Healthcare Value Analysis & Utilization Management Magazine - Volume 9|Issue-3|

Volume 9/Issue 3

Healthcare

Leading Cost and Quality Strategies for the Healthcare Supply Chain

Magazine

Featured Article:

Winning Hospital Value Analysis Strategies for Advanced Wound Care An Interview with Dr. Rhonda Sullivan, DNP, PhD, MSN, MBA, CWON, LNCC, NE-BC, CSPHA

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It’s a Fact….

The More Organized You Are with Your Value Analysis Program…

...the More You Save!

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Contents

Healthcare Value Analysis & Utilization Management Magazine

4 FROM THE PUBLISHER’S DESK

By Robert T. Yokl

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

There is Nowhere Else to Go for Savings 6 FROM THE MANAGING

P.O. Box 939, Skippack, Pa 19474

EDITOR’S DESK

Phone: 800-220-4274

By Robert W. Yokl

What is the Future of Healthcare Value Analysis and the Potential Moving Forward?

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

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9 FEATURED ARTICLE

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Editorial Staff

Interview with Dr. Rhonda Sullivan

Winning Hospital Value Analysis Strategies for Advanced Wound Care

Publisher Robert T. Yokl bobpres@ValueAnalysisMagazine.com

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16 VALUE ANALYSIS 101

Managing Editor

By Robert T. Yokl

The Voice of the Customer Needs to Be Heard

Robert W. Yokl ryokl@ValueAnalysisMagazine.com

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20 Finding Value

Senior Editor

By Arnold Chazal

Elevating Clinical Outcomes by Solving Common Inventory Pain Points in Hospitals: RAIN RFID Leads the Way in Achieving Supply Chain Optimization

Patricia A. Yokl ————————————

Editor and Graphic Design Danielle K. Miller

25 UTILIZATION MANAGEMENT

By Robert W. Yokl

Where are the Next Major Bonafide Savings Going to Come from in 2021 and Beyond?

29 PERSPECTIVE

By Robert T. Yokl

What if Your Group Purchasing Savings Suddenly Dried Up?

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Copyright 2021 SVAH Solutions. All rights reserved. Reproduction, translation, or usage of any part of this work beyond that permitted by Section 107 or 108 of the 1976 United States Copyright Act without permission of the copyright owner is unlawful. For permission, call, fax, or e-mail Robert W. Yokl, Managing Editor.

Phone: 800-220-4271 E-Mail: ryokl@valueanalysismagazine.com for approval to reprint, excerpt, or translate articles.

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From the Publisher's Desk There is Nowhere Else to Go for Savings Robert T. Yokl

We are hearing the alarm bells going off at hospitals, systems, and IDNs nationwide because they have squeezed just about every dollar out of their GPO contracts, and have largely standardized and removed the variation in the products, services, and technologies they are buying. Yet, the ugly truth is that these same healthcare organizations still need new double-digit supply chain expense savings this fiscal year to stay competitive. So, where are these new supply chain savings coming from?

A New Reliable and Obtainable Source for Supply Chain Savings As we have preached in this magazine for nine years now, there are only four sources (e.g., price, standardization, value analysis, and utilization) of supply chain savings available to your healthcare organization.

Once you have exhausted your price, standardization, and value analysis savings, there is nowhere else to go for supply expense savings other than to attack your product, service, and technology utilization misalignments (the wasteful and inefficient consumption, misuse, misapplication, and value mismatches in your supply streams).

All it takes to achieve these new savings is a laser focus on your product, service, and technology usage, as well as past, current, and future trends, patterns, and anomalies in these commodities’ value streams. However, you need to have a proven methodology to identify these new savings, or you will only nibble around the edges with little to show for your efforts.

Activity-Based Costing Is the Key to Uncovering New Utilization Savings Activity-based costing is an industry accounting best practice that identifies the activities associated to the cost of a product, service, or technology according to the actual consumption by each. By employing this same ABC methodology to your supply chain expense utilization, you can identify the lifecycle cost of any commodity for any period of time (month, quarter, year), thus, uncovering where your utilization misalignments reside right down to the department, floor, or unit level. Then you can eliminate them before they damage your healthcare organization’s bottom line. As I said, there is nowhere else to go for savings!

