Volume 8/Issue 3
Healthcare
Leading Cost and Quality Strategies for the Healthcare Supply Chain
Magazine
Featured Article:
What Value Analysis Leaders Need to Know About Mattress Contamination
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Contents
Healthcare Value Analysis & Utilization Management Magazine
4 FROM THE PUBLISHER’S DESK By Robert T. Yokl
Are You Going in the Right Direction with Your Savings? 6 FROM THE MANAGING
Healthcare Value Analysis & Utilization Management Magazine is published Bi-monthly by SVAH Solutions® P.O. Box 939, Skippack, Pa 19474 Phone: 800-220-4274
EDITOR’S DESK
FAX: 610-489-1073
By Robert W. Yokl
There is Always a New Way
bobpres@ValueAnalysisMagazine.com
www.ValueAnalysisMagazine.com
9 FEATURED ARTICLE
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By Bruce Rippe and Edmond Hooker
Editorial Staff
What Value Analysis Leaders Need to Know About Mattress Contamination
Publisher Robert T. Yokl bobpres@ValueAnalysisMagazine.com
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18 VALUE ANALYSIS 101
Managing Editor
By Robert T. Yokl
You Need Champions for Your Value Analysis Program to Excel
Robert W. Yokl ryokl@ValueAnalysisMagazine.com
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21 UTILIZATION MANAGEMENT
Senior Editor
By Robert W. Yokl
Generating Even More Savings from Your Price, Standardization, and Value Analysis Initiatives
Patricia A. Yokl ————————————
Editor and Graphic Design Danielle K. Miller
26 VALUE ANALYSIS ADVISOR By Robert T. Yokl
4 Ideas on How to Deal with Radio Silence
28 PERSPECTIVE By Robert W. Yokl
What Do I Say to Supply Chain Professionals Who Don’t Believe in Savings Beyond Price?
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Copyright 2020 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: 800-2204271 E-Mail: ryokl@valueanalysismagazine.com for approval to reprint, excerpt, or translate articles. 3
From the Publisher's Desk Are You Going in the Right Direction with Your Savings? Robert T. Yokl
Group purchasing organizations (GPOs) and consortiums have been a powerful force in controlling healthcare organizations’ labor and non-labor costs for decades. Yet, no one seems to question whether these cooperatives have really saved what they have claimed to save. However, this “trust level” is changing as many healthcare organizations have been challenging their GPOs and consortiums’ savings claims by verifying that their projected, promised, and guaranteed savings are actually realized. Here are four other reasons why you need to “trust but verify” your GPO’s savings projections (and any other savings projections): 1. Make certain budgeted savings are realized. It is our estimate that 57% or more of hospital, system, and IDNs’ finance departments are now including supply chain expense and value analysis projected or promised savings into their budget assumptions. This emerging best practice can become very unsettling for supply chain professionals if their savings projections given to your finance departments turn out to be wrong. 2. Verify your GPO’s (and other vendors’) savings projections. We have documented that GPO’s (and other vendors’) savings projections can be off by as much as 15% to 46% on most commodities and physician preference items. With this track record, you want to verify that your GPO’s (and other vendors’) promised savings really happened as planned. 3. Prove projected savings of any kind are real. As healthcare supply chain professionals, we owe it to our healthcare organization that when we project or promise a savings - it happens. No longer can we hope that our projected or promised savings were realized if we want to be taken seriously by our senior management. 4. Verify your GPO’s contract ROIs. GPOs also promise expected ROIs for their members on many of their contracts. Shouldn’t you know for certain how much your GPOs are really saving you? This paradigm shift (trusting but verifying your projected, promised, and guaranteed savings) is mission critical for your healthcare organization to survive and thrive. This is especially true since your hospital, system, or IDN will be guaranteeing their pricing more often on their value-based contracts.
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From the Managing Editor’s Desk
There is Always a New Way By Robert W. Yokl, Sr. VP, Operations — SVAH Solutions
“There is always a new way: A new way to solve a problem, a new way of climbing the mountain. The ability to identify that ‘new way’ is a valuable asset because most people won’t see past the way things have always been done. The confidence to pursue that ‘new way’ and look at an issue from a new angle is rare enough because most people will obstinately refuse to change. The desire and drive to execute the ‘new way’ lies at the heart of every great innovation.” My very astute colleague, James Russell, Director of Clinical Resource Management at MD Anderson, and past contributor to HVAUM magazine, was a big influence on me having an inspirational tag line on my email signature. If you have ever emailed with James, you will find that he changes his tag line quite often and always makes great points with his tag line regarding value analysis, quality improvement, and supply chain. Though I don’t change my signature tagline as often as James does, I have settled on one that I believe needs to be the focus of our value analysis and supply chain world moving forward.
