spring 2013

Healthcare Value Analysis Magazine

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You could be leaving up to 11% to 18% in new supply savings on the table untouched!

BenchPlusManager

Does your team have the visibility and

control over your purchase services?

.com

Four easy steps to quickly ring the towel dry on these multi-million dollar expenditures...

1. Build a case for change: Show your C-suite how much they are spending and what the potential savings (11% to 18%) would be if you were to aggressively attack the multimillion dollar expenditures that are ready to be harvested.

Or, let BenchPlus do it for you!

2. Centralize all purchase service contracts: We recommend that all of your purchase service contract documents be archived and administered by your materials management/supply chain department. If the workload justifies it, you will need to hire a contract administrator to manage, control, analyze, bid or negotiate these contracts. However, this very small investment, if required, will yield a high ROI in a very short time. Or, archive w/BenchPlus!

3. Benchmark all purchase service contracts: This will ensure that your purchase service contract’s total lifecycle costs are within acceptable limits. How could you know if there are savings opportunities if you don’t quantify them and have a roadmap to start saving? This shouldn’t be a one time event, but instead a continuous process. Or, BenchPlus can do this for you too!

Spring 2013

Healthcare Value Analysis Magazine

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From the Managing Editor’s Desk

We are all Teachers and Trainers in Value Analysis Robert W. Yokl

This issue of Healthcare Value Analysis Magazine is focused on value analysis training and teaming, so I

thought I would bring up an important point that I have learned over my 21 years in the business; All of us involved in value analysis are teachers, educators, and trainers. Yes, we are, because we are always educating, teaching, and correcting our teams/committees, managers and staff in the proper use of our value analysis methods and practices. We are leading the value analysis and utilization revolution by educating our VA teams/committees, senior management, and clinicians on how to reduce costs while maintaining or improving quality. Easier said than done!

Now, I know there are supply and value practitioners out there that may not look at themselves as a trainer or educator, but trust me, you are always educating staff and yourself towards improving the value that you bring to the organization. Think about it, when you are putting on your value analysis analyst hat and

breaking down a product commodity group for your value analysis team to answer the question, “Why are you spending so much on this product category?”, you are taking that information and educating your value analysis team members, managers, and staff of the affected departments; thereby, leading them to the root cause of the issue. Nine times out of ten you are already offering up a corrective action plan, which of course entails educating and training staff on new methods and practices to fix your root problem and stop the overspend.

Let’s face it, we still very much live in the “Price World” when it comes to making savings happen. In order to help our staff, management, and senior leadership recognize that there is more to the savings equation that value analysis and supply chain professionals work on, such as, over-utilization, product mismatches, product failures, contract integration, quality outcomes, etc., we must continue to educate ourselves in the latest methods and practices of value analysis, so we can educate and train our staff to realize the savings for our organization. I know you are busy and you may or may not view yourself as a trainer or educator but it comes with the territory of being a value analysis professional. Embrace it and your organization’s value analysis program will flourish as you gain more knowledge of the latest strategies, tools, and methods in value analysis and supply utilization methods.

Robert W. Yokl can be reached by phone (800-220-4271) or by e-mail at ryokl@StrategicVA.com with your questions, comments or counter-points to his editorials. Or, anything else that peaks your interest in this issue.

Spring 2013

Healthcare Value Analysis Magazine

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Value Analysis News Also, Yokl has a second new book “10 Best Strategies to Save More in Less Time” that can be purchased at Amazon.com for $9.95 in both Did you know that at most hospitals, systems,

a Kindle or hardcover editions.

and IDN’s purchase service spend is equal to or greater than their supply spend? Well, that’s just one insight into your purchase ser-

vice spend that Robert T. Yokl’s new book

The Association of Healthcare Value Analysis

“How to Rein in Your Multimillion Dollar

Professionals has announced their 10th annual

Purchase Service Spend Before They Damage

conference will be held on October 23-25 at

Your Bottom Line” can give you.

the Chaparral Suites Scottsdale, Arizona. For

After decades of researching, measuring, and

more information, contact Laurie Krueger,

consulting on this topic, Yokl takes you be-

Managing Director, at lauriek@ahvap.org.

hind the curtain to reveal his little-known secrets to reining in these elusive, underman-

aged, and prohibitive costs drivers.

Bed Alarms Fail To Reduce

Patient Falls Study Reports

Yokl projects that healthcare organizations

A new study by the Annals of Internal Medi-

could be leaving up to 11% to 18% in new sav-

cine reports that bed alarms, made of weight

ings on the table — untouched. That figure

sensors embedded into a flexible pad, placed

represents about $28,090 per occupied bed in

on a bed, chair or toilet do not reduce patient

new savings in less than 12 months. He says,

falls. After studying 28,000 patients at the

“It’s a virtual gold mine just waiting to be ex-

Methodist University Hospital, Memphis, the

cavated by value analysis professionals”.

study concluded that the alarms didn’t de-

The good news, Yokl writes, is that this “Category of purchase is the easiet to rein in if you have the strategies, tactics and tools to do so which you will find in my new book.” If you would like a complimentary electronic copy of Yokl’s new book, you can request it by emailing Yokl at bobpres@StrategicVA.com.

Spring 2013

crease patient fails or fall-related injuries. The reason for this was that nurses ignore alarms because of too many false alarms and/or patients have already fallen when the alarm was triggered. The report further states that alarms can be helpful in the context of a well developed fall prevention program.

Healthcare Value Analysis Magazine

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4 Things Supply Chain Managers Should Know About Utilization Management It’s the future of supply chain expense management.

1

Price and standardization have been the primary supply chain cost containment strategies for decades. Now that these sources are waning, there is nowhere else to go for savings other than utilization management.

It’s a problem that's bigger than you might think.

2

We estimate that one in four products, services, and technologies you are buying right now has a utilization misalignment. Meaning, it is costing you on average 26% more to employ these commodities than it is costing your peers. Left untouched, they will cause real damage to your hospital’s bottom line.

It’s eating away at your organization’s bottom line.

For every dollar you save in price you could be losing $2, $3 or even $4 dollars in utilization misalignments. For example, you might get a great price on I.V. catheters, but if your clinicians are using 2.3 per patient to get the job done, it’s costing you more than it should be on just this one product.

3

It’s easier to save when you know where to look.

4

Utilization savings are different than price savings because you can’t see them with the naked eye! That’s why you need an advanced power tool to uncover these hidden savings. Then it is very easy to eliminate them!

“Make your utilization management job a whole lot easier”

www.UtilizerDashboard.com Spring 2013

Healthcare Value Analysis Magazine

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Feature Article Value Analysis Begins & Ends with Training VA training is the foundation for reaching even higher levels of savings

There seems to be an aversion by value analysis practi-

tioners to value analysis training in our industry. This is because there is a universal belief in value analysis circles that value analysis can be self taught and learned by doing. Nothing can be further than the truth!

This misconception has come about because value analysis practitioners have equated val-

ue analysis with the product evaluation and selection of their new products, services, and technologies process. This is not value analysis!

Product evaluation and selection is the examination, appraisal, and testing that leads to an informed judgment of the appropriateness of a product, service or technology.

Whereas, value analysis is the study of function and the search for lower cost alternatives that provide equivalent performance for the product, service or technology under investigation.

Here’s how these two concepts differ in practice. If a requisitioner or GPO contract offering for new surgical gloves is sent to a value analysis team for evaluation and approval, the gloves’ price will be the number one determining factor after a clinical trial has proven that the new surgical gloves are suitable (e.g., size, strength, tactile Spring 2013

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Feature Article sensitivity, etc.) for surgeons’ use. If the same surgical gloves were investigated by employing the classic 6-step value analysis methodology, the functions (primary, secondary and aesthetic) of the gloves would be identified and measured against predetermined standards to determine the lowest cost alternative that meets the required functions to protect surgeons and patients.