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From the Managing Editor’s Desk

What is the Future of Healthcare Value Analysis and the Potential Moving Forward?

By Robert W. Yokl, Sr. VP, Supply Chain & Value Analysis — SVAH Solutions

I was recently interviewed on a new podcast called Power Supply Chain Podcast on which we talked about the future of healthcare value analysis and the potential moving forward. The discussion included how value analysis has been focused on new product requests, recalls, and GPO contract conversions for the past ten to fifteen years. There is nothing wrong with this focus of your value analysis program, but I emphasized that there is much more potential in what value analysis teams could do for healthcare organizations altogether.

History Tells Us We Can Save Big Again The history of value analysis in healthcare dates back to the early 1980s when it was solely utilized as a cost management methodology using a functional approach which parallels the origins of value analysis going back to the mid-1940s. Healthcare organizations were very successful when their value analysis teams’ agendas were totally focused on reducing costs and performing functional analysis reviews of existing major cost product lines. This went on into the 1990s and into the 2000s with value analysis being a primary cost management tool for hospitals and health systems.

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From the Managing Editor’s Desk

Robert W. Yokl

Value Analysis is Versatile Entering the 2000s and beyond, which highlighted the maturity of the group purchasing organization (GPO) and organizational strategic sourcing contracting, VA teams experienced a paradigm shift where health system VA teams needed to focus their attention on implementing and vetting the products that were required to be converted in the system to save the big dollars. This was high value work and was well worth the shift in focus as the power of group purchasing came into its own. These major GPO savings started happening in the early 2000s and would normally be in the 10% to 20% savings per contract range. Over the past 20 years, this savings has fallen off to the smaller percentages or worse, no savings at all. This has nothing to do with the effectiveness of GPOs and more to do with the fact that they have reached a high level of maturity and have wrung the towel dry on many categories of supplies. But at some point, every major savings strategy, if followed year after year, will fall into the law of diminishing returns Cost optimization which is happening right before our eyes.

Cost Optimization is the Name of the Game

reviews focus on high dollar categories of purchase and identify lower cost product alternatives with equal or improved quality.

The next steps for big savings is to follow the cost optimization roots of value analysis in healthcare.

The obvious strategy is to adjust your value analysis agenda to allow for cost optimization reviews of major categories after the contract is already in place.

These have netted significant savings in the past and will for your value analysis team if they focus their attention on them. The cost optimization reviews will focus on high dollar categories of purchase and identify lower cost product alternatives that meet functional requirements with equal or improved quality. No different than what was done in the past.

A Simple Adjustment to Value Analysis Team Strategy Can Go a Long Way Right now, VA teams’ agendas are about 60% new product requests and about 40% product conversions/recall fixes. It is time to reset and rethink your agendas to allow for value analysis reviews of your major spend categories. The new model would look like this: 40% new product requests, 30% contract conversions, and now 30% major category cost optimization reviews. From my 29 years of value analysis experience, I know that the key to value analysis success is what goes on the agenda week in and week out. If your value analysis teams only focus on contract conversions and new product requests, then those are the only results you can expect. If you add agenda items for cost optimization, then you will gain major savings results from cost optimization. Let’s take a page out of a successful period in healthcare and reapply it today!

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Featured Article Winning Hospital Value Analysis Strategies for Advanced Wound Care An Interview with Dr. Rhonda Sullivan, DNP, PhD, MSN, MBA, CWON, LNCC, NE-BC, CSPHA but also products that serve multiple functions.

Interestingly, cost was really the last thing we looked at, mainly because the clinicians were looking at all the other components related to patient care. This team was unique because although the wound clinicians were the leads with advanced wound care, the overarching team was HCVAM: How did you get involved with multidisciplinary. advanced wound care in the healthcare value analysis world?