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From the Managing Editor’s Desk
Robert W. Yokl
The quote above was from Sir Jackie Stewart’s Autobiography (three-time Formula One World Drivers’ Champions back in the late 60s). For those that don’t know much about Formula One Racing, it is and has always been the pinnacle of innovation in racing technology. As one driver stated in an interview, “Our team hires engineers from NASA, and the engineers used to design a part and then they would see it on the spacecraft in about three to five years. In Formula One, they design a part and it is on the race car in two weeks.” Most recently, Formula One Race Teams based out of the UK and European countries pitched in during the pandemic to make ventilators and breathing devices. They did not just want to take a given design. They reengineered the ventilators and respiratory breathing devices to make them better, smaller, and less costly to manufacture in less time. They used their capabilities to innovate and found a better way. During the pandemic, where Personal Protection Equipment (PPE) was scarce, healthcare providers had to find a new and different way to protect their frontline caregivers - and they did! Hospitals and health systems started reprocessing/sterilizing N95 masks when they could not purchase masks. They found a new way out of necessity. My firm, SVAH, has been a pioneer in the clinical supply utilization area of the healthcare supply chain world over the past 10 years in an extremely price focused time where the GPO contract price is king. Supply utilization is based on reporting, benchmarking, trending, and analyzing in-use costs of products to identify waste and inefficient use, value mismatched products, and other non-price related cost increases. The key here is that it incorporates the total cost of a product category, not just the price of the products, and then marries them to their patient volume metric. This gives a powerful baseline of data to benchmark and create amazing key performance indicators not only today but on an ongoing basis. It will not only incorporate your price changes but will capture increases as well as consumption and waste issues. Why aren’t more organizations jumping on the clinical supply utilization bandwagon? Even though it has been around over 10 years, 10 years is still very new, and new takes time in any mature environment like the healthcare supply chain. Think about something like value analysis which has been in healthcare for over 40 years but has only come into prominence over the past 15 years. What we have found is that there will be those who will look no further than the way things have always been done (price is king and only price). However, there are many that are starting to realize that there is more to the savings equation than just getting a better price year after year.
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Volume 8/Issue 3
Featured Article What Value Analysis Leaders Need to Know About Mattress Contamination Bruce Rippe, Chairman, CEO, Trinity Guardion Edmond Hooker, MD, Ph.D., Trinity Guardion
Many hospital leaders don’t know that what might be hidden under the covers could be making their patients sick and costing them money. In order to prevent this, leaders must understand the current state of cleaning and disinfecting of mattresses compared to what the manufacturers’ instructions for use (MIFUs) require in order to maintain the integrity of the investment. While many hospitals have adopted more rigorous cleaning and disinfecting protocols for hospital rooms as a result of the COVID-19 pandemic, most may have not adopted advanced decontamination practices for mattresses. The status-quo is fraught with patient safety issues because it can leave residual bacteria and other microorganisms on the mattress that can be transmitted from patient to patient, leading to hospital-acquired infections (HAIs).1-4 Studies have shown that mattresses contribute to the current high rates of HAIs, but most hospitals currently aren’t aware that they are failing to meet the FDA’s disinfection guidelines. 5-7 Even before the pandemic, ECRI, a leading patient safety organization, underscored the importance of addressing hospital mattress contamination. The organization named hospital beds and mattresses as a top health hazard in 2018 and 2019.8,9 The ECRI report stated that the recommendations for cleaning and disinfecting mattresses made by many mattress manufacturers and mattress rental
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Featured Article companies were not in accordance with FDA guidance.10 It also raised concerns about facilities’ use of non-recommended mattress cover cleaning and disinfection materials, deficient exterior inspections during terminal room cleaning, deficient inspection of support surfaces, use of covers beyond expected life, and hospitals’ protocols of one-step cleaning and disinfection (often using bleach) processes without rinsing. This ECRI alert, combined with increasing pressures to keep patients safe and keep costs down in 2020 and beyond, is a call to action for value analysis leaders. After all, value analysis teams play a critical role in bridging the gap between executives, clinical leaders, patients, and the supply chain directors. That’s why it’s time to reimagine the crisis of this pandemic as a time of opportunity and action. Value analysis leaders have already emerged from behind-the-scenes as healthcare heroes by honoring their call to duty to choose products based on evidence and outcomes. Now, they are poised to advocate for much-needed change, ensuring both clinical efficacy and high financial value for their organizations.