Different Methodologies Through interviews and observations with customers, stakeholders, and experts we would clearly understand what functions weren’t being met and then provide those functions at the optimum cost (not price) to meet our customers’ exact requirements.

I can guarantee you that the outcomes of these two different and distinct methodologies would be quite different — in dollars, satisfaction, and overall acceptability.

That’s why we consider product evaluations to be an inexact science, (i.e., trial and error) whereas, value analysis is an art and science that has a proven, repeatable, and reliable process that provides our customers with their required functions (not more, or less) at

“I can guarantee you that the outcomes of these two different and distinct methodologies would be quite different — in dollars, satisfaction, and overall acceptability”

the lowest cost.

One big difference is that the value analysis methodology starts with a blank piece of paper! First, we obtain the functional specifications of the product, service or technology under investigation and ignore any customer requisition or GPO offering, until we have fully comprehended the underlying reason or purpose for this commodity. We then search for lower cost alternatives to meet the identified functions exactly.

For example, if we received a requisition from the operating room for new one-time use Endopath blunt trocars, we would identify it’s primary function (punch holes), secondary functions (maintain sterility), and aesthetic functions (bladeless).

Spring 2013

Healthcare Value Analysis Magazine

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Feature Article We would then rate (on a scale of 1-10) each function/cost for desirability, reliability, and efficacy. Once we clearly understand what the customer absolutely requires (in most cases eliminating some unnecessary or costly functions along the way), we look for alternatives to meet those functions at a lower cost. As you can see, it’s a whole different “mindset” vs. the product evaluation and selection process most hospitals are employing today to reduce the supply chain spend.

Increase Savings with Training The value analysis process I have just outlined requires extensive training to perfect these higher level skills. It’s not a self-taught or learned on the job proposition! Advanced training in the value methodology will enable you and your value analysis team to save even more dollars (26% on average) than you are saving now.

In figure 1, I have outlined what a typical advanced value analysis training program curriculum would look like, which would be given over a one, two or three day session for your value analysis

administrative

champions,

team leaders, and team members.

“The value analysis process I have just outlined requires extensive training to perfect these higher level skills. It’s not a self-taught or learned on the job proposition!”

We recommend that your value analysis steering committee members also attend this same training so they too can understand the value methodology, what their role is in your value analysis process, and start to bond with your team leaders and team members in order to form mutual respectful, professional, and rewarding relationships.

Vital Savings Engine Value analysis, if practiced correctly, consistently, and scientifically as I have outlined in this article, is the vital savings engine that all healthcare organizations need to make saving beyond price quickly happen. However, your organization’s Spring 2013

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Feature Article success won’t materialize unless your value analysis team(s) has the training and executive management support required to create, manage, and maintain high performance value analysis. If your hospital, system or IDN is serious about value analysis, remember that value analysis isn’t about establishing a value analysis team(s) and then telling the team members to “GO SAVE MONEY!” It’s about having highly trained, motivated, and incentivized value analysis team

leaders and members that understand, internalize, and vigorously apply the six-step value analysis methodology that is taught by experienced professionals who have worked in your shoes. Then, and only then, can you up your value analysis game!

Figure 1: Advanced Value Analysis Training Curriculum Philosophy, Principles and Practices: Must go to the next generation of supply chain savings * Value Analysis is all around you * How are you evaluating/selecting your products and services? * The philosophy of value analysis * Purchase costs are only the tip of the iceberg * It’s all about function * 4 reasons for waste and inefficiencies * Standardization vs. Customization * Opportunity Pyramid * 9 reasons for no-conformity * Value Analysis as a quality tool * Understanding the customer * 6-Step VA/VE customer mapping process * 80/20 rule * Classifying customers by order of importance * How to translate their functions into our language * Why dollarize your functions * How to build functional statements * Developing win-win alternatives * Proving that your ideas work in the real world * How and when to look for opportunities for improvement Value Analysis –The Concept: What is value? * The concept of value * How to apply this concept * Why value analysis must be a system * What is function? * Types of functions * Life cycle cost analysis * The search for alternatives * Why value analysis is a creative tool * How to improve your savings performance * Functional tests you need to know Value Analysis–The Process: Goals and objects for every VA program * 15 triggers for selecting your value analysis projects * Why you need to target your family of products, services and technologies * 6-step value analysis funneling process * Benchmarking for success * How to utilize a functional matrix to make your job easier * How to blast, create and refine your VA project into savings * Why you can’t stop at the first best idea * What’s holding back creative thinking * Why pilot studies are always required * How to design evaluation instruments * 11 key requirements for any VA program

Creating, Managing and Maintaining High Performance VA teams: What makes teamwork work * The characteristics of successful VA teams * What goes wrong with teamwork * How to avoid negative VA team dynamics * How to develop a mission statement * Characteristics of an ideal mission tatement * Why VA teams breakdown in their teamwork * How to obtain optimal VA team performance * Team-Based project management model * The role of team leaders * Techniques and strategies for facilitation * Why listening is the #1 Skill * What’s your conflict style? * 4-Step change management model * Team members’ roles * The 4 stages of VA team development * Why you need a social contract * 11 tips for developing highperformance VA teams * How to structure your VA team meetings for success Value Analysis Project Management: What is VA project management? * How to select you first cycle of value analysis projects * How to conceive, define, plan and implement your VA projects * Goals and objectives for a VA study * How to collect data and data mine * How to benchmark to identify VA candidates * How to select, build and manage your project work groups * How to plan and implement your VA projects * How to keep your VA project on schedule * How to use your power, influence and leadership skills to succeed * How to manage change effectively with your peers Spring 2013

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Fill in the blanks about your

Price Savings ( ) Are your group purchasing savings becoming smaller and smaller? ( ) Is your product standardization substantially completed or done? ( ) Have you had increases in your group purchasing contracts last year? ( ) Are you scraping the barrel for price savings for 2013 and beyond? (

) Is inflation eating into the savings you have achieved in prior years?

(

) Are your value analysis teams running out of meaty projects?

If one or more of these “Price-itus” symptoms (or the lack of new price or standardization savings opportunities) are causing you to lose sleep at night, then maybe it’s time to invest 38 minutes to learn more about the future of supply chain expense management: Utilization Management!

Avoid these symptoms by signing up for a FREE demo @ www.utilizerdashboard.com

Spring 2013

Healthcare Value Analysis Magazine

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Expectations Are Even Higher for Value Analysis Than Ever Before! >Bigger Savings Goals >More Accountability

>Better Attention to Evidence >Quality Improvements >Reduce Infection Rates >Collaborate with Clinicians How Do You Take Your Value Analysis Program to a Whole New Level that Your Senior Leadership Now Expects from You and Your VA Program?

Dear Supply/Value Practitioner: As one of the leading Value Analysis firms in the healthcare industry since 1987, Strategic Value Analysis has seen the maturity of hospital based value analysis programs that has brought about incredible results in cost and quality improvements for hospitals and healthcare systems throughout the country. Incredibly, the majority of value analysis programs at hospitals and health systems in the industry today were formed and run with little or no training in the classic tenants of Value Analysis and Value Engineering. Yes, organization’s have been able knock down supply chain expenses with their home grown programs with a good rate of success but there is still more money on the table to be captured and knocked down.