This approach allowed us to have subject matter experts, that could be broken out into smaller RS: My experience goes back 21 years. Since work groups that would represent their facility to getting into wound care, I always had the oppor- the larger group, for any product category we tunity to participate in the value analysis of the were looking at. Our system was 15 hospitals so product purchasing decisions. I was just lucky getting them all to have the same products, enough to work in a system where the wound care policies across the system, and evaluating these clinicians were always involved in the advanced with the highest level of evidence with the wound care decision-making process. purpose of best outcomes was the goal. Having 15 wound care nursing experts making the decisions I think those experiences always resonate with was a major accomplishment. We made decisions me the most, especially when I was the chair by consensus based on an evaluation of of our enterprise wound care and pressure injury everything that was relevant to that product prevention committee. What happened across decision. It really opened the door to wound care our system was that we were charged with being well-managed with aligned policies and converging practice and products. So, when we products at all the system’s facilities. moved to the advanced wound care category, the wound care nursing representatives from every HCVAM: Please tell us how advanced wound facility sat on that overarching value analysis care is improving outcomes for patients as well as committee. What was unique about that was that clinicians’ ability to have better options for it allowed us to really get that 360-degree review treatment. of our products and the needs of our patients across the entire system, as well as the relevant RS: I've been a nurse for 30 years. Twenty-one of evidence demonstrating outcomes. We looked for those years have been in wound care, so I have opportunities to have diversity in our products, been able to see this specialty evolve over the

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Featured Article years. I was able to see the transformation of the advanced wound care space. This really improved the way we cared for patients because the products that we were now able to access did actively help adjunct deficits in the patients’ wound environment or the patients’ healing abilities. In making the move to advanced wound care, we were able to achieve things like undisturbed wound healing, where we went from dressing changes three times a day to maybe twice a week or even once a week.

Now you're getting better outcomes because we know that we're insulating the wound and allowing the body to heal itself while providing a moist environment. This also helped with the nurses' workload. Can you imagine the time consumed with dressing changes three or four times a day for a nurse who must attend to seven patients? We were able reduce the number of dressing changes, reduce the decision-making process, and really streamline it so that there were clear differentiators in what would work for the patients. Most significantly, the evidence really supported what would work for healing.

When you chose those wound care products, you could depend on them to do the job that they're expected to perform.

Another big win is alleviating waste. Many people think that normal saline, wet to dry three times a day is cheap, but I've performed that cost analysis. The analysis was at a facility I was working with on advanced wound care product introduction. We found that when you factor in the gauze, normal saline, scissors, and Q-tips, not to mention the nursing time and extended period of pain and suffering for the patient, this was much more expensive. Switching from dressing changes four times a day to two times a week

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optimized both the healing and labor elements.

The outcomes spoke for themselves - better and faster healing for the patient.

HCVAM: Most important for healthcare value analysis professionals today is the focus of the triple aim of cost, quality, and outcomes. How do they manage advanced wound care to meet these ever-rising goals?

RS: I think there's a bigger story to value analysis and healthcare purchasing than just cost. You must look at total value. You have to look at how the decisions you make affect your quality and your outcomes; all of your outcomes, not just treatment or healing rate, but your overall functional use. Are you changing the dressing three times a day but could really go to twice a week because the dressing you are currently using is inferior, the tape is not as adhesive as it is supposed to be, or because it doesn’t have good absorption?

You want products that perform in a way that supports optimal quality and outcomes. You get your savings through removing redundancy by having products that are diverse and can address a number of issues. You get your savings through getting support of your practice. Be proactive and

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Featured Article look for educational opportunities from your integrated vendor partners that can extend your organizational knowledge. Look for tools that help with clinical decision-making that make a difference in the end result of quality and outcomes. The focus needs to be on total value, and the value beyond just the price of the product is key.

HCVAM: Advanced wound care is a growing spend area year in and year out at healthcare organizations. What can value analysis and supply chain professions do to manage these want an integrated partner who can help you with utilization costs better, other than just switching all of it across the board, not just give you a vendors for a better price? cheaper product.

RS: You should start off with looking at the partners that you already have and assess what products they offer that can meet your needs.

Think about how you can standardize across your entire portfolio, ideally with one or two vendors who can meet all of your needs. What you're going for is to streamline your unit utilization. By doing this, you will get rid of waste and redundancy because you only have two vendors providing what you need. And I say two, but it might be one that could meet all of your needs. If you can, leverage the partnerships that you have already and then work towards negotiated sole source contracting, if possible. This builds a relationship with that vendor so that they are an integrated partner charged with meeting your needs across the wound care continuum. The biggest thing to consider if you are planning a switch is to consider not just price, but look at the evidence, look at the outcomes that product has produced. Look at the services and support that come along with partnering with that vendor.

