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

Healthcare

Volume 2/Issue 2

Magazine

Insights, Best Practices, and Advanced Strategies You Can Use To Up Your Value Analysis Game Volume 2/issue 2

Healthcare Value Analysis Magazine Published by Strategic Value Analysis in Healthcare

www.StrategicVA.com

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You Don’t Need To Turn Your Organization

Upside Down to Uncover the Millions of Dollars in Savings Still In Your Supply Chain

But You Do Need to Have a Utilization Management System to Find the New Low Hanging Fruit...Supply Utilization Let us help you to quickly and easily identify and implement millions of dollars of savings right in your own back yard.

It’s now mission critical to do so!

WWW.UTILIZERDASHBOARD.COM Strategic Value Analysis in Healthcare WWW.UTILIZERDASHBOARD.COM Volume 2/issue 2

Making Savings Easy for You!

Healthcare Value Analysis Magazine

27 Years as a Trusted Leader in Supply Value Analysis and Utilization Savings Strategies

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contents

Healthcare Value Analysis Magazine Healthcare Value Analysis Magazine is published quarterly

by Strategic Value Analysis® in Healthcare

Connecting the Dots: Time, Costs and Quality

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

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

Editorial Staff 18 Nursing Impact Program: Raising Up the Voice of Nursing Value Analysis Thought Leaders are Addressing the Need to Study the Relationship between quality, outcomes...

A DoubleBarrel Approach to VA

Publisher Robert T. Yokl bobpres@ValueAnalysisMagazine.com

————————————

Managing Editor Robert W. Yokl

22 Lack of Training Is Holding Back Big Gains in Value Analysis Training your VA teams is the magic bullet for your VAT’s Success

ryokl@ValueAnalysisMagazine.com

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

29 Historical Benchmarks Can Be Even Better than Good Most The Last Word by Jamie C. Kowalski

department heads don’t believe thirdparty benchmarks

A Long-View On Value Analysis

Volume 2/issue 2

Healthcare Value Analysis Magazine

Editor Danielle Miller Copyright 2014 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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Our Job Is To Make Your Benchmarking Job Easier

If you aren’t aware of it, benchmarking is your key to becoming the BEST OF THE BEST in supply chain/ value analysis. However, very few supply chain/ value analysis professionals have the time, resources, or comparative data to be successful at this discipline. Let us do the heavy lifting for you!

www.StrategicVA.com Strategic Value Analysis in Healthcare, Skippack, Pennsylvania 27-Years as a Trusted Leader in Supply Value Analysis and Utilization Savings Strategies

Making Savings Easy for You! Volume 2/issue 2

Healthcare Value Analysis Magazine

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From the Publisher's Desk Savings and Quality Aren’t Mutually Exclusive Robert T. Yokl

We have all heard the criticism that any value analysis initiative can and will eventually create quality issues for patients, or some variation of this negative comment, many times in our supply chain career. When in fact, value analysis, if performed correctly, can actually improve the quality for your staff and patients. Let us prove to you that this is an accurate statement!

You have often heard us say, “Value analysis is the study of function and the search for lower cost alternatives.” The function is the reason for a product, service, or technology’s existence. Therefore, if you are doing your job correctly as a value analysis practitioner, you want to understand the functions of your customers’ products, services, and technologies without changing the functions in any way.

I.V, set, isn’t meeting the customers’ requirements RELIABLY. It might be that the needle isn’t sharp enough, securement device is not holding properly, rate flow regulator is not accurate, etc. By solving this quality problem for your customers, as an integral part of your VA study, you just solved a nagging problem for your clinical staff. More importantly, you have improved the quality experience for your patients. A win-win for everyone, wouldn’t you agree?

Now that we talked about quality, let’s talk about savings. Through testing, probing, and observing, value analysis practitioners typically uncover hidden savings in almost every product, service, and technology their healthcare organization is buying without creating any quality issues. I remember a client telling us that he once observed his OB nursFor instance, the primary function of an I.V. admin- ing staff throwing away one sterile glove that was istration set is to “transport fluids” to patients. prepackaged two to a pack because they only needA secondary function could be to “administer medi- ed one glove. He found a lower cost alternative in a cations” within the I.V. set with one port. Its aessterile glove which saved $3,000 annually, meeting thetic functions (or features) could be: sharp neetheir requirements with no waste. dle, securement device, rate flow regulator, etc.

Once we catalog our customers’ functions for any product, service, or technology we can then look for Hopefully you can see that savings and quality a lower cost equivalent. Notice, I didn’t say substi- aren’t mutually exclusive with value analysis. You tute, but EQUIVALENT! can have savings and improve the quality of the products, services, and technologies you are buying Now that we have some context on this topic, here’s if you approach value analysis as an improvement how we improve quality through value analysis: technique, not as a cost cutting technique. Now, 57% of the time when we are interviewing a cusmake sure you teach this to your clinicians so they tomer or observing how their product is being used too can embrace value analysis as a friendly tool we discover that their current product, such as an rather than a cost cutting tool that will create qualiVolume 2/issue 2

Healthcare Value Analysis Magazine

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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 Adverse Clinical departments are not cost management adverse.

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 department 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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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 Strategic Value Analysis in Healthcare, Skippack, Pennsylvania Volume 2/issue 2

Healthcare Value Analysis Magazine

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27 Years as a Trusted Leader in Supply Value Analysis and Utilization Savings Strategies—Making Savings Easy for You!