This new level of savings is going to require a new level of sophistication from your value analysis teams. This is going to require your teams stop operating on the Product Evaluation Best Price first mentality and focusing on a functional requirement and utilization management approach. This new approach will require a new level of training than the old “form a team and go save money” strategy that we have seen up to this point in the majority of the healthcare supply chain world. Like Lean or Six Sigma, Value Analysis is a true management improvement process with over 67 years of development and enhancements that healthcare organization’s are not taking full advantage of because they have never been trained in the Classic Tenants of Value Analysis. Value Analysis is more than two words it is a comprehensive process that Strategic Value Analysis in Healthcare has embraced from our beginnings in 1987 and has trained our client’s in these advanced strategies with the highest level of success. This is your next level too!

Spring 2013

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Think of How Much You Have Accomplished with Little or No Training in the Classic Tenants of Value Analysis/Engineering.

Then, Imagine How Much of a Huge Impact You Can Make if You Now Had Formal Training in the Advanced Practices of Healthcare Supply Value Analysis.

Value Analysis Academy

You Will Be Unstoppable!

Spring 2013

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Clinical Value Analysis Value Analysis: It’s All About Data James Russell, RN-BC, MBA, Value Analysis Facilitator VCU Health System, Richmond, VA

After price is whittled down as low as it can go, utilization can offer an avenue for cost savings. However, without good data, before and after a project, all you have is an opinion. Often, in the value analysis role, we get zeroed in on the price of a widget; and for good reason. Most value analysis programs are evaluated in terms of dollars saved and this is a fine metric for determining a department’s return on investment (ROI). However, once the proverbial low hanging fruit has been picked, one can only squeeze the nickel so far. Luckily, cost savings (or avoidance) can occur from other strategies.

PIV Case Study As an example, consider a project involving peripheral intravenous catheters (PIV’s); clinicians at the Virginia Commonwealth University Health System (VCUHS) wanted to bring in a PIV securement device. They went through the clinical evaluation process and successfully trialed several products. They chose a vendor and made the case for adoption of the device. Part of the Value Analysis process involving new products at VCUHS is to develop a hypothesis related to the proposed product’s impact. In this case, the clinicians claimed that using the securement device would prevent PIV’s from being inadvertently discontinued (pulled out) by

Spring 2013

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Clinical Value Analysis patients moving around (transferring from bed to stretcher, or wheelchair, bedside commode, turning over in bed, etc.). By preventing this negative outcome, the device would: 1.

Decrease the frequency of PIV re-starts experienced by patients, thereby decreasing their pain and the nurse’s instances of exposure to a contaminated needle.

2.

Decrease the quantity of supplies used in performing PIV re-starts, thereby decreasing the total cost of those supplies.

A key to the required hypothesis is deciding upon measurable data by which the project’s success (or lack thereof) will be measured. In this case, normalizing the data to account for census swings was important. The hypothesis was as follows:

After integration of the PIV securement device, the number of PIV supplies utilized per patient day will decrease by 25%. This will decrease patient discomfort, PIV supply costs, the amount of time clinicians must devote to unanticipated PIV re-starts and the clinician’s exposure to contaminated needles.

Outcome When evaluating the results of a project, the data tells the story. After the PIV

project’s completion, a careful examination of the metrics ensued. The inclusion of the securement device occurred in July, 2011. As seen in Figure 1, the number of PIV catheters per patient day remained virtually unchanged from 2010 to 2011. The securement device wasn’t fully embraced (included in PIV start kits, on all supply shelves, etc.) until late in the year. Once fully implemented for the entire 12 month period (2012), the decrease in PIV catheters was quite dramatic: 0.69 to 0.36 IVC’s/PPD (48%). The above results are powerful and clinically compelling in terms of decreasing patient discomfort, decreasing nursing time spent on PIV re-starts, and Spring 2013

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Clinical Value Analysis decreasing the potential for needle sticks. What about the costs? The cost per patient day for PIV supplies increased the first year. What happened? We had to pay for the PIV securement device. This actually increased our cost per patient day for the PIV procedure. However, once the utilization of the supplies decreased dramatically (2012), the costs decreased as well, inclusive of the new securement device. The

decrease is recorded at 21%. This is the delta be-

Figure 1

tween the cost per patient day before the project

IV Catheters Used per Patient Day by Calendar Year 0.80 0.70

($2.34) and after ($1.84) as shown in figure 2. For

0.60 0.50

VCUHS, that’s nearly 6 figures in annual net

0.40 0.30 0.20

spend.

0.10 0.00

All elements of the hypothesis have been

IVC's / PD

2010

2011

2012

0.70

0.69

0.36

proven. Clinical quality (patient discomfort) has improved, staff safety (needle stick exposure) has

Figure 2

decreased, nursing time devoted to PIV re-starts has decreased (fewer IVC’s used per patient day), and supply cost per patient day have decreased, even including the new securement device. This results in a truly positive outcome and successful pro-

ject. However, it is the data that shows the impact and makes the case for the continued purchase of

PIV Costs per Patient Day by Calendar Year $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $$ / PD

2010

2011

2012

$2.34

$2.85

$1.84

the PIV securement device.

Data veterans may be asking if the facility measured any reduction in staff needle sticks. In this project, it was decided to consider that a “soft,” but important cost.

It wasn’t quantified because the facility was doing a great many things to decrease staff needle sticks; many of them had begun during the timeframe above. To attribute Spring 2013

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Clinical Value Analysis the needle stick reduction to the introduction of the PIV securement device would be suspect. Instead, the team included reducing the exposure to needle sticks, based upon the number of PIV’s occurring per patient day, in the hypothesis.

Summary The project described above had a positive outcome in both value analysis areas: Cost and Quality. A good value analysis department concerns itself with both and speaks the language of clinicians (quality/safety) and operations (cost). When providing feedback to either group, data makes the case. It provides a transparent and logical picture of the return on investment for the project. Clinicians pride themselves on making decisions using evidenced-based practice. The data above is exactly that. Operational departments use metrics to evaluate performance; this is evidenced-based practice as well. It’s all about the data.

Jim Russell is a Value Analysis Facilitator for Virginia Commonwealth University Health System and has more than 25 years of nursing experience, specializing in critical care and psychiatry. He's been a Staff Nurse, Charge Nurse, Clinical Coordinator, Nurse Manager, Director, and Chief Nursing Officer. He worked for many years in the for-profit community healthcare sector and also has several Academic Medical Centers on his resume. Jim sat for 5 years on the Nursing Advisory Board for a HealthTrust, performing Value Analysis for nursing related products and represented more than 70 hospitals. He is currently on several Advisory Councils and Special Interest Groups for UHC and Novation. When not at work, he can be found rolling around with his hyperactive rescue Husky. You can contact Russell with your questions or comments at jrussell2@mcvh-vcu.edu

Free On Line Video Course

#1 Secret to Upping Your Value Analysis Game Click here to Join the Journey to Generate New and Better Savings Spring 2013

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Audio Bonus

Value Analysis Teams

How To Avoid “Group Think”!

You need to diversify your VA team’s membership to energize your team

When selecting or replacing your value analysis team member-

ship, you need to consider the diversity of your team’s members. Do they look alike, dress alike, and think alike (i.e., homogeneous) or are they edgy, rebels, and free thinkers (i.e. heterogeneous)? The reason I ask this question is because there have been numerous studies conducted which show that if you have a homogenous group, you are in danger of “group think” or the practice of thinking or making decisions as a group in a way that discourages creativity, individual responsibility, and territoriality.