Getting Informed to Keep Patients Safe According to the most recent Healthcare-Associated Infection (HAIs) Prevalence Survey by the CDC, in 2015, U.S. acute care hospitals experienced an estimated 687,000 HAIs and 72,000 HAI-related deaths.11 In 2017, C. diff infections accounted for 235,000 HAIs, many of which are the result of crosscontamination between patients. 12 Studies also show that patients are 6 times more likely to acquire an HAI if the previous bed occupant had been infected; another key indicator that current mattress contamination practices are falling short. 13
Possible soiling EMBEDDED in fabric
But it’s vital to understand that stronger disinfectants are not the answer. These harsh chemicals can damage mattress “skins” and mattress cores, which increases the infection risk for patients. 14 Yet, many hospitals still rely on the off-label use of disinfectants and single-step processes that are not recommended by mattress manufacturers, which results in the failure to disinfect the surface and ultimately leads to a shortened life of the beds and mattresses.
Hospitals must recognize that they must move away from the idea of using single-step processes for cleaning and disinfection. They must realize that a new process has been designed by the manufacturers specifically for the healthcare mattresses of today, as the manufacturers have moved away
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Featured Article from vinyl (hard, non-porous surface) to polyurethane (soft, porous surface). The change in material for the surface of the mattress (the “skin”) was made in order to decrease patient pressure ulcers. The vinyl mattress surfaces were previously cleaned and disinfected with a one-step hard surface disinfectant, but polyurethane surfaces require multiple steps, as determined by the manufacturer, in order to achieve the disinfection levels recommended by the FDA and CDC. None of the currently used surface disinfectants are approved for use on soft surfaces.15 Also, none of the non-contact methods (e.g. UV light) have any FDA approved claims to kill bacteria on these soft surfaces.16
A New Best Practice with Tangible Value and ROI A recent peer-reviewed study published in Sage Fluid emersion INSIDE the Journal’s Infectious Disease Research and Treatment mattress; staining on publication, found that using a removable, launderabottom of top cover, ble bed barrier is more effective at eliminating fire barrier, & foam bacteria that cause C. diff, MRSA, and E. coli than manual processes using chemical disinfectants.17 This verifiable and cost-effective method of bed and mattress disinfection is quickly becoming an industry best practice, especially in today’s COVID-19 reality as more patients begin to re-enter hospitals and resume elective procedures. The commercial laundry process detailed in the study provides detergent, bleach, agitation, and heat. These elements allow bacteria and spores to be physically separated from the barrier surface. The chlorine works to kill residual organisms. Multiple rinse cycles allow the microorganisms to be removed from the washing machine. The use of the laundry ensures a repeatable process that takes the human element out of the equation. Hospitals, patients, and caregivers know that they have a disinfected surface for the patient every time. “The current state of cleaning and disinfecting beds and mattresses is dangerous because it can leave residual bacteria that can be transmitted from patient to patient. However, laundering removable bed barriers provides an alternative. It eliminates issues with insufficient removal of pathogens from the patient surface, ” said Ardis Hoven, MD, Professor of Medicine at the University of Kentucky and an Infectious Disease consultant to the Kentucky Department for Public Health.
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Featured Article Launderable bed barriers, developed by Trinity Guardion based on scientific evidence and countless research studies, meet and surpass the required disinfection guidelines.18 The first-of-its-kind bed barrier empowers hospitals to achieve superior disinfection results by leveraging a more robust, high heat laundry process to exceed the CDC guidelines and manufacturers’ recommended multi-step processes. As a result, beds and mattresses are cleaner when compared to more traditional disinfection methods, and the risk of cross-contamination is eliminated. The final inspection process at the laundry ensures that the barrier has no tears or other damage. The use of the barrier helps hospitals to keep patients safer by reducing healthcare acquired infections and extending the life of beds and mattresses. By reducing risk and reducing infections, launderable bed barriers boost patient safety and promote high-value care.