From the Managing Editor’s Desk Supply LifeCycle Cost Management TM Robert W. Yokl

As this issue of HVAM suggests, the new healthcare economy is all about saving time, controlling costs, improving quality, and expanding the scope (population management) of your healthcare organization’s services. It is our opinion that the best way for supply chain professionals to meet these multifaceted challenges is to embrace the concept of Supply LifeCycle Cost Management™.

sets over five years. This proves my point that the future of supply chain management is not to search out a better price (GPOs can do that for you), but to double your efforts to identify lower cost alternative products, services, and technologies through your value analysis process. Then, manage and control how your commodities are utilized and finally limit the cost of disposal after its useful life.

This LifeCycle concept encompasses the management and control of the beginning (value analysis), the middle (utilization management), and the end of a product, service, or technology’s useful life (economic and ecological disposal). This concept is important in the new healthcare economy since our goal now is to lower the total cost of our patients’ stay, visit, or procedure (while maintaining quality service), not to focus only on the price of the commodities we are buying.

Another way to put this is that it is now mission critical for you and your staff to manage and control the total costs of the products, services, and technologies you are purchasing. Why? Because this is how a large percentage of your healthcare organization’s revenues are being contracted for (i.e., fixed contract cost), and this practice will only grow in the future.

You need to look holistically at where your LifeCycle costs reside and then whittle away at these costs until they are much lower than the fixed costs for any of your healthcare organization’s services.

Price is the smallest cost element in the LifeCycle equation. If you look at the LifeCycle cost of an I.V. pump over five years, you will find that the pump itself costs a few hundred dollars to purchase, the pump sets themselves cost hundreds of thousands of dollars over five years, and the disposal cost of the pump at the end of its useful life is minimal.

A new day is dawning for supply chain professionals!

It’s a time when you can make a major contribution to your healthcare organization’s bottom line. You can move from a service department to a revenue contribution department, if you decide to embrace the LifeCycle concept I just discussed. Those who decide to ignore this message will find themselves at a distinct disadvantage, since only the profit contribWhere is the highest cost in this LifeCycle case utors, as I see it, will be left standing in the new study? It’s in the in-use or utilization cost of the I.V. healthcare economy we live and work in.

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Value Analysis News Bestselling Value Analysis Book – Ever!

You might not be aware, but the bestselling book in the value analysis world is Value Methodology sold by Goal/QPC. The unit price of this book is $14.95. Discount available for 5 or more. www.GoalQPC.com The book is advertised as, “A Pocket Guide to Reduce Costs and Improve Value Through Function Analysis.” But this book is really a dictionary (A to Z) of everything you ever wanted to know about value analysis. We highly recommend it for individual value analysis practitioners. Each of your value analysis team members should have a copy, too.

Larry Miles Foundation is Still Alive and Well Family and colleagues of Larry Miles, the father of value analysis, started a foundation (valuefoundation.org) after Larry’s death in 1985 to promote value analysis worldwide.

MVF is a non-profit organization which promotes education in value analysis in colleges and universities. They maintain the Larry Miles historical document center at the Wendt library at the University of Wisconsin. The MVF is looking for new Board members. If you have an interest in serving on the MVF Board please contact Jim Rains at J.rains@avgconsulting.com.

Volume 2/issue 2

Injury Rates in Healthcare Are 2nd Highest of Any Industry The Journal of Professional Safety reported that healthcare injury rates are second only to commercial loggers and fisherman. Patient handling causes many of these injuries, as does slips, fails, violence, and chemical exposure at a cost of $13 billion in 2011, representing 2 million lost workdays.

10 Healthcare Technology Hazards ECRI has published the 10 biggest technology hazards in 2014: 1.

2.

3.

4.

Alarm hazards Infusion pump medication errors CT radiation exposure in pediatric patients Data integrity failures in EHRs and other IT systems 5. Occupational radiation hazards in hybrid ORs 6. Inadequate reprocessing of endoscopes and surgical instruments 7. Neglecting change management for networked devices and systems 8. Risks to pediatric patients from “adult” technologies 9. Robotic surgery complications due to insufficient training 10. Retained devices and unretrieved fragments

Healthcare Value Analysis Magazine

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The Future of Supply Chain Expense Management is Now! “Every so often, an idea, innovation, invention, or revolution appear in the marketplace that changes the game forever. We call these breakthroughs ‘Game Changers’ or the rules or variations that change the game enough that a new or different game emerges.”

Healthcare organizations are now facing big challenges from lower revenues, more patients, and value-based purchasing, to name a few. How can supply chain professionals meet these challenges when their price savings are slowly disappearing? The simple answer is Supply Utilization Management which can open up a >>>>>>>

Volume 2/issue 2 The

Value Analysis Magazine Future of SupplyHealthcare Chain Savings—www.UtilizerDashboard.com

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The Future of Supply Chain Expense Management is Now! whole new world of supply chain sav- about utilization management”, not The Rest of The Story ings that you never knew existed. about price. Naturally, this was music This materials manager didn’t know to our ears, so we asked him why he us, our products, or our services beNo Longer a Theory believed this to be true. fore our meeting, but we found ourSupply Utilization Manageselves on the same page with him ment is no longer a theory or before the meeting was over. hypothesis. Our intensive reIt’s no surprise to us that more search, comprehensive studand more materials managers are ies, and hundreds of client enthinking and acting the same way gagements over the last 15 as this supply chain professional years have proven beyond a when it comes to reducing their doubt that Supply Utilization supply chain expenses.

Management is a new disciple that all supply chain profesSee The Light sionals need to master if their They are letting their GPOs do healthcare organizations are what they do best, reduce their to continue to achieve double acquisition cost, thereby freeing digit supply chain savings in up their time so they can focus on the future. utilization misalignments where It’s Time to Innovate their best supply chain savings Better Time Investment opportunities reside.

