Healthcare Value Analysis & Utilization Management Magazine - Volume 3 Issue 3

Volume 3/Issue 3

Healthcare

Leading Cost and Quality Strategies for the Healthcare Supply Chain

Magazine

A Collaborative Value Analysis Approach to Solving a Major Problem...

IV Fluid Shortage

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Healthcare Value Analysis & Utilization Management Magazine

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contents

Healthcare Value Analysis & Utilization Management Magazine Healthcare Value Analysis & Utilization Management Magazine is published quarterly

by Strategic Value Analysis® in Healthcare P.O. Box 939, Skippack, Pa 19474 Phone: 800-220-4274 FAX: 610-489-1073 bobpres@ValueAnalysisMagazine.com

8 FEATURED ARTICLE

By James Russell, RN-BC

A Collaborative VA Approach to Solving a Big Problem A robust Value Analysis department will collaborate with many other divisions within a hospital on a routine basis.

15 VALUE ANALYSIS ADVISORS

By Robert T. Yokl

Are Your Suppliers Considered Your Value Analysis Advisors? It is our opinion that a wealth of untapped knowledge and expertise exists within your supplier organizations but isn’t being regularly tapped into by value analysis professionals in a systematic way.

21 THE LAST WORD

By Alan Weintraub, FABC

Standardization: Time for a New Model The tipping point varies with each product.

Volume 3/Issue 2

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

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

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Managing Editor Robert W. Yokl ryokl@ValueAnalysisMagazine.com

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

Editor Copyright 2015 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.

Healthcare Value Analysis & Utilization Management Magazine

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From the Publisher's Desk

Why You Need to Focus on Supply Utilization Management Robert T. Yokl

We know that value analysis practitioners are hungry for big savings to justify their existence in their healthcare organization. Since new GPO contracts and departmental requests usually cost a hospital, system or IDN money, how do value analysis practitioners make this goal happen?

Well, the best way that we know of to ensure your annual savings goal is met each year is to focus on supply utilization management. That’s why we recognized this third savings source (price and standardization being #1 and #2) as being an integral part of any and all value analysis programs.

For you see, we realized 15 years ago that the savings we were identifying and implementing for our clients weren’t price or standardization opportunities, but were something else that we labeled “utilization misalignments (UM).” We defined UM as wasteful and inefficient consumption, misuse, misapplication or value mismatches in a healthcare organization’s supply streams. We found that this is where 97% of all new supply chain expense savings are hiding.

To get at these new UM savings opportunities you will need to look beyond price and standardization and then investigate why your consumption on given products or services is higher than your own historical standards and/or your peers’ benchmarks. You can try to do this with the naked eye, but the chances are very poor that you will uncover substantial utilization savings for your healthcare organization.

Instead, you will need to invest in a utilization analytical tool to identify the savings for you. It will act just like supply chain radar! Nothing passes through this UM filter unless it conforms to your healthcare organization’s requirements. Conversely, if you think you can perform this task with a Spend Manager - think again. Spend Managers may find you a better price, whereas a utilization analytical tool searches for waste and inefficiencies in your supply streams.

Lastly, it is also important for you to follow the 40/20/40 value analysis rule: 40% of your team’s time should be spent on new product reviews, 20% on GPO contract conversions, and 40% on investigating utilization misalignments. This is the ideal time management template to help you focus on the right things, in the right timeframe, yet all at one time.

Volume 3/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

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Volume 3/Issue 2 Healthcare Value Analysis & Utilization Management Magazine 5 LEARN MORE WITH A FREE TEST DRIVE WWW.UTILIZER-DASHBOARD.COM

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Volume 3/Issue 2 Healthcare Value Analysis & Utilization Management Magazine 6 LEARN MORE WITH A FREE TEST DRIVE WWW.UTILIZER-DASHBOARD.COM

From the Managing Editor’s Desk Broadening Our Perspectives Robert W. Yokl

This issue, I am writing about what I consider to be one of the most important aspects of the mindset of a value analysis, clinical resource, or utilization management professional. This, I believe, is what your perspective or viewpoint is.

Back in 2010, I gave a demonstration of our supply utilization dashboard to a large five-system IDN’s corporate purchasing staff. This was new technology to our marketplace at the time, and before the demo they had mentioned that they were really into technology but specifically Inventory Management. They were so into all the latest inventory technology that they had partnered with their primary distributor to align their strategies with the latest and greatest software/tools for inventory that their distributor was deploying. I was darn impressed but I knew that inventory management was not our focus with our utilization software, so I complemented them and began my demonstration.