I know you have seen this “group think” behavior with your own value analysis teams over and over again. Team members don’t want to hurt someone's feelings, step on their toes, or seem to be unreasona-

ble, so you “go along to get along”. Not a good business practice, if you want to make the best decisions possible at your value analysis team meetings.

Another big turnoff is a team member who is obviously protecting their turf when a decision is put on the floor for discussion. They will find every reason possible (logical or illogical) to keep their products or services from being changed. Yet,

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Value Analysis Teams no team member will challenge their positions, opinions or intransience. This is the danger of “group think”, when the desire for harmony and conformity trumps good management practices. To avoid this counterproductive, dysfunctional, and limiting group dynamics we recommend the following three new rules: 1.

To ensure the unbiased nature of your value analysis team composition, up to 50% of your membership should be non-clinical. For instance, if you have ten

members on your value analysis team, five would be clinical and five would be non-clinical. The non-clinical members could be recruited from finance, maintenance, food service, public relations, telecommunications, etc.

2.

All value analysis members should be selected for their core competencies instead of by their title. We call this recruiting the usual suspects (OR and ER

director,

infection

control

manager, clinic manager, etc.) to be

“This is the danger of “group think”, when the desire for harmony and conformity trumps good management practices”

members of your value analysis team instead of selecting them for their unique attitudes, talents, and traits that complement your value analysis process.

3.

To avoid “group think”, territorial constrains, and to lower resistance to change, value analysis project managers should have no ownership over the products, services or technologies they are investigating. Meaning, if they specify, use or have budget control over any commodity group they would be disqualified as a project manager on a project in their spear of influence.

4.

Rule #3 goes for team leaders too; they shouldn’t be permitted to lead a value analysis team that is organized by product line if they have owner ship over the product line they are evaluating or investigating. For example, a

director of nursing shouldn’t be a team leader for a clinical VA team.

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Value Analysis Teams The purpose for these three new rules is to structure and encourage your value analysis team members to be cooperative, have an open mind, and to look at the big picture, rather than just their department, division or subsidiary's particular selfinterest. This goal can only be achieved if there is diversity in your value analysis team membership that leads to creativity, individual responsibility, and respect.

Guide to Selecting Team Leaders and Team Members

Based on Their Core Competencies

All winning teams are a combination of attitudes, talents, and traits matched with tight leadership to give them the needed vision, goals, objectives, and can-do attitude. We need team members and leaders who will take reTeam Leaders sponsibility for their actions, and pride in their Motivator accomplishments. Over the last two decades, Organized SVAH has documented and observed ideal team Team Builder core competencies, or what outstanding value Enthusiastic analysis team leaders and team members do more Results Oriented often, in more situations, with better results, than Communicator the average performers in highly successful value Welcomes Challenges analysis teams. To identify the individuals in your healthcare organization Anticipates problems and resolves them who also exhibit these same core competencies, we would suggest that you employ a 360-degree Spring 2013

Acts as Role Model

feedback mechanism in assessing your value team leasers and team members candidates’ qualifications, prior to membership on your value analysis teams. This means that you have the candidates, their direct report, Team Members customers, and colleagues rate their Analytical Thinker competencies on a scale of 1-10 prior to Organized final selection as a value analysis leader or Reliable and Dependable team member. The reason for doing so is Enthusiastic that you only see one face of this individual, Takes Initiative but by having them assessed by numerous Computer Literate individuals with whom they interact, in many Welcomes Challenges different venues, you can truly identify who Looks for Growth is the right candidate and Recognition to be involved in your value analysis proActs as Role Model gram.

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Requisition Manager: All of your new purchase requests will be completed online, numbered, and then automatically triaged to the appropriate responsible party for action. Thus, eliminating the hassle of dealing with the hundreds of unwieldy and non-uniform

(e-mail,

fax and phone) new purchase requests that flow through your office annually.

We have listed (see side bar) the primary and secondary features and benefits of our CliniTrack™ Value Analysis Management System to give you an idea of how it can help you to quickly organize, document, and then capture and control all of the pertinent details of your

value analysis process for new and better re-

Document Manager: To ensure that your im-

sults:

portant documents are never lost

If you are looking for an intuitive, uncomplicat-

or mis-

placed in your requisition to approval process, all relevant data will be automatically archived in the CliniTracK™ file repository until deemed appropriate to be removed. This will give you peace of mind to know that all of the critical data you require to manage your value analysis studies will be at your fingertips

when you need it.

ed, yet complete system to manage and control your value analysis program, this just might be the solution for you. It will also ensure that you have complete documentation (from requisition to approval) to value justify all of your new purchases: No more lost documents, no more unanswered questions, no more hassles or

loose ends with your product, service & tech-

Value Analysis Manager: All relevant value analysis team documents will be housed in this module. It will also contain our proven six -step Value Analysis FunnelingÂŽ process to assist your VA team in the evaluation/selection of

nology evaluations.

FREE 30-Day Trial Click Here to Sign up

any and all products, services or technologies

If you are one of the hundreds of supply chain

and clinical supply trials. All and all, with this

managers who are dissatisfied with the time, lost

module you will never lose a document or

opportunities, and complexity of your current

miss a vital step in your value analysis process.

Clinical Trial Manager: This module will provide your clinical supply trial team with a step -by-step process to follow to manage and control all aspects (project manager, trial location, length, training, cost/benefit analysis, survey forms, etc.) for your clinical supply trials.

By using this embedded process we can almost guarantee you that your clinical supply trials will be more consistent, credible, and exacting.

Spring 2013

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Value Analysis 101 Value Analysis Steering Committee: A Value Analysis Prerequisite In each issue of HVAM we will provide our readers with the one basic proven and time tested tenet of value analysis to assist you to refine, enhance, and advance your value analysis processes. If you have any questions on this lesson, please contact us at bobpres@strategicva.com.

We have worked with hundreds of value analysis teams over the last two decades and have discovered that the most successful high performance value analysis teams have had their CEO establish a value analysis steering committee to monitor, guide, and arbitrate disputes related to their healthcare organizationwide value analysis program. We see it as a value analysis prerequisite!

Some healthcare organizations have so-called value analysis steering committees, but they really function as value analysis teams. That’s not what we are talking about here! This committee consists of representatives from your senior management whose role is not to review and evaluate your product, service, and technology requests or GPO offerings, but to provide your value analysis team(s) with overall direction and guidance.

A typical monthly meeting agenda of a value analysis steering committee would consist of : (i) review of monthly savings report (new savings this month, savings fiscal year to date, cost avoidance, and rejected savings initiatives, Spring 2013

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Value Analysis 101 (ii) report from team leaders on progress from last month and the challenges and opportunities they have identified, and (iii) issues that are impeding their progress.

We see the most important responsibility of this committee is to arbitrate disputes between department heads and managers and the value analysis team leadership, since this is what holds back most value analysis teams from being successful.

For example, we helped a client to identify $725, 989 in telecommunications sav-

ings, but the telecommunications director at this hospital wouldn’t seriously discuss this project with the value analysis team’s project manager assigned to this study.

When this topic was brought up by the chairperson of the steering committee after being informed of this issue, she confront-

“We see the most important reed the telecommunications director at the sponsibility of this committee is committee meeting, who didn’t have an to arbitrate disputes between excuse for his intransience. Fast forward department heads and managers and the team leadership“ one month and this savings was implemented and booked by the team.

This is the power of the value analysis steering committee; it can make decisions quickly that can move your value analysis projects forward, or at least put issues to bed if the committee agrees with the department head or manager position on an issue. Either way, this committee can keep the ball moving forward for you, as opposed to having roadblocks that never are removed from your value analysis

team’s way.