A few years ago, we met for an introductory meeting with a new materials manager at one of our Utilizer® Dashboard client hospitals which we have been servicing with our Value Analysis Analytic services for 10 years.

He then said that he had found, after decades as a materials manager, that it was a waste of time for him to haggle with his vendors to save a few pennies off his expense budget when his GPO contracts achieve 98% of the The agenda for this meeting was for savings available on price for his hosus to demonstrate our Utilizer® Dash- pital. board and talk about the value analy- On the other hand, if he invested the sis coaching and training we have same amount of time in uncovering, been providing under our subscrip- investigating, and implementing his tion service. However, this discussion utilization misalignments he could soon spun off in another direction save hundreds of thousands of dolwhen this materials manager stated lars a year. to us, without prompting, that supply chain management today “is all

Volume 2/issue 2

Healthcare Value Analysis Magazine

Take Action If you, too, see your price savings disappearing, now is the time to request a FREE “test drive” of our Utilizer® Dashboard at:

UtilizerDashboard.com A Software-As-A-Service brought to you by Strategic Value Analysis in Healthcare, Skippack, Pennsylvania 27 Years as a Trusted Leader in Supply Value Analysis and Utilization Savings Strategies

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Feature Article

Robert T. Yokl

Connecting the Dots: Time, Cost, and Quality It’s important to master all three cost drivers.

Value analysis is an interconnected process centering on time, cost, and quality. If you aren’t focusing on all three of these elements with your value analysis program, you aren’t maximizing your outcomes. In this article, we will explore all three elements in detail and why they are mission critical to the success of your value analysis program.

Time It always amazes us how long it takes for value analysis projects to be completed. It isn’t unusual to see a VA project take a year or more to be finished. Well, this is an impediment to drive costs out of your healthcare organization in a timely manner. For you see, your hospital, system or IDN needs all the savings it can muster now that the effects of the Affordable Care Act are being felt on your healthcare organization’s bottom line.

This is why you must set deadlines for all of your value analysis projects and must not treat each and every value analysis project the same way. We set a project deadline with the client teams we facilitate for 90 days on most projects. We also encourage our clients to follow these rules to speed up their projects: 

Projects that have a value of less than $10,000 in savings should be fast-tracked with a 30-day deadline to speed up your value analysis process.



Projects that only involve one or two departments should be fast-tracked for quicker results.



Projects that have a high ROI need to be expedited quickly, if possible, to obtain a more rapid impact on your healthcare organization’s bottom line.

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Feature Article 

Robert T. Yokl

Projects that can be broken down into pieces need to be given priority over getting the total project completed at one time.

My point here is that value analysis isn’t just about savings, it’s also about time! If it takes your value analysis project managers six, eight, or even 12 months to bring about savings on each and every one of your value analysis projects, this is too slow to meet the demands of your hospital, system, or IDN to generate savings now.

What this means is that we are asking you to put on your thinking cap to find additional ways to speed up your value analysis process, since savings tomorrow might not be enough to keep your healthcare organization afloat in these turbulent times. We know this is possible, since we see these tactics being employed every day with clients we are working with to up their value analysis game.

Cost When we use the term cost, most think of price, fees, and charges, when we should be thinking about lifecycle cost for the products, services, and technologies we are buying. We have all experienced buying a copier for $99.00 only to find that the ink cartridges are costing us twice as much as the copier itself after just a few months. This also happens when we buy almost anything for our healthcare organizations. That’s why we all need to employ the lifecycle cost formula when we buy anything or we will continue to use the acquisition price of the commodities we are buying and think we know the true cost of the items.

The formula for lifecycle cost is, “The sum of the purchase price plus the subsequent costs of ownership over the life of the product, service, or technology” or LCC=C+M+E+R-S (Exhibit “A”).

Ex-

C

Capital Cost

Initial Capital Expense

E.g., equipment, design, engineering, and installation

M Maintenance

Operations & Maintenance

E.g., supplies, salaries, inspections, and maintenance

E

Energy Cost

Utility use

E.g., fuel, electric, and gas

R

Replacement Cost

Repairs & Parts

E.g., service calls, filters, bulbs, etc.

S

Salvage Value

New Worth

E.g., Trade in value in final year

hibit “A” Volume 2/issue 2

Healthcare Value Analysis Magazine

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Volume 2/issue 2

Healthcare Value Analysis Magazine

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Cost & Quality

Robert T. Yokl

Double-Barrel Approach to Value Analysis Cutting Costs and Waste While Also Improving Quality

The late and great comedian, Rodney Dangerfield, always talked about not getting any respect in his daily life. He once said, “Last week I told my psychiatrist that I keep thinking about suicide. He told me from now on I have to pay in advance.” Well, I can tell you from experience that value analysis practitioners are in the same situation as Rodney if you let your clinical staff continue to discount the value of value analysis at your healthcare organization.

Teaching Moment Let’s take a few moments to review what value analysis is all about so that the next time a clinician (or anyone else) tells you that value analysis is all about saving money, you can give them the facts.

Value analysis was never about saving money. When Larry Miles (the father of value analysis) invented this technique in the 1940s at General Electric, he was asked by his boss to find substitutes for the materials GE was buying (i.e., steel, iron, aluminum, rubber, etc.) because during World War II raw materials were scarce in the domestic market.