Assessing the Financial Impact – A Business Case that Makes Itself Keeping the status-quo is not just ineffective but incredibly costly. Beds and mattresses are typically a hospital’s fifth largest capital investment. Current processes not only leave bacteria that can be transmitted from patient to patient but also drastically reduce the life of beds, mattresses, and mattress skins. Although hospitals may be concerned about any capital outlays during these challenging financial times, investing in a new mattress decontamination approach with launderable bed barriers delivers a substantial ROI in less than one year. Even more importantly, it continues to deliver value year over year.
5 Reasons to Invest in the Launderable Bed Barrier 1. MIFU reprocessing costs are very expensive, timeconsuming, and ineffective for C. diff. 2. Not adhering to MIFUs for cleaning and disinfection voids the manufacturer’s warranty. 3. Reaching the warranted life of mattresses and mattress covers has a profound positive impact on hospital budgets. 4. Reducing HAIs improves patient safety. 5. Launderable bed barriers help hospitals to keep patients safer and margins more manageable by reducing HAIs, reducing reprocessing costs, and extending the life of beds and mattresses.
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Featured Article Hospitals have invested millions in beds and mattresses; however, due to use of harsh chemicals, these mattresses are failing at alarming rates.19,20 This is costing the organizations millions of dollars. Failures are being caused by non-MIFU compliant cleaning and disinfection processes. That means that they fall short of reaching the expected life promised by the manufacturers and must be replaced much sooner than planned according to capital budget cycle. One real-world example from a recent mattress audit at a large academic medical center found that 60 percent of 3-year-old mattresses needed to be entirely replaced.21 An additional 40 percent of mattresses needed a new mattress skin.21 Hospitals spend countless hours and dollars on cleaning and disinfecting beds and mattresses, and yet, the time spent on one-step processes, or even following complicated MIFUs, fails to deliver meaningful Inside of top mattress cover is DISINTEGRATED BY results. The cost of labor, combined with the lack of efficacy of the disinfection during the status-quo DISINFECTANT use as well approach, is ultimately both expensive and ineffecas fire barrier sock tive. Also, hospitals are required by manufacturer protecting the patient MIFUs, as well as FDA and CDC recommendations, to perform routine inspection of the mattress after each use.22-23 Unfortunately, most hospitals do not have a mattress audit inspection process for the interior and exterior. As a result, failed mattresses are common in many hospitals, exposing patients to previous patients’ bodily fluids due to fluid immersion inside the mattress. While the use of the launderable bed barrier has an excellent ROI just based on hard cost, the complete business case also should account for soft cost savings which may not always show up on the balance sheet but matter more than ever in this era of tenuous finances. Contaminated mattresses can pile on costs when the patients lying on them develop HAIs. The launderable bed barrier, which has been shown to reduce C. diff infections by 50 percent or more, has a profound impact in decreasing these soft costs. 24,25 For example, a 40-bed medical ICU using the Trinity Guardion Soteria Bed Barriers can experience an annual savings of $125,000 thanks to the synergistic combination of decreased replacement costs of mattress skins and mattress cores, a 50% reduction in C. diff cases, and a decrease in environmental service cleaning labor and materials.
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Featured Article Value Analysis Leaders Call to Action For value analysis leaders, the time is now to translate this new knowledge into action to protect patients. The time is now to turn this newly acquired knowledge about mattresses and hospital beds into major financial savings for organizations.
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Featured Article
Bruce Rippe, Chairman, CEO Bruce is a serial entrepreneur who was responsible for inventing Trinity Guardion’s flagship product, a hospital bed barrier designed to prevent patient infections, & guiding the development & validation of this unique product. As CEO, he oversees all operations of the company. He previously served as CEO of Romweber (Batesville, IN). With more than 30 years of experience in furniture manufacturing & product development, Bruce spent nearly 20 of those years developing patient room products for HillRom & Med-Mizer. In addition to his work at Trinity Guardion, Bruce serves as board chair for the Batesville Senior Café, a developer of affordable senior housing in Southeast Indiana that offers assisted living services, & is a past board member of Margaret Mary Health. Bruce holds a BSBA in accounting from Xavier University.