Yes, reliable products are part of a bigger picture of best practice and quality outcomes, but you

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HCVAM: What are some best practices that you could offer to value analysis professionals that would help them with advanced wound care product evaluations, evidence analysis, standardization, and utilization?

RS: First for me is to be customer focused. In healthcare, the customer is the patient first, the end user second, and then the organization third.

Always keep the patient within your priorities.

Secondly, develop a collaborative multidisciplinary team - a team where there is an exchange between value analysis and the subject matter experts on all relevant decisions so that you ensure that the stakeholder and the voice of the customer is represented in the decisions. One of the situations I often come upon with wound care decisions is that many times value analysis teams think that they don't have to consider some decisions because they don't really affect the bedside nurse or the clinician.

A good example is when the supply chain VA team at one of our facilities decided they wanted

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Featured Article to change Q-tips and they didn't ask anybody because it's just a Q-tip. It's a common generic product, so why not just switch it out? Then we found out that we had Q-tips that were always fraying in the wounds and inevitably took the nurses longer to do wound care because we had to pick out the frayed Q-tip as well as make sure the new one did not fray in the wound. This change was reversed in our facility in less than a week because it put our patients at risk and wasted nursing time. Something so simple had such a far-reaching effect. Another example of this is tape. The wound care nurses cannot accept a change of tape unless a full-blown trial is performed because it will have a dramatic effect on wound care. It’s not just tape.

RS: Wound care just keeps getting better and better. The first thing that can be expected from wound care product lines is more innovation as the products continue to evolve as we learn more about wound healing. Products will be created that will help better care for patients that optimize the healing environment, improve outcomes, reduce waste, and minimize complications of care. You will see vendors wanting to be more integrated in their clients’ practice to be better partners in their outcomes, and to help with operational efficiency to standardize across multiple service lines and be a part of that continuum of care.

HCVAM: What can value analysis professionals expect from advanced wound care product lines in the near future?

Rhonda Sullivan, DNP, PhD, MSN, MBA, CWON, LNCC, NE-BC, CSPHA is a Registered Nurse with close to 30 years’ experience. Twenty years have been dedicated to the wound and ostomy specialties. She is board-certified as a Nurse Executive, Wound-Ostomy Nurse, Legal Nurse, and Safe Patient Handling Associate. She is a published author, award-winning researcher, med-legal expert, approved CE provider for the Florida Board of Nursing, and an international speaker on pressure injury prevention and deep tissue pressure injury.

Dr. Sullivan is currently employed as the Clinical Director of Wound Care Marketing for Molnlycke Health Care. In this role, she serves as clinical consultant to Academic Medical Centers and Magnetdesignated healthcare facilities, with a focus on reducing waste and redundancy in care and improving clinical and financial outcomes by alleviating avoidable hospital-acquired conditions.

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Value Analysis 101 The Voice of the Customer Needs to Be Heard Robert T. Yokl, President/CEO, SVAH Solutions

To Miss a Customer, Stakeholder, or Expert Can Be a Fatal Mistake We all say we want to hear the voice of the customer in all decisions related to their product, service, and technology requests, evaluations, or studies, but do you have a failsafe system to do so? If not, missing just one customer (collectively known as customers, stakeholders, and experts) in your VA process can be fatal. By fatal, I mean that they will be uncooperative, unresponsive, and territorial once they find out you left them out of the decision-making process. Trust me, they will find out from someone in their peer group.

Definition of Customer, Stakeholder, or Expert •

A customer is anyone who touches the product, service, or technology throughout its lifecycle.

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Value Analysis 101 • •

Robert T. Yokl

A stakeholder is a party or parties that have a vested interest or can influence the product, service, or technology decision.

An expert is someone that knows the most about this commodity, inside or outside your institution.

6-Step Value Analysis Customer Mapping Process Realizing how critical it is to identify and then listen to the voices of our customers in our value analysis process to ensure the quality and credibility of our evaluations and studies, how then do we think we can assess our customers’ exact requirements? Based on the imperial experience of SVAH’s customers and by employing many of the concepts taught by the late J.M. Juran, the man who taught Japan how to manage quality, we have found the following six-step Value Analysis Customer Mapping Process to be extremely effective in doing so: 1. Identify who the customers are for each product, service, or technology under investigation.