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Cost & Quality

Robert T. Yokl

That’s when Miles developed the value analysis technique of defining a customer’s internal or external requirements based on their functions (i.e., primary, secondary, and aesthetic), which helped him and his GE colleagues to search for materials or products that provided equivalent performance to the materials or products they were substituting. Miles had such success with this value analysis technique that he thought it might work to reduce costs and remove waste in everything GE bought or was considering buying. It wasn’t hard for him to convince his boss that this was a good idea. Naturally, Miles was appointed the first value engineer at GE and later headed a department of hundreds of value engineers who revolutionized how GE did business going forward.

Until his death in 1985, Miles was still teaching thousands of his students his value analysis techniques, which are now continued by the Miles Value Foundation in Wisconsin. Miles often talked about the quality improvements he made with his value analysis studies, but for some reason downplayed the benefits of doing so as an advantage of value analysis. From what I have experienced in my many years in value analysis, quality improvement is just as important as cutting costs. Maybe, Miles didn’t see the connection.

Healthcare Experience In our long experience in healthcare value analysis (27+ years), we have seen value analysis mature into a profession. Yet, I’m not sure value analysis practitioners realize (Miles apparently didn’t) that the most important benefit of value analysis overall, as we see it, is that it is a waste remover or quality improvement tool. Yes, value analysis does reduce the costs of what you are buying by: (i) getting your purchasing specifications right and, (ii) substituting a lower cost product, service, or technology that is a functional equivalent, but we see these as natural everyday occurrences for value analysis practitioners. Some might say that these two advantages of VA are low-hanging fruit that generate about 3% to 5% of your VA savings overall. These same value analysis practitioners might not realize that the waste removal can yield 7% to 15% in savings using the same VA techniques that Miles taught 74 years ago.

An example of this waste removal would be the discovery (through analytics and observations) that your nurses are taking too many bath kits into the patient rooms to bathe patients and wasting these packs unnecessarily. This waste issue needs to be addressed by your value analysis team, since each bath kit could cost your hospital up to $1 to $3 each. Once procedural or product related corrective action has taken place, I can assure you quality will improve and costs will go down for your bath kits because you are meeting exact bathing requirements.

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Cost & Quality

Robert T. Yokl

Double-Barrel Approach In this era of healthcare reform, when reducing costs and improving quality stand side by side as concurrent goals for all healthcare organizations, value analysis should and can play an important if not critical role in meeting both these objectives. But first, your value analysis teams must move beyond price and standardization to also investigate how your products, services, and technologies are being employed on the front lines.

These twin goals can’t be accomplished in team meetings or sitting behind your desk. You need to actually visit your customers’ locations to observe what’s going on. There is no substitution for gathering firsthand information from your customers’ workspace about how they are utilizing the products, services, and technologies you are buying for them.

“Value analysis teams must move beyond price and standardization.”

I remember such a visitation at one of our client’s nursing units a few years ago to see why the highest dollar line item purchased by this hospital was a General Requisition Form (used to order tests).

What I observed, within a half-hour of my visit, was that for every form that was printed on their nursing floors a second identical form was printed because of a computer glitch. This glitch was easily fixed by the IT Department once they were made aware of it which helped saved this hospital $93,994. Just as important, this value analysis study revealed that the forms were not meeting the clinical requirements of the nursing staff that were the main customers for these forms. The study help the nurses communicate their quality issues with the form which help further eliminate waste and improved quality.

As you can see, you too can cut costs, remove waste, and improve your healthcare organization’s quality, if you decide to use the powerful technique of value analysis as a double-barrel approach to your supply chain expense management. But to reap these benefits you need to move beyond price and standardization savings alone and focus at least 40% of your VA efforts on how your clinical staff is utilizing the products, services, and technologies they are employing for patient care. It can revolutionize how you do business!

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Join an Elite Group of Value Analysis Professionals Networking — Best Practices — Data Sharing Member Forums — Education — Mentoring

What Are Members Saying About AHVAP? “Great networking forum!”

“I found the AHVAP Foundation and conference very helpful for me to become successful and more resourceful as a Value Analysis professional.”

“Value Analysis in Healthcare has become the ‘go to’ resource for identifying and realizing savings as evidenced by the sheer number of new conference attendees at AHVAP 2013.”

“AHVAP just keeps getting better and better every year!”

Join or Learn More Today

Volume 2/issue 2

“So glad that there is education in Value Analysis through AHVAP!” “AHVAP has provided a vehicle to share our daily successes and frustrations.

The networking opportunities at the annual conference are invaluable. I am proud to be a member of our growing organization!”

WWW.AHVAP.ORG

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Value Analysis Success Story Nursing Impact Analysis Program: Raising Up the Voice of Nursing Karen E. Bry, RN, BA, CPHQ, System Director for Nursing Education and Professional Practice, Sinai Health System, Chicago Illinois.

Historically the rank and file, front line nursing department staff has had little influence or control over the flow of new products. Decisions are made by purchasing department management in consultation with nursing management. Nursing staff sometimes “trial” new products and are asked their opinion, but there is rarely an appropriate survey instrument upon which to rank or score the opinions, and the impact on nursing process is rarely weighed. Ultimately, nursing’s opinion is one factor in a decision dominated by cost, utilization, and the influence of bundled purchasing agreements.

New VA Model Value Analysis thought leaders are addressing the need to study the relationship between quality, outcomes, and valued based purchasing. Emerging voices encourage Value Analysis team members to embrace Clinical or Evidence-Based Value Analysis which involves evaluation of the product use before and after implementation to measure the impact on outcomes. The Cost Quality Outcomes model (CQO) stresses the confluence of cost, quality, and outcomes, and the need to embrace all model components equally. Lastly, Value Analysis leaders have come to understand the importance of the “voice of the customer” in preventing expensive utilization misalignments.