Edmond Hooker, MD, DrPH, Clinical Advisor Edmond Hooker teaches in the Department of Health Services Administration at Xavier University. He also practices emergency medicine & conducts public health research at the University of Cincinnati Hospital, & serves as their residency research director, overseeing the clinical research coordination program. Edmond has authored more than 50 articles in leading journals & published numerous book chapters. He serves as an editor & has contributed numerous chapters for eMedicine, an online clinical knowledge base. Edmond holds a BS degree from Hampden-Sydney College in Virginia & a MD from Eastern Virginia Medical School. He completed his residency training in emergency medicine at the University of Louisville, then served as an associate professor & director of resident research there from 1991–1996. He then served on the faculty at the University of Virginia. In 2007, Edmond earned his Doctorate in Public Health from the University of Kentucky, & in 2015, was promoted to professor. He has spent eight years researching infection risks associated with hospital beds & mattresses, which has led to numerous published articles & guest lectures on the topic.
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Featured Article References 1. de Andrade D, Angerami ELS, Padovani CR. A bacteriological
study of hospital beds before and after disinfection with phenolic disinfectant. Rev Panam Salud Publica. 2000;7(3):179-184. doi:10.1590/s1020-49892000000300007 2. Fernando FSL, Ferreira AM, Colombo TE, Rubio FG, Almeida, MTG. Fungal contamination of hospital mattresses before and following cleaning and disinfection. Acta Paul Enferm. 2013;26 (5):485-491. 3. Hooker EA, Allen S, Gray L, et al. A randomized trial to evaluate a launderable bed protection system for hospital beds. Antimicrob Resist Infect Control. 2012;1(27). doi:10.1186/2047-2994-1-27
14. Milnes J. The impact of cleaning chemicals on polyurethane mattress cover materials and their propensity for physical damage. Dartex Coatings Limited. http://www.dartexcoatings.com/Dartex/ media/SiteImages/Applications/events/TVS-Poster-Presentation%28-news-article-5%29.pdf. Accessed September 4, 2020. 15. McGoldrick M. Soft surface sanitizing. Home Healthcare Now. 2015;33(1):52-53. https://www.homecareandhospice.com/pdfs/ McGoldrick_Soft_Surface_Sanitizing.pdf. Accessed September 4, 2020. 16. UV Lights and Lamps: Ultraviolet-C Radiation, Disinfection, and Coronavirus. fda.gov. https://www.fda.gov/medical-devices/ coronavirus-covid-19-and-medical-devices/uv-lights-and-lampsultraviolet-c-radiation-disinfection-and-coronavirus. Updated August 19, 2020. Accessed September 4, 2020.
4. Hu H, Johani K, Gosbell IB, et al. Intensive care unit environmental surfaces are contaminated by multidrug-resistant bacteria in biofilms: combined results of conventional culture, pyrosequenc- 17. Hooker EA, Ulrich D, Brooks D. Successful removal ing, scanning electron microscopy, and confocal laser microscopy. of Clostridioides difficile spores and pathogenic bacteria from a launderable barrier using a commercial laundry process. J Hosp Infect. 2015;91(1):35–44. doi:10.1016/j.jhin.2015.05.016 Infect Dis (Auckl). 2020;13:1-6. doi:10.1177/1178633720923657 5. Bousquet A, van der Mee-Marquet N, Dubost C, et al. Outbreak 18. Reprocessing Medical Devices in Health Care Settings: Validaof CTX-M-15–producing Enterobacter cloacae associated with therapeutic beds and syphons in an intensive care unit. Am J Infect tion Methods and Labeling. fda.gov. https://www.fda.gov/ media/80265/download. Published March 17, 2015. Updated June Control. 2017;45(10):1160-1164. doi:10.1016/j.ajic.2017.04.010 9, 2017. Accessed September 11, 2020. 6. Cadot L, Bruguière H, Jumas-Bilak E, et al. Extended spectrum beta-lactamase-producing Klebsiella pneumoniae outbreak reveals 19. Bradbury SL, Mack D, Crofts T, Ellison RT. Potential bloodborne pathogen exposure from occult mattress damage. Am J Inincubators as pathogen reservoir in neonatal care center. Eur J fect Control. 2014;42(4):421-422. doi:10.1016/j.ajic.2013.10.011 Pediatr. 2019;178(4):505–513. doi:10.1007/s00431-019-03323-w 7. Pantel A, Richaud-Morel B, Cazaban M, Bouziges N, Sotto A, Lavigne JP. Environmental persistence of OXA-48–producing Klebsiella pneumoniae in a French intensive care unit. Am J Infect Control. 2016;44(3):366-368. doi:10.1016/j.ajic.2015.09.021 8. 2019 Top 10 Health Technology Hazards: Executive Brief. ECRI Institute. https://www.ecri.org/Resources/ Whitepapers_and_reports/Haz_19.pdf. Published October 2019. Accessed September 4, 2020. 9. Top 10 Health Technology Hazards for 2018: Executive Brief. ECRI Institute. https://www.ecri.org/Resources/ Whitepapers_and_reports/Haz_18.pdf. Published 2018. Accessed October 2, 2020. 