During the demonstration I went into the elements of the dashboard reporting with utilization cost per metric and associated benchmarks, but the prospective customer’s team kept stopping me and relating everything back to inventory management. So cost per metric was now being related as cost per inventory item and so on and so forth. I could not budge them away from their concentration on inventory; they were stuck in inventory-only gear and were not shifting out of their zone of excellence which was inventory management.

Now I did not fault this prospective customer and chalked it up to the fact that they were not ready for utilization management as they preferred to focus their efforts on inventory management. This same example has played out in so many different realms of our supply chain, from the totally “price focused” to the “evidence only-ers” to the plain old “not our idea” focus. The bottom line is that their perspectives would not allow them to open up to any new ideas outside their viewpoints.

Inventory management can save you a small amount of money and offer better customer service but will not disclose where the utilization misalignments are based on cost per metric. Plus, not all products go through the inventory systems of hospitals which limits the view.

As a value analysis and supply chain professional I have realized that you must be open to any and all ideas, strategies, and tools, otherwise you will be quickly left behind because you are labeled as “one dimensional” by your peers and bosses. The worst perspective or viewpoint you can have is to think that your “go-to strategy” is the be-all and end-all and will be used to obtain all of your objectives.

Even carpenters, plumbers, mechanics, surgeons, dentists, and other trade professions use a series of strategies and tools for each situation that warrants their use. We must have that same mindset in value analysis and supply cost reduction to be successful moving forward.

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Featured Article Value Analysis, Collaboration, and an IV Fluid Shortage James Russell, RN-BC, Value Analysis Facilitator

A robust Value Analysis department will collaborate with many other divisions within a hospital on a routine basis. These can include, but are certainly not limited to: Supply Chain, Pharmacy, Laboratory, Infection Control/Epidemiology, Performance Improvement/Quality, Patient Safety, Risk Management, Decision Support, Information Technology, and of course, Medicine and Nursing Leadership.

In a very real-world scenario, a hospital’s suppliers experience a shortage of intravenous (IV) fluids, specifically 1 liter bags of normal saline (NS). This shortage in supply will affect numerous clinical areas that utilize this product and will require a collaborative effort in strategizing ways to deal with it. Here are some examples of how Value Analysis can work with other departments to facilitate a project:

Supply Chain This is the entry point for IV fluids. Whether the facility classifies IV fluids as a drug (technically correct) or a supply, the Supply Chain department will usually be involved in the ordering (Purchasing), sourcing (Contracting), delivery (Central Receiving), and distribution (Central Supply) of the items.

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Featured Article

James Russell

Clinical departments that utilize the items will look to Supply Chain to keep them stocked of this necessary, and often life-saving, product.

Central Supply A simple, yet often overlooked, driver of utilization can be individual nursing unit par levels. Central Supply can run a report showing the actual volume of the supply being used in each location. Perhaps one nursing area has a par level of 10 bags and they use an average of 3 per day. Their shelf stock is about 3 days’ worth. Perhaps another nursing unit has a par level of 20 bags and uses an average of 4 per day. Perhaps this second unit is a bit more vocal in its demands that “they never run out!” Since that second unit maintains a 5day supply on their shelf, cutting it to a 3-day supply (12 bags) might be practical, as long as they never run out! Multiply this by 50 different locations and by trimming par levels to more realistic levels, CS could wind up “saving” many dozens of bags per day that can be used to combat the shortage (for a time).

Nursing Leadership KVO These are the primary users of IV fluids. In a typical hospital, nurses will use liter bags of NS hundreds of times per day. This can equate to hundreds of thousands of “eaches” annually. Any alteration in utilization can have a dramatic effect. Consider the concept of “Keeping a Vein Open” (KVO).

In many areas, where a patient has an IV catheter placed but no maintenance or primary IV fluids infusing, nurses will hang a bag at a very low rate (i.e. 10 ml/hour) to keep the vein from closing off.

In this example, 10 ml/hour results in 240 ml per day. Most hospitals will have a policy requiring these bags of fluids to be changed every 24 hours. If the rate of the infusion never needs to go over 10 ml/hr, the facility could benefit from a practice change of encouraging the nurses to hang a 500 ml bag, or even 250 ml, instead of the 1 liter bag that is in short supply. In one facility, this practice alone accounted for a decrease in utilization of 1 liter bags of NS by 60-80 “eaches” per day.