The Value Analysis Committee (VAC) at Mount Sinai Hospital in Chicago welcomes nursing involvement. New products are introduced by purchasing personnel, the nursing department, and many different ancillary departments. If the product is thought to have a clinical impact, typically a nursing director will volunteer to trial the product and gather input from the staff. Those involved in the trial use a generic VAC trial review instrument which has a varying degree of ability to capture product or device specific performance. If the product is not thought to have a clinical impact it may be approved without trial. At times it is unclear the degree to which a department will be impacted. >>>>> Volume 2/issue 2

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Value Analysis Success Story

Karen E. Bry

In 2013, several product introductions by ancillary departments resulted in major process flow interruption and an undue burden on the Department of Nursing. Based on those product introductions, a Nursing Clinical Impact Analysis Program was designed. The new process better captures the real impact on nursing and patients by weighing benefit, risk, and true cost as it relates to process change, utilization patterns, and end user educational burden.

The Mount Sinai Hospital Clinical Impact Analysis Program is executed by the Share Decision Making Council Members. Staff nurses on the Council were educated on supply chain fundamentals. In order to answer the first critical question - why the product is changing, the nurses were given education on supply chain fundamentals and an overview of hospital purchasing collaborative ability to reduce operational cost by leveraging negotiation strength.

New VA Impact Process Our Council members review the old and new products and then use the Clinical Impact Analysis form (Exhibit “A”) to walk through the product reviews. Items under review include: 1.

2.

3.

4.

5.

6.

7.

8.

New product sponsor Reason for product change Key stakeholders impacted by product change Will the product come in contact with the patient?

Will the new product impact patient care process or work flow in any area?

Are there any patient or caregiver safety considerations associated with the product change?

Is there a significant difference between the old and new product?

Results of the trial  Sample size  Area(s) where product was tested/trailed  Results of trial  Will the product require education?  Type of education  List departments requiring education and the number of staff in each department  Cost center where training costs may be charged 9. Recommendations In the example provided (exhibit “A”), 22 highly experienced nurses were given samples of both IV catheter products. They handled the catheters, engaged safety mechanisms, and discussed the pros and cons for the adult and pediatric populations. Careful consideration was given to patient safety and the patient experience. They determined that the cost benefits did not outweigh the risk to the patient due to the projected increase in needle sticks secondary to 500 nurses and physicians learning and mastering a new device technique.>>>>>>> Volume 2/issue 2

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Value Analysis Success Story

Karen E. Bry

Exhibit “A� Sample Clinical Impact Analysis Form

Conclusion Findings of the Impact Analysis were presented to the Value Analysis Committee. Based on the recommendations of the Nursing Council the VAC committee did not proceed with the IV catheter change. Nursing and the VAC now collaborate regularly on the review of new products. The Nursing Impact Analysis has strengthened the voice of nursing and afforded the Value Analysis team a strong clinical partner to prevent product misadventures and optimize purchasing quality and outcomes.

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It’s a Fact….

The More Organized You Are with Your Value Analysis Program…

...the More You Save!

CliniTrack™ Value Analysis Manager gives you the automated tools, reporting, and knowledge library to help make the savings game much easier for you and your Value Analysis Teams See how CliniTrack™ Value Analysis Manager can help take your Value Analysis Program to a whole new level!

www.CliniTrackManager.com A Software-As-A-Service brought to you by Strategic Value Analysis in Healthcare, Skippack, Pennsylvania

Volume 2/issue 2 Healthcare Value Analysis Magazine 21 27 Years as a Trusted Leader in Supply Value Analysis and Utilization Savings Strategies—Making Savings Easy for You!

Value Analysis Teams

Robert T. Yokl

Lack of Training Is Holding Back Big Gains in Value Analysis Training your VA teams is the magic bullet for your VAT’s success.

The late Zig Ziglar, great speaker, author, and trainer, once said, “If you think training is costly, just think of the cost of not training someone.” If you buy into this idea, (which we do wholeheartedly) then you should be concerned by the lack of training of most value analysis teams nationwide. The hard fact is that only about 7% of the value analysis teams in the U.S. have any formal value analysis training. This isn’t a statistic we should be proud of…

Magic Bullet We have found, after training hundreds of value analysis practitioners over the last 21 years in our 6-step Value Analysis Funneling model, that without formal value analysis training VA teams and team members are lost in the wilderness. They go hither and yon, backwards and sideways; anywhere but where savings are hidden at your healthcare organization. Worst of all, untrained VA team members’ default position is to look at price alone, which isn’t value analysis - but price shopping.

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Value Analysis Teams

Robert T. Yokl

An even bigger problem for hospitals, systems, and IDNs, due to lack of VA training, is how long VA team members take to complete a value analysis project. Our estimate is that, on average, it takes 8 or 9 months to complete a VA project and most of these team members are just price shopping. A classic value analysis project should be completed within 90 days!

Just like any other skill, value analysis isn’t hard to learn if you are competently trained to do so. It can be compared to learning a new computer program which is confusing a first, but then becomes second nature after just a few weeks of study. It’s all about getting a new “mindset” about how you analyze what new products, services, and technologies to buy or to investigate savings opportunities on existing purchases. It’s been our experience that value analysis training can be a “Magic Bullet” for all of the challenges you are facing with your value analysis teams and team members.

“A classic value analysis project should be completed within 90 days.”

New Mindset The way you approach (or, mindset) a value analysis project from the standpoint of philosophy, principles, and practices can make a huge difference in the speed, quality, and outcomes of your VA projects. Let me break these three value analysis tenets down further for you: 

The philosophy of value analysis, as espoused by Larry Miles, is, “When most people evaluate a product, service (or technology) they only look at the aesthetics and not its reason for being….FUNCTION.” Miles further states that, “The more one understands the function of a product, service (or technology) the more opportunities arise for dramatically reducing the cost of the product, service (or technology) by substituting and/or in some cases eliminating an element of a product, service (or technology) with an equal or better product, service (or technology).