10. Reducing the Risks of Fluid Ingress and Microbiological Contamination in Bed and Stretcher Support Surfaces. ECRI Institute. https://www.ecri.org/components/HDJournal/Pages/ReducingFluid-Ingress-Risks-in-Bed-Support-Surfaces.aspx?tab=2# . Published May 10, 2017. Accessed September 4, 2020. 11. Healthcare-associated Infections: Data Portal. cdc.gov. https:// www.cdc.gov/hai/data/portal/index.html. Reviewed January 2, 2020. Accessed October 2, 2020. 12. Guh AY, Mu Y, Winston LG, et al. Trends in U.S. burden of Clostridioides difficile infection and outcomes. N Engl J Med. 2020;382:1320-1330. doi:10.1056/NEJMoa1910215 13. Cohen B, Liu J, Cohen AR, Larson E. Association between healthcare-associated infection and exposure to hospital roommates and previous bed occupants with the same organism. Infect Control Hosp Epidemiol. 2018;39(5):541-546. doi:10.1017/ ice.2018.22
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20. Marks B, de Haas E, Abboud T, Lam I, Datta IN. Uncovering the rates of damaged patient bed and stretcher mattresses in Canadian acute care hospitals. Can J Infect Control. 2018;33(3):171-175. 21. Trinity Guardion Mattress Audit. 2020. 22. Stryker® Operations/Maintenance Manual: IsoAir™ REV 4. Stryker. https://techweb.stryker.com/Support_Surfaces/2940/AO -SM-70-C_EN_Canada_Rev4.00.pdf. Published December 2015. Accessed September 4, 2020. 23. Covers for Hospital Bed Mattresses: Learn How to Keep Them Safe. fda.gov. https://www.fda.gov/medical-devices/hospitalbeds/covers-hospital-bed-mattresses-learn-how-keep-them-safe. Published November 20, 2017. Accessed September 4, 2020. 24. Hooker EA, Bochan M, Reiff TT, Blackwell C, Webb KW, Hart KW. Decreasing Clostridium difficile health care–associated infections through use of a launderable mattress cover. Am J Infect Control. 2015;43(12):1326–1330. doi:10.1016/ j.ajic.2015.07.002 25. Hooker EA, Mallow PJ, McKinney C, Gnoni ML, Fernandez Gonzales F. Use of a launderable bed barrier and antibiotic stewardship to decrease hospital onset Clostridioides difficile infections in an acute care hospital: A retrospective pre/post case study. JHEOR. 2019;6(3):196-202. doi:10.36469/001c.11149
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Featured Article
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Value Analysis 101 You Need Champions for Your Value Analysis Program to Excel Robert T. Yokl, President/CEO, SVAH Solutions
Robert McNamara, Secretary of Defense in the 1960s, was a champion (i.e., spoke up in favor of and supported the initiative) for value analysis in the defense department. Bob Galvin, CEO of Motorola, was a champion of Six Sigma and so was Jack Welsh at General Electric. For the most part, these cost and quality initiatives would never have gotten off the ground and been sustained at these corporations and others (DuPont, Ingersoll-Ran, and Raytheon, etc.) without the presence of these champions. It is the same with your healthcare organization’s value analysis program if it is to excel. You need champions to lead the charge and support your value analysis program to be successful. In our value analysis consulting, facilitation, training, and coaching practice, SVAH identifies our clients’ value analysis champions at the initial stages of our orientation, strategic planning, and advanced value analysis training. We then ask our primary champion (usually the CFO) to chair the client’s Value Analysis Steering Committee that guides the value analysis program. We ask the other champions (usually vice presidents) to be administrative representatives on our client’s value analysis teams. Specifically, these value analysis team champions are responsible for:
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Value Analysis 101
Robert T. Yokl
1. Guiding their value analysis team through the political and administrative mine fields they will encounter. As you know, everyone doesn’t like change. Therefore, the administrative representative can help smooth the way to make change happen for your value analysis teams. 2. Informing their value analysis team when it needs administrative approval. Rather than guess what needs approval from other committees or teams, your administrative representative can guide your VA team through the decision-making process. This can save hundreds of hours waiting for approvals. 3. Acting as a liaison between other standing committees or teams. Your administrative representative sits on a number of committees already or has knowledge of the workings of other committees, and therefore can keep these committees informed of your value analysis activities - if it will affect them. 4. Keeping CEO and healthcare organization’s management team fully informed of their value analysis team’s activities. By your administrative representative keeping your CEO and management team fully informed of your value analysis team’s activities, you should rarely have a conflict, confusion, or a missed communication with your management team.