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Featured Article

James Russell

Trauma Another area in which the department of nursing can be helpful with the IV shortage is Trauma. In one hospital’s busy trauma center, they hung (spiked the tubing into the bag) 1 liter bags of NS on their rapid infusers in anticipation of a trauma patient arriving. The hospital’s policy was to discard opened IV bags after 24 hours. This unit had 5 rapid infusers. By encouraging them to hang (but not spike) a bag of NS and tubing on the rapid infuser, this saved several bags of waste per day. It did, however, require them to remember to prime the tubing when they were alerted that a trauma patient was en route. The unit’s willingness to do this was an important collaborative step in helping the hospital as a whole.

Medicine Leadership Routine Orders When physicians are presented with the data concerning a project, they will often come up with their own solutions that can be quite effective. In one facility, the physicians agreed there were other IV solutions that could be just as effective as 1 liter bags of NS and agreed to have a pop-up alert in the electronic medical record come up whenever they ordered the solution that was in short supply. They had already put this practice in place with pharmaceuticals that were short. For example, if an MD placed an order for Midazolam and it was on the pharmacy’s drug shortage list, a pop-up window would alert the doctor and suggest an alternative drug. This is exactly what happened with the IV fluids. If the MD decided to order the 1 liter bag of NS anyway, they were required to document a rationale. This practice decreased the usage of 1 liter bags of NS by another 60–80 “eaches” per day.

Priming Machines When presented with the prospect of the hospital having to decrease its usage of 1 liter bags of NS, the Anesthesia department volunteered to prime their machines using other fluids. It was their habit to use 1 liter bags of NS, dozens of times per day, just to prime their anesthesia machines. Their willingness to contribute to decreasing utilization was very helpful.

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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!”

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“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!”

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Featured Article

James Russell

Conclusion By implementing the utilization techniques above, the facility was able to decrease its usage of the 1 liter bag of NS from 500 per day to 300. A 40% decrease in utilization. This is huge in terms of collaboration and teamwork. Broadcasting this interdepartmental coordination (sharing the credit) can go a very long way in encouraging future collaborations. Celebrating successes like this can lead to even greater ones down the road.

The common denominator in the IV fluid project is value analysis. VA team members can meet with clinicians and work through strategies that are realistic and based on data, without compromising safe and effective patient care. This works to the benefit of all concerned.

Value analysis can make appropriate suggestions to clinicians about altering their practice without creating a hostile environment where clinicians and supply chain don’t listen to each other. By speaking both the language of operations (supply chain) and clinical (nursing/medicine), the Value Analysis Facilitator can lead the project toward a very impactful outcome.

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 has 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

Volume 3/Issue 2

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AHVAP 12th Annual Education Conference & Supplier Showcase October 21-23, 2015 - Frisco, Texas (Dallas)

Healthcare Value Analysis: Patient Centric and Outcome Driven The 12th Annual Education Conference & Supplier Showcase offers an outstanding program of continuing education, and a great opportunity for Value Analysis professionals to network and exchange ideas.

Included in this Year’s Program • Preconference sessions on Excel, clinicians’ lack of knowledge on value analysis, and reducing errors within the healthcare supply chain • A best practice model for physician leadership in navigating toward outcome-driven patient-centered value analysis • Value analysis – a lean approach to supply utilization • The future of value analysis evidence outcomes and interventions • Everything old is new again – reclaiming conservative approaches to patient care • The pathway to provider/supplier collaborations • Reverse engineering value analysis; it’s not just about the product • Advancing your value analysis program; the power of data, integration, and automation • Closing session on Humor in Healthcare • Supplier Showcase • Networking receptions • The “Wall of Experience,” formerly the “Wall of Success” • Nursing contact hours

Register or Learn More Today Volume 3/Issue 2

13 WWW.AHVAP.ORG

Healthcare Value Analysis & Utilization Management Magazine

Value Analysis Advisors

Robert T. Yokl

Are Your Suppliers Considered Your Value Analysis Advisors™?

It is our opinion that a wealth of untapped knowledge and expertise exists within your supplier organizations, but isn’t being regularly tapped into by value analysis professionals in a systematic way. If only value analysis practitioners would consider their suppliers as Value Analysis Advisors™ they would find that their supplier resources can make their value analysis job much easier.