The value analysis steering committee should be chaired by your president, executive vice president, vice president of finance or senior vice president. The reason you want the highest level of management to chair your committee is that it gives it status, decision making power, and clout. The membership of your committee should include, but not be limited to, the following members: supply chain manager, value analysis coordinator, value analysis team leaders, director of quality Spring 2013

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Value Analysis 101 improvement, vice president of finance (if not selected as chairperson), vice president of nursing, vice president of support services, vice president of medical affairs, and a recorder. The goal here is to have the right stakeholders on your committee that can make decisions for their divisions, which can differ from facility to facility.

I can speak from experience that not having a value analysis steering committee in place to monitor, guide, and arbitrate disputes can often cover up serious defi-

ciencies in your healthcare organization’s value analysis program. I’ve seen team leaders avoid their responsibilities, ignore chronic problems and miss most of their team meetings. Then senior management, after many months, wonders why their value analysis team isn’t saving money. It’s all about accountability!

In the final analysis, that’s what your value analysis steering committee can do for you; hold all team leaders and team members accountable for your value analysis program’s success. Don’t miss this critical structure in your value analysis program!

On-Site, fully customized 1, 2 or 3 day Advanced Value Analysis Training Program can help

your VA Team(s) increase savings by 300% or more “This (training) program offers a different perspective on value analysis than the GPO based programs. It can offer a recipe – complete with tools for the development or revitalization of a (VA) program.” Betsy Miller, Value Analysis Manager, Shands Healthcare

E-mail BobPres@StrategicVA.com for on-site fees Spring 2013

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Leadership Interview Value Analysis Leadership Interview Alan Weintraub, Chief Procurement Officer/Director of Support Services Enloe Medical Center, Chico, CA The following interview was conducted by Robert W. Yokl, Managing Editor, Healthcare Value Analysis Magazine

Allan Weintraub is a 30-year supply

analysis offered a more suitable

the inclusion of both new technology

chain veteran who is Chief Procure-

method to consider technology pur-

requests and retrospective review of

ment officer and Director of Support

chase decisions. From there, it be-

existing technologies; however, I

Services for a multi-facility system

came about crafting a model for a

wanted the program to have a cer-

serving a six-county region in North-

program that fit within the organiza-

tain degree of flexibility, that is, to

ern California. Allan is past-president

tions’ culture.

withstand being moved to different

and board member of the California Association of Healthcare Purchasing and Materials Management.

(HVAM) When you first started planning your value analysis program, what was your vision of how

(HVAM) How did you get into value

value analysis should operate at En-

analysis?

loe Medical Center? Was it a steep

(AW)

I think it was an evolution

born out of my passion for decision-

learning curve for you and your organization?

making models, but certainly influ-

(AW) Those who were around at that

enced by the works of Miles, Deming

time will likely tell you that I was pas-

and Yokl. I was interested in better

sionately committed to certain char-

ways to make capital and consuma-

acteristics that I felt the program

ble technology decisions than old

must possess to be effective, evi-

product standardization committees

dence-based, collaborative decision-

could offer. I saw technology pur-

making, an emphasis on determining

chases merely as an input that need-

what technology is functionally nec-

ed to be evaluated by its effect on

essary to achieve a desired quality

quality and outcomes. I felt value

outcome, a focus on cost of care, and

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Healthcare Value Analysis Magazine

settings (both physical and electronic). I didn’t want our program restricted to “only these individual decision-makers and only in this specific meeting”.

In addition, I wouldn’t say the learning curve was steep, but the adoption curve sure was. Our program caused us to change the way we make decisions and that didn’t happen overnight, nor did it happen without some resistance.

(HVAM) A number of years ago, you hired a value analysis coordinator to manage your value analysis program. Back then it might have been a bit forward thinking, but today

27

Leadership Interview hiring a value analysis coordinator is a ”best practice” for hospitals and systems. Why do you think this is such an important position for your hospital, and why should other hospitals consider this position mission critical for their organization?

(AW) First off, let me just describe the position at our hospital. An outstanding value analysis coordinator is a supremely talented individual that is able to speak multiple languages, possess x-ray vision along with a microscopic attention to detail, able to build bridges while standing on them, and display the skills of a UN ambassador while being outspoken.

What I mean is that we are dealing with the second largest area of expense in a hospital. Numerous stakeholder groups have input in how the money is spent. Those stakeholders don’t all speak the same language, so I wanted someone with a clinical background who understood supply chain to translate between clinicians and non-clinicians, a clinical/financial liaison if you will, and focus on it every day to ensure that we maintain traction for our program. Someone who also gets up out of their seat and observes practice to understand what our clinicians are trying to accomplish…someone who sees the disconnects and wants to make a difference like I do.

(HVAM) How did you gain your senior management and department

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heads buy-in to your approach to value analysis?

(AW) I mentioned earlier, I was passionate about the characteristics of the program but open to what the organization’s culture would support.

So, the short answer is that I sat down and talked to people - our senior leadership team, medical staff, key department leaders – and shared what I saw as the impetus for change. We talked about the inconsistent use of items, excessive variation, the lack of consensus and clinician input into decision-making, fragmented process, unfavorable financial impacts of existing technologies, and the disconnect to quality.

Once there was common ground on those items, I shared the characteristics I desired for the program and asked a lot of questions to determine what each leader would support in terms of commitment, structure, process, turnaround time, etc. Asking the questions I did allowed me to implement a program that fit within Enloe’s culture. From there we kept at it until it was grafted into the fabric of how we do business.

(HVAM) Could you give me an example of one or two of your most recent successes?

(AW) Our IV securement device initiative stands out due to the collaboration between our anesthesiologists, nursing staff, OR staff, radiology, and our value analysis program. It is a great example of how focusing on functional need first helped to faciliHealthcare Value Analysis Magazine

tate solutions. Our stakeholders in this initiative were focused on meeting the patient care need (functionally) rather than being married to any particular manufacturer.

Our annual savings will exceed $43,000.

Another recent initiative focusing on reducing variation in both price and practice in orthopedics is expected to save our organization in excess of $500,000 over the next year.

(HVAM) Can you share with me some key leadership attributes that make your value analysis program successful?

(AW) Several things stand out. First, we hold quarterly meetings with our senior leadership team to discuss our value analysis program activities and initiatives and any concerns we have relative to our initiatives. I will tell you that the opportunity to collectively discuss these issues with our CEO, CFO, and VP’s and make decisions together is amazing and key to our success. Second, we have great working relationships with quality management and Infection Control which I believe is essential. Third, we use a standardized scoring system to objectively rate each request. Fourth, each of the early decisions that I made – a flexible, movable model, inclusion of new and existing technology review, and inclusion of Pharmacy—have all contributed to our success. Last, but certainly not least, we have an outstanding program coordinator, who is everything I described earlier and more.

(HVAM) How is your value analysis

program incorporating new disciplines within value analysis, 28

Leadership Interview such as, utilization management and evidenced-based evaluation into your program?

(AW) Maybe here too, we were a bit ahead of the curve in that we’ve used a utilization benchmarking tool for several years now. Prior to using it, I felt we had a blind spot that its use helps resolve. We also consider studies and market data, when available and reliable, to drive evidencebased decision-making (often shying away from early adoption of new consumable and capital technologies).

(HVAM) What advice would you give a fellow supply chain leader if they were looking to take the plunge into a comprehensive value analysis program?

(AW) Ensure senior leadership support, hire the right coordinator, be careful to exercise relational (rather than positional) power, understand your culture, and don’t worry about whether your structure matches what you may see in a magazine article. Value analysis is a methodology – how you apply it depends on you and your organization.