The principles of value analysis are (i) know your functions, (ii) understand your functions, (iii) solicit and buy functions, and (iv) drive out all waste and inefficiencies in your supply streams.



The practices of value analysis, which we call the 6-step VA/VE Customer Mapping Process, are as follows:

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Value Analysis Teams

Robert T. Yokl

2. Determine the primary, secondary, and aesthetic functions (i.e., features) that are absolutely required by the customers.

3. Translate their needs, wants, and desires into our functional language.

4. Look for opportunities for improvement as you investigate and study your customers’ products, services or technologies.

“Prove that the new product, service, or technology works in the real world.”

5. Develop alternatives that can respond to your customers’ needs, wants, and desires.

6. Prove that the new product, service, or technology works in the real world (i.e., Pilot Study).

We often tell our clients that value analysis is like “peeling an onion – one layer at a time.” Until value analysis practitioners understand each layer or the complexity of the product, service or technology under investigation, we as a disciple will never ring the towel dry on savings or improve the wasteful and inefficient practices that have crept into the product, service or technology we are buying over the years.

This is why it is so important for your team leaders and team members to be trained in the philosophy, principles, and practices of value analysis, since without training their hearts and minds won’t be changed and old habits (i.e., price shopping, poor time management, nibbling around the edges of savings, etc.) will take over and make your value analysis job even harder than it already is.

Last Word After training, coaching, and facilitating value analysis programs over the last 20 years, here are four reasons that we have observed why you need to train your value analysis team leaders and team members in advanced value analysis principles and practices:

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Value Analysis Teams

Robert T. Yokl

1. Training will make your value analysis studies easier: Your team members will be more comfortable with their value analysis role and VA studies, since they don’t work in this area of hospital operations on a day-to-day basis. You can’t tell them to “go save money” and be happy with it if they don’t know the first step in doing so.

2. Infrequent dry holes: With comprehensive training, your team members will encounter less dry holes with their studies, since they will know how and where to look for savings (beyond price).

3. The more you know, the more you don’t know: It is almost impossible for any team to know the quickest and most efficient way to save money and improve quality and safety without training. Hunting and pecking to find savings isn’t cost effective for any healthcare organization.

4. Training puts everyone on the same page: Because your team members all have a different level of experience, bias, and maturity (beginner to expert) when they become members of your value analysis team, you need to bring all of your team members up to the same level (expert) all at one time with training. Otherwise, you will be hand holding the beginners forever and holding back the masters who want to run ahead of the pack.

As you can see, all of these benefits of value analysis training can begin almost immediately after your first training session. Why wouldn’t you like to receive these and other benefits of VA training, when the cost of not doing so is so high and risky?

3 Immutable Laws of Value Analysis 1. THE LAW OF THE CUSTOMER – A common misconception with value analysis is that it is all about the products, services, and technologies. In reality, it begins and ends with the customers. Customers use the products we analyze and change; it is their requirements that must be met by the products, services, and technologies. If a product does not meet the required function then we must find alternatives that do.

Our job in value analysis is to find out what those required functions are that the products must do, not simply whether our customers "like it" or “don't like it."

which you cannot effect significant changes or savings but yet could chew up a tremendous amount of time and mental resources.

3. SYSTEMATIC LAW – The only way to be successful in value analysis is to follow a systematic process. Don't confuse simple forms, polices, and team meeting procedures with systematic processes. The process is how you analyze the products, services, or technologies on an ongoing basis, your step by step "system" for doing so. How do you start from a request, idea, or problem and progress through to the completion of a thorough value analysis process? You must have a 2. PARETO'S LAW – Also known as the 80/20 rule, this is a powerful law to follow on any value analysis systematic process, e.g., SVAH's Value Analysis Funneling Process that everyone in your supply chain and study. Normally, 80 percent of the spend volume is located in 20 percent of the departments. Focus on the 20 healthcare organization will come to understand. percent versus the entire organization or departments in Volume 2/issue 2

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Healthcare Value Analysis Magazine

Value Analysis 101 (Basics)

Robert T. Yokl

2 Tactics to Help You Negotiate with Your VA Customers Your customers don’t need everything they are requesting.

One thing I have observed over the last 20 years as a value analysis trainer and practitioner is that your customers don’t need everything they are requesting. Most of the time they are either selecting their products, services or technologies based on recommendations from a sales representative or they select their specifications from a catalog. Either way, the chances that your customers require every function and feature they are requesting, from my experience, is negotiable. Here are two tactics to help you negotiate with your VA customers: 1. Value Justify Any and All Functions and Features One of the most important jobs of a value analysis practitioner, as I see it, is to value justify each and every function (primary, secondary, and aesthetic) that a customer is requesting on their new product, service or technology. Why? Because your customers don’t need everything they are requesting. How do I know this to be a true statement?

As a value analysis practitioner, I have challenged hundreds of requisitioners on specifications (i.e., functions and features) of products, services, and technologies they are requesting. Approximately 67% of the time, I am able to identify functions and features that customers either can’t justify or explain how these new functions or features will help them do their job better.

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Value Analysis 101 (Basics)

Robert T. Yokl

The first thing I do (if practical) is to obtain a sample of the product, service or technology to see for myself what the customer is talking about. If it is an I.V. set, then I want to know how the customer is going to use the three access ports they requested, the securement device they like, and the very expensive drip device they want, etc. If I still have questions, I will visit the clinical department with the requisitioner to further understand how he or she will be employing the new product, service or technology in their department. These two steps most often answer all of my questions.