Thousands of Products to be Evaluated, Not Enough Time Think about it for a moment, there are thousands of products that need to be monitored, tracked, and evaluated at your healthcare organization. How are you going to find time to do so? It makes sense to tap into your supply networks to conduct value analysis studies to help you to lower your healthcare organization’s costs and improve quality in this age of doing more with less.

One such supplier driven value analysis study comes to mind when a client of ours asked their I.V. set supplier to conduct a value analysis study to determine why they were spending almost 22% more annually on their I.V. sets than their peers. After an extensive value analysis study, the supplier’s experts concluded that the hospital’s: (i) restart rate was 42% higher than their peers’, and (ii) the hospital’s nursing staff were changing the I.V. sets every 36 hours vs. 48–72 hours (community standard). From this information the hospital realized that they were not using date and time labels on their I.V. sets, which was the root cause of this problem. After changing this behavior, the hospital saved $93,296 annually without doing any of the heavy lifting.

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Value Analysis Advisors

Robert T. Yokl

Imagine Having More Hours In the Day By delegating many of your value analysis studies to your current or potential suppliers you will have more time to: (1) Perform high level value analysis studies (e.g., pacemakers, orthopedics, spinal, etc.) that only you can do. (2) Triple or even quadruple the output (e.g., savings and quality improvements) of your value analysis projects - almost overnight. (3) Obtain answers to your department heads and managers’ product or service concerns in a timely fashion.

As you can see, by tapping into your suppliers’ networks you can greatly expand the impact of your value analysis program at your healthcare organization.

Consider This Time Saving Idea I know that some healthcare organizations believe that value analysis is an internal process, but who says you can’t utilize your suppliers to speed up, simplify, and even improve your value analysis studies. The alternative is to see your value analysis studies continue to take six months to a year to complete, if they are even completed at all.

Big Savings with Activity-Based Cost Management We have been designing and implementing Activity-Based Cost Management Systems (ABCMS) for labor and non-labor cost management for over 15 years with great success.

Why Activity-Based Cost Management Systems? Every activity has an associated cost driver. An ABCMS identifies an activity, captures the cost associated with it, and then measures and manages these cost drivers going forward. For example, we have found that the cost driver for office supplies is FTEs. If you measure your office supply cost by FTE, you can then effectively manage this non-salary cost. No other system can make this claim!

ABCMS Encompasses All Supply Chain Costs: An ABCMS encompasses all costs (price, standardization, and utilization) associated with a supply activity. If any of these costs are out of alignment with your peers or your own historical data, the ABCMS will pick it up before it becomes a crisis. It’s just like having supply chain radar; when a cost is out of alignment, an alarm goes off.

Think About Total Expense Management: If you are only measuring your price compliance, how can you be sure your utilization or consumption costs are within acceptable limits? You won’t know unless you are utilizing an ABCMS to assist you in this task.

It’s Not About Price: Everyone agrees that it isn’t about price any longer, but most haven’t really dived deep into their supply streams to reduce their in-use costs where the biggest savings are available to their hospital, system or IDN. An ABCMS is the answer to this challenge.

Volume 3/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

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PUTTING UTILIZATION MANAGEMENT EXPERTISE

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www.UtlilizerDashboard.com Volume 3/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

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I Hate Waste… and So Should You! WASTE IS OUR ENEMY WE SHOULD ALWAYS BE ON THE ATTACK

It should be clear to all healthcare executives that you can’ t cut your way to profitably, but neither can you get there without eliminating all of the waste and inefficiency in your supply chains.

WASTE IS COUNTERPRODUCTIVE IT DILUTES OUR PRICE SAVINGS

Most hospitals, systems, and IDNs think they are saving money when they obtain a good price for a commodity. But these same savings can quickly disappear if your clinical or non-clinical staff is wasting the product you are buying for them. For instance, if your clinical staff is using 3x the electrodes they need to get their job done, due to poor quality, have you saved any money? The answer is no!

WASTE IS EVERYWHERE WE NEED TO NIP IT IN THE BUD

It is our estimate that 77% of the products, services, and technologies you are buying today have wasteful and inefficient processes, practices or unintended consequences due to misuse or misapplication. We need to root out this waste or pay the high price of non-conformity to compliance.

WASTE IS CONTAGIOIUS IT’S DUE TO THE COMPLEXITY OF THE TIMES

One of our tenets is that complexity contributes to waste, since so many things must go right in this complex world we live and work in in order to get our costs to be in line. The only way to know if we are getting it right is to monitor and control the outputs of our activities.