(HVAM) How do you envision the impact of value analysis moving forward in the age of the Affordable Care Act dramatically effecting hospitals’ bottom lines?

(AW) The ACA is a very complex issue which many are struggling to understand. Since I don’t possess the crystal ball that gives me the answers, my approach is simple. I believe that Spring 2013

our ability to control expenses and reduce cost of care may be the difference between those that make it and those that don’t. Unless or until I find a methodology more effective than value analysis, I’m sticking with value analysis.

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Bill Baecker, CFO, Clinton Memorial Hospital, Wilmington, Ohio

Most healthcare organizations are “hitting the wall” on their VA saving because their value analysis teams or committees have been too informal, unstructured, and free form to get the job done. To move to the next level of savings performance, your value analysis program will need to have new rules, new systems, and a new operational model to generate new and long-lasting performance. Why not have the healthcare leader in value analysis teach, guide, and assist you to “up your value analysis game”. Just click on the box below to obtain even more information on this game changer.

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29

Value Analysis Techniques

Did You Know That Standardization Can Cost You Money?

Not all standardization is good for your healthcare organization’s bottom line

For over 40+ years, the healthcare supply chain industry has espoused standardization as a technique of choice for reducing and controlling their costs. I cannot argue that if implemented strategically this will definitely reduce your supply costs. Unfortunately, we have seen hundreds of supply chain organizations over-standardizing because of the scope of their standardization practices. Consequently, this practice ends up costing you more than you are saving, and you may not even realize this is occurring.

Best Practice To give you more insight into this thinking, let’s define the true benefit of standardization as a best practice: Standardization is the consolidation of vendors and/or

manufacturers of defined product/service categories with the goal of gaining the most economy of scale to render a better negotiable price and/or contract terms. A simple example of this practice would be consolidating your Peripherally Inserted Central Catheters (PICC Lines) to one manufacturer, which will give you the highest group purchasing contract tier to achieve “Best Price” in this category of purchase. On the surface this looks like a great price strategy, Spring 2013

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Value Analysis Techniques but here’s the problem that has been created by this tactic; most hospitals, systems, and IDN’s decide to go one step further and standardize on the PICC lines that the customers will use house-wide to one primary triple port PICC line on the manufacturer’s contract offering. Their thinking is that this one PICC line would cover all of your customers’ needs throughout their healthcare organization. This is what we call overstandardization. Does this thinking really benefit your bottom line?

New Tactic First off, there is no additional economy of scale that you will receive by consolidating inside a manufacturer’s contract by doing this, since you have already consolidated your volume to the one manufacturer and gained your best price. You may think that you are keeping inventory lines to a minimum, but does that really equate to a measurable advantage? Even worse, with this PICC lines’ standardization example you now have standardized to a triple port PICC line, when the majority of the time your

patients only require a single or dual port, but the only option your PICC nurses have is an expensive triple port line. This equates to 13% to 32% of unused PICC line features being wasted 53% to 71% of the time. The question you must ask yourself is why knowingly throw away 13% to 32% of your PICC lines’ cost/value, representing tens of thousands of dollars annually, especially when it is not clinically required?

The lesson to be learned here is that your triple port PICC line will cover all of your clinical bases but you are wasting the value of this particular product. Keep in mind that the goal of value analysis is to find these gaps and close them to make sure that you are only using the exact product with the right configuration at the right time.

Customization vs. Standardization The solution to this over-standardization problem is to look at customizing your PICC lines (and other commodities) within the manufacturer’s product mix, instead of standardizing on one PICC line.

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Value Analysis Techniques To this end, find out through observations and interviews what your nursing floors/ departments unique PICC line requirements are, and then just buy what they absolutely need – no more or less. Then, establish standards for each nursing floor/ department. (e.g., ICU – dual and triple PICC lines; ED– single and dual; 4 Tower North – single line, etc.) to build your purchasing specifications. Next, follow up with training programs in the proper use of each of these PICC catheters. The goal in doing these three steps is to eliminate the wasted and costly feature gaps to ensure that you are only using what you absolutely need, not only in PICC lines but all products and services organization wide. Further, make sure you are utilizing every penny/dollar you pay for each and every product/service you buy, since waste and inefficiency is no longer an option!

Ignoring A Customer In Your Value Analysis Process Can And Will Destroy Your Credibility When we teach our clients’ value analysis team members in our LEAN Value Analysis Program about the “Hierarchy of Customers” (internal and external), we start out by focusing on the obvious customer who is anyone who touches the product, service or technology through its life cycle.

their key customers and stakeholders in new product evaluations that their value analysis team has approved for purchase.

Then, through happenstance, they find out that these customers and stakeholders were using the product improperly and wastefully, not to mention upset that they were not involved in the value analysis process of their product. These misunderstandings are quite an embarrassment for value analysis teams when the key customers and stakeholders find out (and they will find out) that they were omitted from their product’s value analysis process.

However, we also talk about the importance of identifying stakeholders (anyone who can block or influence your initiative) and experts (know more than any other person about the product, service or technology), because if you ignore any one of these customer classifications in your value analysis process, you can and will de- I can’t think of any one thing that stroy your credibility. can terminate a value analysis study more rapidly than missing or I cannot tell you how many times ignoring a key customer in your we see value analysis project man- value analysis process. This misagers forget to communicate with take happens most often because Spring 2013

at the start of their project, value analysis project managers don’t map out (on paper) who their customers, stakeholders, and experts are in their value analysis study. Don’t make this same mistake!

All it takes to avoid this fatal error is to ask these three questions: Who touches the product, service or technology through its life cycle, who can block or influence this initiative, and who knows more about the product, service or technology than any other person. By conducting this short exercise, you can be assured that you won’t miss a customer, stakeholder or expert in your value analysis process ever again.

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If you are honest, the answer is nobody!

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Spring 2013

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Utilization Management The Missing Link in Supply Expense Management Do you have all of your supply expense management bases covered?

It wasn’t so long ago that price and standardization was king in

supply chain management circles. All you needed to do was join one or two GPO’s and then maximize your compliance, and you where home free. Then, products, services and technologies became so complex that value analysis became in vogue to decide what was the most appropriate product, service or technology to purchase. Now, more and more supply chain professions are acknowledging that there is a missing link in their supply expense management strategies and tactics; attacking their utilization misalignments.

At a recent AHRMM’s Executive Thought Leaders Forum, participants emphatically stated that “Even with the lowest possible price, if utilization

is inappropriate the cost will remain too high.” Supply chain leaders also noted that with commodities, there is a point at which the price is as low as it can possible be, and they must look at reducing utilization to capitalize on further savings.

Well, it looks like the jury has given its verdict; utilization management is Spring 2013

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Utilization Management the future of supply expense management. However, to make this great leap forward from price and standardization alone you will need your value analysis team(s) to also focus their cost reduction efforts on utilization management. This way, you will be covering all of your supply expense management bases. More importantly, this transition from price and standardization to also include utilization could up your savings yield by as much as 7% to 15% on your total supply spend. Wouldn’t you

agree that it is worth the effort?

One word of caution, the transition to utilization can’t be achieved with your current spend manager’s tools, since they are focused on price, not utilization. You will need to develop or purchase new value

“However, to make this great leap forward from ly to attack your utilization misalignments. price and standardization alone you will need your As we like to say, you need to have more value analysis team(s) to than one tool in your supply chain expense focus their efforts on utilitoolbox to enable you to have the right tool, for zation” analysis analytical tools that are built specifical-

the right task, at the right time, to make your cost management job easier and more efficient! It’s just like a carpenter; the more exacting the tool he has that is designed for a specific purpose the faster, easier, and more professional the job gets done.