This can be accomplished by researching their usage patterns in your healthcare organization’s ERP or materials management information system to identify current users. Then, sort and classify your customers by the terms “Vital Few” and “Useful Many” or 80/20 Rule.

2. Determine the primary, secondary, and aesthetic functions for the customers’ needs. Then, prioritize and rank by order of importance. This can be accomplished by interviewing and shadowing your “Vital Few” customers and surveying your “Useful Many” customers. The reason for this is that all functions aren’t as important as others to your customers, so you need to know what is negotiable and what is not.

3. Translate their functions (primary, secondary, and aesthetic) into our language. J. M. Juran found that, “Customer needs (or functions) may be stated in any of several languages: The customer’s language, our language, (or) a common language,” and most often in vague terms or terminology. That’s why a value practitioner’s language always includes “a verb and noun” to describe a function. Therefore, we need to work with our customers to correctly describe their functions to get it right the first time.

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Value Analysis 101

Robert T. Yokl

4. Look for opportunities for improvement that are holding back savings and quality gains. With rare exception, internal and external customers do not complain or report to anyone waste and inefficiencies in the methods and practices regarding products, services, or technologies they have observed or experienced. Therefore, during your interviews and shadowing of your customers, you will uncover scores of opportunities for improvement you can turn into savings and quality improvements for your healthcare organization.

5. Develop win/win alternatives that can meet your customers’ needs and your needs. To paraphrase the late great speaker Zig Ziglar, “You can have anything in life you want, if you help enough other people get what they want.” With this said, effective change can only be made if the person experiencing the change agrees that this change will make their job or life better. The challenge of a value analysis practitioner is to find win/win lower cost alternatives that can meet their customers’ needs as well as their own needs for savings and quality improvement.

The challenge of a VA practitioner is to find win/win lower cost alternatives that meet their customers’ needs as well as their own needs for savings and quality improvement.

6. Prove that the new product, service, or technology works in the real world. It is important to emphasize that even the best savings or quality improvement ideas must be tested in the REAL WORLD to ensure that they meet the requirements of your customers in their eyes, not yours. Therefore, you must test your assumptions with a pilot study, simulation, or parallel study to determine the efficiency of your solutions in a controlled study environment.

Based on our empirical experience, these six steps are the most critical stage of any value analysis study that you would undertake due to the fact that all value analysis studies are customer driven and must be designed to meet your customers’ requirements exactly. We absolutely want to know their likes and dislikes, what does and does not work, and what they think are and are not the most important functions and features. This is not a game, but a scientific process to truly understand our customers’ unique requirements. This Value Analysis Customer Mapping Process should be the foundation of your value analysis methodology if you are looking to repeatedly satisfy and delight your customers.

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Featured Article

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Finding Value Elevating Clinical Outcomes by Solving Common Inventory Pain Points in Hospitals: RAIN RFID Leads the Way in Achieving Supply Chain Optimization Arnold Chazal, Co-Founder and CEO of VUEMED

Dealing with unpredicted stock-outs of needed items or difficulty documenting items? No idea where an item is located or if it’s even available? Unsure which items are about to expire or unable to track a recalled item to an individual patient? Tired of the burden of manual entry for items at the point of care?

If these problems sound familiar, it’s because they are. In fact, they’re extremely common inventory-related pain points at hospitals. There are tens of thousands of medical products needed for hundreds of procedures - for very different patients with unique needs. As a result, there are a tremendous number of medical devices and supplies on the market, many of which are stocked at hospitals to perform these procedures. However, these hospital supplies and items aren’t necessarily being tracked inside the facilities or even to a specific patient, despite limited shelf life and being subject to possible recalls.

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Finding Value

Arnold Chazal

Without accurate information about which items are needed for patient care, whether they’re in stock, where they’re located in the hospital, and whether or not they’ve expired or been recalled, there are tremendous inefficiencies and risks to patients. In addition, clinical staff commonly have to use outdated and manual systems, and/or cumbersome processes, to document items used on a patient, which leads to poor compliance and errors in medical records and billing, and distracts them from focusing on the patient. Any breakdown in the supply chain affects patients directly by putting them at risk.