Volume 3/Issue 2

If you are looking for a great leap forward in your savings strategies; if you care about being a leader in your profession; if you are looking to impress your boss and you don’t mind a little work, then this is the system for you.

It is our goal each year to work with a few progressive supply chain leaders who want to break away from the pack and learn how to tame their utilization tiger that is costing their healthcare organization millions of dollars a year due to waste and inefficiency. If this sounds like you, then we would like to give you a FREE test drive of our utilization management system.

Bob Yokl Robert T. Yokl CEO and Chief Value Strategist Strategic Value Analysis in Healthcare Co-Author, “Healthcare Supply Chain Utilization Revolution”

Healthcare Value Analysis & Utilization Management Magazine

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Utilization Management

Robert W. Yokl

It’s Time to Stack the Deck in Your Favor - NOW!

The other day I completed a new SMART Success Value Analysis Model for a major product group for one of our large IDN customers. This new SMART Model is intended to highlight all of the areas of opportunity to reduce costs within this product category along with guiding protocols. The next day I went back over my SMART model and started counting the amount of major and minor savings opportunities that were possible in this product group and found that there were 18 areas of savings opportunities. Interestingly, only 3 of the savings opportunities entailed enhancing the price or standardization. That means that only 17% of the savings opportunities available on this product group’s savings was related to price and the remaining 83% was beyond price.

17% Price Savings Opportunities Versus 83% Beyond Price After my quick review I sent this off to my customer so they could answer a few questions on some of the price-related areas. They quickly responded, stating that they had in fact already knocked out the 3 areas of pricing opportunities that we had highlighted in my SMART Success VA Model. In the past, we may have felt certain that everything was taken care of pricewise and that our job was done there. But, because we had been brought in to not only track the costs but also benchmark them with Volume 3/Issue 2

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Utilization Management

Robert W. Yokl

other like-sized organizations, we could clearly see that there were still some major savings opportunities hiding within this major category of purchase.

Everything We Have Been Saying About Utilization is Happening Now! As most healthcare organizations around the country are experiencing, price savings are dwindling away due to maturity of contracting and standardization by your GPO and/or supply chain department. Most importantly, price is significantly affected by vendors who are no longer willing or able to give the discounts that they provided previously. What is left after price? The answer is simple, utilization and life cycle cost management.

Paradigm Shift – Stagnant Price – Burgeoning Utilization The product group I highlighted for one of our customers had many areas of opportunity that were virtually being left untouched because their efforts were focused on getting the best price and rebates available. But when I focused their efforts and changed their paradigm toward utilization and life cycle value management, they saw that there were so many more opportunities that were ripe for the picking. The best part is that this won’t need to affect their contracting or standardization programs that are already in place.

Ignoring Utilization and Life Cycle Cost Management Will be Detrimental to Your Healthcare Organization’s Bottom Line Another customer of ours has areas that will generate more revenues/profitability, will better utilize staffing, and bring more awareness and better quality towards the use of products for their patients, visitors, and employees. The alternative to moving to utilization and life cycle cost management is to do nothing or hope that you find a savings opportunity in your ongoing business of contracting and value analysis. Why not better your chances by stacking the deck in your favor by putting a utilization and life cycle cost management program in place today so that like price, you can feel rest assured that you are doing all you can do about utilization and life cycle cost management. The wellbeing of your healthcare organization’s bottom line may very well depend on your efforts!

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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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No More Guessing Where Utilization Savings Are Hiding In Your Clinical Departments

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Goes Beyond Supply Budgets to the Actual Utilization for Each Department by Major Supply Category

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www.ClinicalSupplyUtilization.com A Software-As-A-Service brought to you by Strategic Value Analysis in Healthcare, Skippack, Pennsylvania Volume 3/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

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

The Last Word

Alan Weintraub

Standardization: Time for a New Model The tipping point varies with each product Alan Weintraub, FABC, Chief Procurement Officer, Enloe Medical Center, Chico, CA

I heard it again the other day. I was reading an application from a job candidate and there it was on the application – “chaired the product standardization committee.” For so many years in the hospital and healthcare industry, it has been the dominant paradigm for dealing with supplies and consumables. Like many paradigms, it served a purpose, but has now reached the end of its useful life. It’s time to rethink the model.