After our review of the request, the requisitioner will typically agree that they don’t need some of the functions and features they have requested and then decide to do more research to locate a product, service or technology with the right fit. This tactic has saved thousands of dollars annually for the hospitals we have worked with over the years.

2. Negotiate The Number of Times They Will Use a Function or Feature

“Ask how often they will be using the functions and features.”

If the customer in the above scenario can value justify the functions and features, I then ask how often they will be using the functions and features. What I often find is that the customer’s answer is once a month, once a quarter, or even once a year. Sometimes, their answer is, “Just in case I need it.”

Well, we would all like to have redundancy in our products, services, and technologies, but the cost of doing so could be prohibitive.

For instance, let’s say that only one I.V. port is required 80% of the time, two ports 20% of the time, and a third port is almost never needed. If an I.V. set with three ports costs $5.28 and a two-port costs $4.28, we are spending $1.00 per patient day just in case it is needed. This is not a very cost effective way to do business!

A better way is to ask the customer where he or she would obtain an I.V. set with three ports if they needed it for a patient. About 80% of the time the customer will state that another department would have one available, if needed. This is when you need to negotiate with your customer to reduce his or her request to two ports which is value justified based on the data at hand.

To sum up, it’s almost impossible to negotiate with your VA customers if all you have is their requisition to guide your way. However, if you store these two tactics in your value analysis toolbox, you will find many ways to use them to negotiate with your customers for better outcomes. Best of all, everyone will feel that they are treated fairly and professionally at the end of the day.

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Benchmarking

Robert T. Yokl

Historical Benchmarks Can Be Even Better Than Good Most department heads don’t believe third-party benchmarks.

While our firm has over one million supply chain expense comparative benchmarks, more and more we are employing our clients’ own historical benchmarks since they can’t be disputed, discounted or ignored. This is because most hospital department heads and managers don’t believe third party benchmarks, so why not go with the flow.

Go With The Flow We learned years ago that it is better to go with the flow than to fight it. This is the case with third-party benchmarks, which aren’t believed by your department heads and managers - even if they are right on target.

We now see hospitals, systems, and IDNs following this same course. This is because it is much easier to explain how you (or we) obtained a department or unit’s historical benchmark rather than trying to justify some other hospital’s benchmark, too often, from an unknown entity.

The reason for employing this new tactic (historical benchmarks) is to give your clinical and nonclinical staff ownership and accountability over their supply and purchase service expenses, since they are the only ones that can make change happen. This can’t happen if they don’t believe the benchmarks you are providing to them.

Historical Benchmarks Our definition of “historical benchmarks” is year-over-year metrics that show the activity of a supply or labor cost that represent a department or unit over time. Our technique is to show graphically at least four quarters of activity on a supply or purchase service to a department head or unit manager.

If a supply or purchase service cost by unit of measure (patient days, adjusted patient days, clinic visits, etc.) over this period is higher than today, it needs to be addressed by your department head or manager.

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Benchmarking

Robert T. Yokl

For example, if your anesthesia I.V. sets have jumped over four quarters from $10.42 to $15.11 per surgical procedure, then you have a reason to bring this to the attention of your anesthesia department head. Otherwise, how would they know that they had a 69% jump in their I.V. set cost (not price).

We have one client who sits down with his department heads on a quarterly basis to share this historical information with great success. In my opinion, this supply chain manager is successful since he has made it a routine to visit with his department heads on a quarterly basis, instead of surprising them with this information in a random fashion.

What Has Changed One of the questions we always ask when sharing a department’s historical benchmarks over time that is unfavorable is, “What has changed” over the period being reviewed. Inevitably, something has changed that has caused their cost (not price) to be out of balance.

I remember a story about an anesthesia department that had a 27% jump in the cost (not price) of anesthesia trays over four quarters. Upon investigation, it was found that 10% of their trays were being received damaged and then being thrown away. As you can see by this example, there is always a reason for your supply or purchase service cost to jump, so don’t ignore it.

#1 Best Healthcare Supply Benchmarking Process Technique The classic benchmarking process has 10 steps (i.e., identify what is to be benchmarked to recalibrate benchmarks), but we have discovered that the #1 best healthcare supply benchmarking process technique (or gap analysis) is a “site visit” to determine what your peers are doing differently that is producing superior performance in the category you are investigating.

until we saw it ourselves, asked questions about how the system operated, and then read a confidential cost analysis that showed that our client had saved 3.2 FTEs after fully installing their supply cabinets. You can’t get this type of sensitive information on the phone.

This is a crucial step in your benchmarking process since what your peers tell you they are doing in their emails, phone calls or surveys is only part of the story.

Nothing substitutes for seeing a best practice yourself, since there are nuances to every best practice that can’t be described in texts, phone conversations or surveys.

However, you too can replicate a consultant’s knowledge by performing “site visits” to your best-inclass peers to uncover why they have reached superior performance in the areas you are investigating.

That’s why healthcare supply chain consultants are known as “walking benchmarks” because they have the This is an obvious next step in any benchmarking “gap opportunity to visit hundreds of hospitals, systems, and analysis”, but how many hospitals, systems, or IDNs are IDNs in their career and then compare and contrast supactually taking the time and effort to travel to their peers’ ply chain best practices. We know this to be true, since location to understand what makes their peers’ perforthis is how we obtain our best practice ideas that we mance better than theirs? share with our clients.