Additionally, the healthcare supply chain continues to be saddled with massive waste due to the failure of hospitals to have an optimized and lean inventory. Supply chain costs are one of the primary expenses for hospitals, and particularly impact institutions with a high Case Mix Index, such as academic medical centers with busy interventional departments. These departments (cath labs, interventional radiology, EP, OR, GI/endoscopy) are areas where the majority of supply expenses occur, and where consumable supplies and implants represent an essential part of the patient care process and cost.

Wouldn’t you like to have data at your fingertips that tells you how many days of on-hand inventory you have, what your burn rate is, how much safety stock you need, which specific supplies you need, and what you can cut from purchasing if you need to redirect dollars elsewhere?

Despite the high costs and patient care impact, most specialty departments don’t have visibility and operational control over their supply spend and levels of waste, and lack accurate utilization data and effective inventory management tools and practices. A clear priority for these departments must be to improve inventory alignment, reduce inventory expenses, and uncover savings opportunities. The COVID-19 pandemic has made it abundantly clear that better supply chain visibility and predictability are needed to manage hospitals’ operations and resources because they enable hospitals to plan, redirect, and scale resources up or down depending on the situation. Smart Key Performance Indicators (KPIs) – such as those tracking expiring or expired inventory, stagnating or unused items, and consumed vs. purchased inventory – provide hospitals with the data visibility needed to guide and achieve inventory optimization and alignment with clinical needs, while also preventing waste and unnecessary spending.

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Finding Value

Arnold Chazal

How RAIN RFID Technology Solves These Challenges RAIN RFID data capture solutions enable hospitals to track medical devices and supplies from the manufacturer all the way to the point of care, and to gain the data needed to feed their KPIs and regain control over their inventory. As explained by the RAIN Alliance, RAIN RFID is a “wireless technology that connects billions of everyday items to the internet, enabling businesses and consumers to identify, locate, authenticate, and engage each item.”1 “RAIN” stands for RAdio frequency IdentificatioN. It uses Ultra High Frequency (UHF) passive Gen 2 RFID Manage inventory, tags and readers that are compliant with global reorders, and standards (GS1 EPC) and the FDA’s Unique Device expirations while Identification (UDI) regulation. RAIN RFID solutions are able to continuously and automatically track in real monitoring the overall time, and with 99.5% accuracy, the movement and utilization, costs, and location of all tagged supplies, all of which is achieved contract compliance. without the need for human intervention. Data capture is hands-free and cabinet-free. With the use of strategically placed zonal and steerable antennas in the ceiling, RAIN RFID turns any space - whether a supply room, procedure room, or warehouse - into a fully controlled inventory space using existing shelving and storage systems.

RAIN RFID ensures the accurate data capture of every item coming in and going out of the department, as well as used at the point of care. This data is then reported to the Cloud in order to be able to provide real-time visibility and trackability of medical products and supplies throughout the supply chain. The power of the Cloud lies in its ability to store, compute, analyze, and report tremendous amounts of data with easy user access, and to help turn data into actionable information. When ERP and EMR interfaces are then put in place, they provide streamlined processes for clinicians to swiftly capture and document all required products with their UDI data in one single motion and with complete accuracy, thus saving time and avoiding non-value-added tasks. As for the supply chain staff, the Cloud-reporting nature of RAIN RFID and the same interfaces allow them to efficiently manage inventory, reorders, expirations, etc., and administrators are able to monitor the overall utilization, costs, contract compliance, and so on.

10 Transformative Outcomes Driven by RAIN RFID By applying RAIN RFID technology together with inventory optimization software, hospitals have the tools to achieve many dramatic outcomes: 1

What is RAIN? - RAIN RFID

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Finding Value

Arnold Chazal

1. Recalled products traced to patients within seconds 2. Expired devices never placed in patients 3. Guaranteed availability of required products for procedures 4. Accurate and complete patient medical records 5. Reduction in unused inventory 6. Reduction in purchases and waste 7. Reduction in unnecessary product variation 8. Inventory aligned with clinical needs 9. Automated procure-to-pay processes 10. Comprehensive and accurate charge capture and billing RAIN RFID is an incredibly powerful tool for achieving supply chain transparency and inventory optimization through the collection of essential data. Information truly IS power – the power to analyze and decide, the power to make changes and adapt, the power to succeed and excel.