As I said, the verdict is in; utilization management is the future of supply expense management. Your bosses, your peers, and your professional associations are jumping on this bandwagon. Isn’t it time you make the same leap forward with your own value analysis program to align with your healthcare organization’s transition from volume-based to value-based purchasing? It can make all the difference in your hospital, system or IDN’s bottom line, now and in the future.

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Spring 2013

Healthcare Value Analysis Magazine

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Value Analysis Analytics

Audio Bonus

What You Can’t See Will Hurt You Most of your new saving opportunities are below the water line

We like to equate supply chain expense savings to an iceberg!

Above the waterline are your price and standardization savings, which are easily identified. However, your robust savings opportunities (67% to 79%) are below the water line where they are hidden from your view. More importantly, these hidden utilization savings can and will hurt your healthcare organization’s bottom line if not eliminated, rectified, and controlled.

Scientific Approach That’s why a more scientific approach is called for to root out your utilization misalignments before they damage your healthcare organization’s bottom line. This approach is called value analysis analytics or the new science of savings. With this said, I’m sure you realize that your hospital, system or IDN’s senior management is looking to its supply chain professionals for even more savings to help them meet this unprecedented and unanticipated challenge in the healthcare marketplace that we are facing; lower revenues, demand of higher quality, and more patients.

Unfortunately, these new supply chain savings won’t be achieved with price and standardization alone. New sources of savings must be discovered to bridge the savings gap that you will experience with the erosion (if you haven’t already) Spring 2013

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Value Analysis Analytics of your price and standardization savings in the very near future. This is because most healthcare organizations aren’t employing a scientific approach to identifying the best value analysis target, beyond price.

Value Analysis Analytics That’s where value analysis analytics comes into play. It’s the art and science of measuring trends, patterns, anomalies, and variations in your supply chain spend to quickly uncover savings opportunities. For example, we identified with our Utilizer® Dashboard (which does all the value analysis analytics work for our clients), that one of our client’s transcription service utilization cost was $1.64 per CMI adjusted patient day higher than their peers, or $211,888 based on annualized savings.

When our client investigated this

“Its been our observation that anomaly in their supply spend they not most healthcare organizations are only discovered that they were spend- throwing darts at an elusive and moving target to find their value ing too much on their fragmented and analysis candidates, and with decentralized outsourced transcription meager results” services, but also decided after a thorough analysis to outsource all of their transcription functions for an additional savings of $66,999 annually (or $278,887 in total).

It’s not an accident that we uncovered this big transcription savings, and 96 other utilization misalignments, for this client. It’s because we employed value analysis analytics to do the difficult work for us that never would have been uncovered by the naked eye or even intuition.

Measuring Over Time Because some of our clients have employed value analysis analytics for several years, we are able to trend their purchases over a two or three-year period to Spring 2013

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Value Analysis Analytics identify additional saving opportunities that they weren’t aware of until our Utilizer® Dashboard led the way to these savings.

Since “things change and people change”, this always brings about new savings opportunities when you look at your data retrospectively. This was the case with a 98 bed hospital we worked with which reduced its contrast media cost by $43,632 the first year, after it identified this utilization misalignment. Then, the hospital had to

revisit this same commodity two consecutive years thereafter when its contrast media utilization cost spiked repeatedly. The reason for these lapses in protocol was that the radiology staff members kept falling back to their old habits and had to be re-educated about the best practices that were keeping costs in line in the first place.

It is a worthwhile effort for you to refresh all of your purchasing data on a quarterly basis to ensure that your utilization trends, patterns, and variations are within acceptable limits and have not spun out of control. A reversal in your supply chain expense performance metrics can easily happen, especially when your hospital’s census has a large variance.

Up Your Value Analysis Game It should be understood that since your value analysis team members have limited time for value analysis studies, their energies can’t be needlessly wasted on dry holes. Your value analysis candidates must be real, quantifiable, and irrefutable before you even consider them as targeted savings opportunities. This precision in identifying your value analysis candidates can only happen if you are assisted in this effort by the new discipline of value analysis analytics. It will give you the process, metrics, and competitive intelligence you need to uncover the high-value savings target that have eluded you for years. If you are looking to up your value analysis game, value analysis analytics is the correct path to follow to repeatable savings.

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Evidenced-Based Value Analysis

Good Evidence: The Missing Link Dee Donatelli, RN, BSN, MBA, Sr. Vice President, Provider Services, Hayes, Inc.

There’s no question that great advances in medicine have been

made over the last century. Still, not every medical technology, service, and intervention that we have at our fingertips is safe or works as well as or better than existing options. That’s what clinical trials are for: to figure out how well a product or medical technology works and compares with other approaches, to identify when and for whom it should be used, and, ultimately, to determine its clinical value.

If the clinical trial evidence shows a clear benefit, then we need to make sure we’re using the medical technology in the way in which it was intended—for the appropriate disease and patient population. This is what we call evidence-based medicine, a common buzz word these days that everyone seems to be talking about. But as we know, talk doesn’t necessarily align with behavior, does it?

Recognizing the need to incorporate evidence into our purchasing and utilization decisions is one thing. Being able to evaluate the quality of the evidence and understand how the data should impact our healthcare decision making is another.

Once we commit to using clinically based criteria to make decisions about the items we use in the course of delivering medical services to our patients, the next step is to understand the evidence and to differentiate between good and not-so-good evidence. So what is evidence? Let’s define it simply as the outcome data derived Spring 2013

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Evidence-Based Value Analysis from formal, scientific research. That’s it. Ideally, we want the evidence we use to be of the highest quality and to be unbiased; that is, we want the researchers to report the results clearly and accurately without any influence or bias from the clinical trial sponsor or any of the stakeholders involved in the research. Don’t consider the slick marketing brochures that sales representatives hand you or the testimonials that appear on manufacturers’ websites to be unbiased forms of evidence.

Unfortunately, not all evidence from scientific research is created equal. Assessing the quality and strength of the evidence isn’t easy. It’s not enough to simply review the abstracts of a few studies that the librarian at your institution pulled when you requested a search. A host of factors (study design, sample size, patient population, study execution, data reporting, etc.) impact the quality of evidence and these factors often aren’t apparent in the abstract alone.

High-quality evidence begins with a suitable research design. The figure shows the basic hierarchy of clinical study designs. The weakest form of evidence comes from single case reports. These are the anecdotal reports of the outcomes seen in 1 or 2 patients. The strongest type of evidence comes from meta-analyses and randomized controlled trials (RCT) that enrolled enough subjects so that the results have meaning.

Keep in mind that we don’t always need an RCT to determine with reasonable confidence whether a health technology works and is safe. Sometimes other types of studies provide high-quality evidence as long as they are well designed, well executed, and applicable to the patient population in which we’re interested. Moreover, even the best study can be fatally flawed if it’s poorly executed. That’s why it’s important to review the entire body of evidence rather than just a few studies.

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Evidence-Based Value Analysis We need to look at all of the clinical evidence to establish an accurate perspective of a technology’s efficacy and safety. Cherry picking only those studies that support one position or opinion is a poor way to assess and compare the clinical value, and operational and financial impact, of new and existing health technologies. And since new studies are added to the body of evidence over time, any review of the evidence must be ongoing rather than a one-time process.