For instance, we weren’t sure that automated supply dispensing cabinets were a cost effective best practice Volume 2/issue 2

Yes, it will cost you some time, money, and effort to do so. Yet, the reward for your labors will quickly translate into savings and/or process improvements that will be worth your due diligence.

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The Last Word A Long-View On Value Analysis Jamie C. Kowalski CEO Jamie C. Kowalski, Consulting, LLC, Milwaukee, WI

Back in the day, as many say, could anyone even imagine that Value Analysis would be what it is now? That might further beg the question, “What is VA now?” In perfect “consultantese”, the best answer might be, “Well, that depends…..”

Historical Perspective In the 60’s, most hospital based purchasing staffs were focused on providing whatever the clinician or physician wanted. Since cost-based reimbursement prevailed, cost was not a factor. The efforts to standardize were mostly based on trying to buy more items from the same suppliers, because that was a more efficient way to do business, even though it might not result in the most costeffective outcome.

Product Evaluation committees emerged and focused on looking at (and reacting to the introduction of) new products to determine the most effective (aka, “best”) product for the medical need. Pharmaceuticals, handled by the Pharmacy & Therapeutics Committee, sought and mostly achieved similar objectives. The committees were inclusive of key stakeholders - diverse members; sometimes 20 or more attending meetings.

By the early 80’s, providers began to consider cost and effectiveness, together. The changes in reimbursement (TEFRA and DRGs) supercharged that movement. Thus, the concept of “value” became mainstream. But, did that actually happen? Once again, the probable best answer is, “Well, that depends….”

What’s Value Analysis?

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The Last Word

Jamie C. Kowalski

There is a lack of data and information anymore. Today, the goal has been reached.

Data is being transformed into information, which is being transformed into intelligence and insight. However, is that intelligence being applied to reach the goal of finding the acceptable level of value and achieving the lowest total delivered cost?

Ask several people to define the value in VA, and they will likely provide multiple answers. Consider this, if the primary definition is not substantially the same as this: Value Analysis is determining the process, product, drug, device, etc., that meets but does not exceed what is required, then real value is NOT being achieved.

“Value Analysis is determining the process, product, device, etc. that meets but does not exceed what is required.�

It does not mean consistently just defining VA, it means applying it, consistently, fearlessly, vigilantly, yet tactfully. Too frequently, Supply Chain leaders have admitted and expressed exasperation about the savings foregone because the VA process did not result in the most costefficient choice. They grumble when some physicians (mostly surgeons) insist that the item to select is the one with the most bells and whistles that go beyond the needs of the medical requirements, or, is the one from the company with which they are most familiar (and maybe are buddies with the sales representative) with, frequently stating all the other products are inferior, while all the evidence (based on many sales to other hospitals and use by many other surgeons, without any negative effects on the outcomes required for that patient, that condition) proves otherwise. Is that the best value?

Long-View Why is this happening in this era of negative bottom lines, ACA legislation driven drastic reductions in reimbursement to both hospitals and physicians? It seems the answer is, missing commitment to VA and the discipline to execute its principles, plus inadequate leadership. A harsh, inaccurate, or unfair conclusion? When considering all the factors/evidence, what other conclusion can

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The Last Word

Jamie C. Kowalski

Why is commitment lacking? Most likely because of insufficient education/communication and salesmanship. Like in any campaign, all participants and stakeholders need to be informed about the reality of the situation. What is the provider’s bottom line? How many surgical procedures are performed for which the reimbursement doesn’t cover the costs? More procedure volume doesn’t fix this. What are and why is there such a wide range of total costs for the same procedure, for all surgeons doing the procedure? Why is an item that may be the lowest total cost alternative, and provides the same outcome, being rejected? The facts clearly show that, while such “unnecessary” spending may have been acceptable or allowed (even encouraged) in the past, it is not possible to continue this for another day. This information can and must be presented to stakeholders, in a professional, tactful, and educational manner.

Maybe the needed sales pitch includes something like, “We are all in this together, and we’ll figure out how to deal with it.” “It’s not your fault or anyone’s fault, it just happened, and it cannot be afforded anymore.” Or, “We are not just calling you out; everyone has to do more.” Slogans? Maybe. With many, it works. Given what is at stake, it’s worth a try.

“Why is commitment lacking?”

Leaders lead, see the big picture, envision an end state that deals with the challenges of the big picture, develop a plan to create the future vision, and sell it to all those who have to help execute it, along with the stakeholders who will be affected by it. Then, leaders get people to follow them, and do what each can and must do to make things happen. Surveys of provider and supplier executives, and personal observations, continue to reveal that too many of those in leadership positions (Supply Chain and/or VA) either don’t know what a leader is and how a leader leads, or do not want to do the hard work, handle the hassle, or take the risk.

The data is there. The technology/analytical tools are there. VA can fulfill its destiny. It must. Now. Since the 1970’s, Jamie C. Kowalski has developed and utilized his specialization in healthcare and hospital supply chain & spend management, as an executive, strategic advisor, thought leader, frequent speaker, coach/mentor, consultant, and advocate. He is the author of five books on healthcare supply chain management, contributed to 3 others and has written over 50 published articles on supply chain management topics. In 1980, Jamie founded the firm Kowalski -Dickow Associates, Inc. (KDA), which grew to an internationally recognized, leading hospital supply chain management consulting firm that served over 1000 hospitals and 150 IDN clients. In 2002, KDA became a subsidiary of Aramark. Jamie is a Co-Founder and Board Chairman of The Bellwether League, Inc., the not-for-profit Hall of Fame for the Healthcare Supply Chain leaders. For questions or comments, Jamie can be contacted at www.jamieckowalskiconsultingllc.com.

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