Arnold Chazal is the CEO and Co-Founder of VUEMED, a global healthcare Information Technology company committed to providing innovative and transformative technologies to healthcare organizations, such as VueTrack-RF, VUEMED’s RAIN RFID technology. He has built VUEMED as a Software-as-a-Service (SaaS) company, the focus of which is to help hospitals and medical product/ device manufacturers improve their performance and data accuracy throughout the healthcare supply chain, from manufacturing to point of care. Prior to VUEMED, Arnold was a Founding Partner at the medical market research and consulting firm Kieris Solutions and spent 12 years in the management consulting and business intelligence industry, providing strategic advice, technology implementation, and lean process improvement solutions to Fortune companies, primarily in the healthcare field in the U.S. and Europe. He holds a B.A. from Nanterre University in Paris and a J.D. from the University of Sorbonne Law School, and completed graduate studies at Oxford University and Harvard Law School.

EMAIL: achazal@vuemed.com; TEL: 239-784-8292 VUEMED is based in Seattle, WA www.vuemed.com

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Utilization Management Where are the Next Major Bonafide Savings Going to Come from in 2021 and Beyond?

By Robert W. Yokl, Sr. VP, Supply Chain & Value Analysis— SVAH Solutions Hospitals and health systems have achieved huge savings gains from group purchasing and internal supply chain contracting/sourcing over the past 10-15 years. There is no doubt that the healthcare supply chain contracting and strategic sourcing programs have reached a high level of maturity. However, a byproduct of this high level of maturity is less price savings opportunities on the table than there used to be in all the major and minor supply categories. Add to this fact that we now have the fallout of 2020 with all the revenue, PPE, and other product sourcing challenges that are still ongoing today.

Though this news may sound bleak, it only means that supply chain needs to add new major opportunities of savings that have not been tapped into in the past. Many would think I was crazy if I were to tell you that there is still an additional 7% to 15% in savings beyond price from your supply budget after all that you have done up to this point - but there is.

What Can We Expect Moving Forward?

In a recent conversation with a Director of Procurement of a large health system, he stated, “We have implemented all of the major GPO contracts and are only seeing pennies on the dollar in new savings right now.” Translate the pennies into percentages and we are talking only a few percentage points in savings on each new contract coming down the road. Your GPOs and Supply Chain Strategic Sourcing Departments will undoubtedly find new ways to obtain new price savings, but there is one area that is still virtually untouched. That area is savings beyond price.

How Can Savings Beyond Price Add Up to an Additional 15% of Supply Budget?

Savings beyond price is exactly as it appears. It is the process of reviewing your purchases after you have implemented the contracts and looking for areas that are running higher than they should be.

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Utilization Management

Robert W. Yokl

Over the years we have found that these cost overruns, due to savings beyond price issues, can apply to 50% to 70% of your major product categories of spend. Quite simply, you are not getting the value from the dollars you spend due to life cycle usage issues, unforeseen waste or misuse, and value mismatches (using the wrong product for the clinical function). Ask yourself, how are we addressing these issues at our organization right now? More than likely, you do not even know where these issues are or how much cost savings there are for you to drive out, let alone doing anything about them.

Savings Beyond Price is the Next Untapped Well of Major Bonafide Supply Chain Savings These savings beyond price cost overruns are not anyone’s fault or a black eye on the supply chain contracting process.

This is a natural occurrence with the multitude of products and areas of use within a healthcare system. The bottom line is that they are occurring and if you don’t have a strategy to knock these cost overruns down, then the challenge will be finding another source that will net big savings in another area of supply chain other than price. I’m not sure there is anything left in the well to tap into other than savings beyond price.

These cost overruns can apply to 50% to 70% of your major product categories of spend.

There are No Major Savings Results Until You Start Your Own Savings Beyond Price Program Most healthcare supply chain organizations now have value analysis managers and analysts who review contracts and work up the results for strategic sourcing and value analysis product reviews. I am glad to see these great resources available to supply chain departments, but they need to be educated and given the right tools to identify and weed out these currently hidden savings beyond price. You will be surprised at how many strategies, trainings, and tools are available (email me at ryokl@svahsolutions.com if you cannot find them) to take your supply chain team to this new level of savings beyond price.