I am speaking of product standardization. I’m not, for the record, suggesting anyone do a one-eighty and adopt radical customization as a single strategy to deal with supplies and consumable technologies in hospitals; however, somewhere on the spectrum - with standardization at one end and customization at the other - lies the answer. A tipping point, if you will. Stray too far in either direction and one becomes counterproductive. Costs will rise. It is the obligation of the supply chain professional, the value analysis practitioner, to identify the tipping point in each case.

I have learned through the years that the tipping point varies by product. I have learned that it can move, even relative to the same product, from year to year because of other forces or circumstances around the use of a product. Forces such as changes in practice patterns, patient types, and market dynamics cause movement in the tipping point. One must be on the lookout for its indicators with regularity and discipline if one is to stay ahead of it.

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The Last Word

Alan Weintraub

The most obvious indicator which coincides with the tipping point is waste. Journals are filled with real-life stories about healthcare waste in all its inglorious forms. As one studies the utilization of each product or technology, one must be sensitive to observe the formation of waste – that is, excess inventory, discards, redundant motion, unnecessary practice variation, and irrational consumption – all of which are suggestive that one is in the neighborhood of the tipping point and the ratio of standardization to customization is out of whack.

Direct observation of the use of technologies and objective discussion of identified waste allows us to take a more rational approach to our standardization versus customization strategy – and allows each of us to more effectively contribute to lowering the cost of care in each of our respective organizations.

Are You Happy With Your Supply Expense Management Efforts?

You might be surprised to learn that there are many supply chain managers that are satisfied with their supply expense management efforts, since their management hasn’t pressed them to do better than just good with their annual savings goals. Well, the times are changing!

The time to save is before you need to: Jack Welsh, former GE President, once said, “The time to save is before you need to” because it takes time to ramp up for savings, but if you are already in high gear any goals will just be a matter of course. For instance, we are always looking for new savings sources for our clients, since old sources of savings (e.g., price and standardization) are bound to dry up at some time in the future. Remember, nothing lasts forever!

Pharmacy utilization savings is now mission critical: If you weren’t aware of it, most hospitals’ drug costs were up 11% (mostly in utilization*) in 2014. This is an area of hospital operations that we have been working on for five years. Now that there is a crisis, we are ready to jump into the fray to help our clients beat back these costs. If we would have started now to investigate this phenomenon, it would have taken us years to catch up. This is why you need to save before you need to.

Always be in a state of readiness: Being in a state of readiness prepares you to be proactive rather than reactive. It takes time to get your savings engine ramped up. If you think it will happen overnight, you are kidding yourself. You should always be experimenting and testing new savings ideas. If you don’t, when you need to save “big time” you won’t have the time necessary to get your saving engine started. Never get caught short with your savings goals.

Volume 3/Issue 2

Healthcare Value Analysis & Utilization Management Magazine

22

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 tools, benchmarks, evidence and knowledge resources 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 3/Issue 2 Healthcare Value Analysis & Utilization Management Magazine 23 28-Years as a Trusted Leader in Supply Value Analysis and Utilization Savings Strategies—Making Savings Easy for You!

“Time is Running Out” Time to Take the Should-I-Sign Up-Or Should-I-Pass-Test!

Your supply savings budget is locked in place for this fiscal year, but your supply savings haven’t appeared yet. Maybe this isn’t of concern to you...so this offer isn’t going to make a difference. However, maybe it does matter. We’ve prepared this simple test to see if you are ready to move to the next level of savings performance — Just circle YES or NO. 1. You're COMPLETELY satisfied with the savings you have been generating now.

YES

NO

2. Your savings yield on each and every project couldn’t be better.

YES

NO

3. Every group purchasing contract is working like gangbusters to save money.

YES

NO

4. Your contract compliance rate is close to 100%.

YES

NO

5. You know that you have the latest, cost-cutting software to save money.

YES

NO

6. You face ZERO pressure to reduce budget expenses beyond 1% to 2% annually. YES

NO

7. Everyone in your organization accepts your cost proposals, without question.

YES

NO

8. Your department heads and managers don’t need evidence to change.

YES

NO

9. Time is on your side when it comes to making your expense budget for FY 16.

YES

NO

10. Your value analysis teams are generating all the savings that you need this FY 16. YES NO

RESULTS: If you see a bunch of NOs circled, it’s clear that you NEED to sign up for a no-cost—no obligation “test drive” of Utilizer® Dashboard to ensure that you can make your expense budget each and every year!

Call or Email Strategic Value Analysis in Healthcare Today for a FREE Test Drive!

Volume 3/Issue 2

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

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