Good evidence has all too often been the missing link in our health technology acquisition and utilization decisions. It’s time for a new approach. Let’s remove marketing considerations, vendor-clinician relationships, physician preference, hope versus proof, and revenue potential from the process. Let’s focus instead on evidence that documents improvements in patient outcomes or operational efficiencies. By integrating high-quality evi-

dence into our decisions, we have the potential to improve clinical outcomes,

“Good evidence has all too often been the missing link in our health technology acquisition and utilization decisions”

reduce waste and unnecessary costs, and make more cost-effective use of our limited healthcare resources. Isn’t that what we’re all trying to achieve?

Ms. Donatelli has more than 30 years of experience in the healthcare industry, with expertise in the areas of supply chain cost reduction and value analysis. Before joining Hayes, Ms. Donatelli was Vice President of Performance Services at VHA, Inc., where she provided executive leadership and direction for VHA’s consulting services, including Clinical Quality Value Analysis. She is a Certified Material Resource Professional (CMRP) and a Fellow of the Association for Healthcare Resource and Materials Management (AHRMM).

She was recently elected president-elect of AHVAP, the Association of Healthcare Value Analysis Professionals. Dee can be reached at ddonatelli@hayesinc.com for questions or comments.

Hayes, Inc. (http://www.hayesinc.com), an internationally recognized leader in health technology research and consulting, is dedicated to promoting better health outcomes through the use of evidence. The unbiased information and comparative-effectiveness analyses it provides enable evidence-based decisions about acquiring, managing, and paying for health technologies.

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Benchmarking

The Search For Best Practices It’s not the metrics that count, but how they lead you to superior performance

There is one overlooked fact about benchmarking; that it is the

search for best practices that leads to superior performance.

This is accomplished by utilizing metrics to determine performance “gaps” in your practices and then to understand why you are different from you benchmark partners. Or, where are you now vs. where you should be to meet or exceed your peers’ practices!

This fact was brought home clearly to us a few years ago when we were benchmarking a client’s forms’ cost. Our client’s cost per patient day was $1.26, but the best-in-class benchmark in this category of purchase was .09 cents. Or, a gap of $1.17. We couldn’t believe this was possible until we contacted the best-in-class hospital to understand what they were doing differently.

This mystery was quickly solved when we uncovered, by way of a discussion with their peer hospital, that they had gone 98% paperless. This then become our best-in-class best practice for forms that we recommend to our clients. Therefore, it’s not the metrics that count in benchmarking, but how they can lead you to superior performance at your own healthcare organization. That’s why blinded benchmarking studies never work; only customized studies can give you the right answers.

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The Final Frontier for Supply Chain Professionals The introduction to the wildly popular Star Trek TV series and eleven movies, “Space…The Final Frontier: These are the voyages of the Starship Enterprise…to boldly go where no man has gone before” has much in common with supply chain management of the 21st century. We as an industry, having conquered the world of price and standardization, are now looking for new worlds to conquer!

Like Captain James T. Kirk, whose job it was to find new worlds and new civilizations, we too as supply chain professionals need to seek out new savings sources to maintain our hospitals, systems or IDNs’ competitive advantage in our marketplace.

“It can be quite scary out there searching for new and better saving sources”

Utilization management is that NEW FINAL FRONTIER to be conquered! Let us help you with our Utilizer® Dashboard. The only all-in-one

power tool that will absolutely increase your savings yield by as much as 7% to 15% — almost overnight!

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The Last Word

The Evolution of Value Analysis Michael Bohon, Founding Principle, Healthcare Solutions Bureau

Twenty-seven years ago, I unexpectedly found myself working

in the supply chain sector of the healthcare industry in Arizona.

For nineteen years prior to that I was also employed in the supply chain, but in the steel and electronic businesses back east.

In some ways, the transition from electronics to healthcare was smooth. In others it was a challenge. I immediately took pleasure in the fact that everything my team and I did during our daily work had a positive effect, directly or indirectly, on another human being. I could not say that about my previous jobs.

What really was a surprise to me was the technological change that occurred rapidly and continuously with multiple new product lines and product changes being introduced weekly. That’s when I was introduced to a “Product Evaluation” system.

In fact, the hospital where I was employed in 1986 was one of the first to have an RN on the materials staff, and she was the key to much of the success we experienced. It

was a good process which provided some order in difficult situations. At least it offered a channel to have new products reviewed in a less subjective manner. Good decisions were made and dollars were saved. But was it the real answer to all the issues that the supply chain faced? Did it maximize all opportunities and make all the right decisions? Probably not!

Now in the 21st century we use a process called “Value Analysis”. Where did this concept come from? When I conduct seminars for the Institute for Supply Spring 2013

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The Last Word Management I ask people from industries, other than healthcare, if they use a value analysis process in their procurement. The most common response is the question, “What is value analysis?” This is surprising because the concept is said to have originated as “value engineering” during World War II by General Electric which is defined by SAVE International as: Value engineering is a systematic method to improve the

"value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost.

Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvement.

The transition from Product Evaluation to Value Analysis has been a good one that enabled hospitals to increase the breadth and depth of their programs. They have expanded their scope, and included broader and more consistent participation by key players. They are using new tools including software to document their processes, track their savings, and verify the correctness of their decisions. Hearing this, we can assume that we have finally reached nirvana. Hold on! Not so fast! As quickly as we progress, the world around us continues to change even more rapidly.

So what’s new? There is this new concept called “Value-Based Purchasing.” (There’s that value word again.) It states that not only cost and quality are important, but that now we must address outcomes. This changes our whole approach once again because prior to this it was advisable to have physician participation in our meetings. Now it is virtually required. How else are we going to address the outcomes piece of the formula? That will make for a different and certainly more effective means of addressing product and service selection. AHRMM recently Spring 2013

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The Last Word announced a new movement they are championing in the supply chain, CQO. Its symbol (below) shows the area of intersection of the three circles of focus. The point in which they all overlap could be redefined and referred to by the term we have heard before, VALUE. After all, that is our goal.

I attended a supply

chain regional meeting re-

cently during which a

speaker asked the audience

how many used a val-

ue analysis process at their

facility. He also asked

how many just attended

regular

meetings

called Value Analysis where

little is accomplished.

About half of the audience

responded that they

haven’t attended a meeting

or weren’t happy with

the results.

This being said, value analysis is a complex and arduous method, but when done

correctly can provide immeasurable advantages to its users. Healthcare needs these aids to improve its value platform. The wisdom that can be gleaned from publications like this is invaluable. Take advantage of it!

Michael Bohon, CPSM, CMRP, is the Founding Principal of HealthCare Solutions Bureau (HCSB), a healthcare supply chain consulting firm and speakers’ bureau. His extensive business background spans 19 years of work in materials, operations, sales, and administration in three industries (steel, electronics and specialty manufacturing) plus the last 24 years in healthcare supply chain management. Prior to founding HCSB, Bohon held positions as Director, Supply Chain Management at TMC HealthCare, and Director of Purchasing and Contracts at Health Partners of Arizona. He also worked as a consultant independently and for Perigon, LLC and OMSolutions. Among his accomplishments in consulting are the supply cost reduction of $4M+ at two major systems in the Northeast and leading successful facilities planning and design projects at expanding hospitals. Michael can be reached at bohon@hcsburea.com with your questions or comments.

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The healthcare supply chain profession will be experiencing challenges never before envisioned over the next few years. That’s because your bosses have even higher expectations for you and your department. We are at a crossroads as a profession, we can either live or die with our price and standardization strategies, or embrace the new discipline of utilization management to save more in less time -- the easy way.

Sign Up for a FREE UtilizerÂŽ Dashboard Test Drive @

www.UtilizerDashboard.com

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