There are many intelligent ways to go about attacking these savings beyond price that will create a streamlined process and ongoing flow of savings. You can make the savings opportunities come to you instead of you and your supply chain team chasing savings within your value stream. Most importantly, the results will astound you as you drive out double digit savings from all of your major and minor categories systematically.

Start today. You will look back on this day and say, why didn’t we do this sooner?

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Imagine Losing Up to 17% or More of Your Overall Annual Savings Implemented from All Sources The $5.2 Million in Projected Savings for Your Hospital is Now Only $4.3 Million - Net Loss of $884K to Your Bottom Line

The $12.5 Million in Projected Savings to Your Health System is Now Only $10.4 Million - Net Loss of $2.1 Million to Your Bottom Line

How Could This Be Happening?

Because 96% of All Supply Chain Organizations Are Only Tracking Savings on the Front End After Implementation and Not Tracking Them Any Further for Actual Real Time Results Throughout the Year Find Out How You Can Fix Your Leaky Bucket Scenario

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Perspective

What If Your Price Savings Suddenly Dried Up? Robert T. Yokl, President/CEO, SVAH Solutions

I often asked the attendees at seminars I have conducted what they would they do if their group purchasing savings suddenly dried up. Some of the attendees’ answers were that they would look for another job in another industry, take early retirement, or squeeze their distributors even harder.

This is no longer a hypothetical question. We are now hearing from members of our supply chain community that many hospitals, systems, and IDNs have squeezed their last dollars out of their national GPOs and are only saving pennies with their regional GPOs. The time has come to accept this reality: The law of diminishing returns has reached a tipping point with your GPOs. No longer can you expect robust supply chain savings from them. This doesn’t mean your savings job is over!

That Doesn’t Mean Your Savings Job Is Over Your healthcare organization needs to save even more every year to offset reductions in reimbursement, keep pace with inflation, and balance their budget. This means that supply chain/value analysis

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Perspective

Robert T. Yokl

professionals need to identify new sources of savings, beyond price and standardization, just to keep running in place. Here are three areas to consider when searching for these new and better savings opportunities: 1. Unbundle Your Contracts: We often observe that GPO contracts covering a supply category, such as office supplies, can be enhanced even further by unbundling high-volume/high-cost commodities (e.g., toner, copy paper, office furniture) inside the contract and bidding or negotiating them separately.

2. Supply Utilization Management: If you aren’t attacking your wasteful and inefficient consumption, misuse, misapplication, and value mismatches in your supply streams, you are missing 7% to 15% more savings.

3. Purchased Services Contracts: Purchase price is just the tip of the iceberg on the savings on your purchased service contracts. For example, here’s a list of 9 Things to Negotiate With Your Purchased Service Contracts Other Than Price.

Supply Utilization Management Can Provide 7% to 15% More Savings

These are just three “savings beyond price” ideas that are available to your healthcare organization.

All it takes is a curious, experimental, and determined mindset to uncover them.

There Are Always More Savings Between the Lines We have relied on our GPO savings (price and rebates) for almost a century to fill our supply chain budget gaps. However, the new normal, as I see it, will be less GPO savings for our healthcare organizations and more savings beyond price (i.e., advanced value analysis techniques, clinical utilization management, purchased services vested outsourcing, etc.). That’s why I believe there are always more savings between the lines.

Where Can You Achieve 7% to 15% More Savings Beyond Price and Standardization?

CLICK HERE TO LEARN MORE

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The Best Practices are FREE but the Lessons are Priceless!

Want to Learn More About How You Can Help Your Organization Achieve 7% to 15% in Additional Supply Savings Beyond Price? Read Our Free Best Practices to Find Out How.

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How Is Your Organization Managing the Purchased Service Hot Potato?

Advanced Purchased Service Analytics Average $2.1 to $4.1 Million in Savings Per Hospital

Purchased Service Advantage

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A System That Does All the Heavy Lifting So You Can Achieve All of Your Savings and Improvement Goals

www.PurchasedServiceAdvantage.com

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