5. Facilitating any value analysis study or investigation with customers, stakeholders, or experts. Maybe your VA project manager can’t get an appointment with one of your department heads, physicians, or clinicians to discuss a VA project. This is where your administrative representative can intervene to make this meeting happen. 6. Becoming a champion of value analysis techniques organization-wide. Now that your administrative representative has been trained in the value analysis techniques, he or she should encourage the use of these techniques in all purchases that fall under his or her responsibility. 7. Actively looking for opportunities to give your value analysis team positive exposure to the board, management team, department heads and managers, media, and public at large. For example, having a value analysis team leader present a successful value analysis project to your management team or even board of directors. I can’t reinforce enough how important it is for your hospital, system, or IDN to have champions at every level (value analysis steering committee and at your VA team level) to help your value analysis program excel, prosper, and be sustainable over the long term. Otherwise, from our decades long experience, your VA teams will lose their momentum, legitimacy, and enthusiasm within the first year of your value analysis program. Trust me when I tell you that your administrative representative or champion is the glue that holds your VA team together.
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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 is now mission critical to do so! www.ClinicalSupplyUtilization.com SVAH SOLUTIONS WWW.UTILIZERDASHBOARD.COM Volume 8/Issue 3
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Utilization Management Generating Even More Savings from Your Price, Standardization, and Value Analysis Initiatives By Robert W. Yokl, Sr. VP, Operations — SVAH Solutions
Let’s face it, we live in a GPO-centric healthcare supply chain world and that isn’t going to change much in the near to distant future. I am not stating anything that is not obvious to anyone reading this article, but this now creates new mission critical challenges for supply chain professionals that need to be addressed. The biggest challenge is validating the financial ROI from group purchasing organizations (GPOs) and all other contracted savings opportunities, thanks to the Covid-19 pandemic as well as other market conditions.
Even GPOs Can’t Tell You Exactly How Much You Saved Overall Yes, supply chain leaders can easily say that they implemented the new GPO contract conversion, value analysis initiative, physician preference contract, or standardization opportunity because their teams made the changes and they are in place on their purchasing/ERP systems. This still leaves an avenue in which even the GPO organizations cannot tell you with certainty whether all the projected monies hit the bottom line and exactly how much hit or did not hit.
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Challenging the Status Quo to Find an Additional 26% to 53% Savings The standard operating procedure for savings tracking to date is to use the base number that you started with when you signed the contract. This normally was derived from your supply usage from the previous 6-12 months and then projecting your savings based on the new pricing. The big question is, is this still a realistic business strategy to leave an avenue that greatly affects your bottom line for the next one, two, or three years? Basically, you are using an estimate to report your savings. Is this good enough in these challenging times? Now that you are on the hook for millions of dollars in savings and most Chief Financial Officers are looking for budgets to be reduced, do you really want to rely on estimates that are going to influence your supply budget for the next one, two, or even three years? Our studies in tracking savings validation over the past three to five years for clients have found up to 25% to 53% of all projected savings do not hit the bottom line due to factors other than price, standardization, and value analysis implementation. This is mostly due to volume swings, policy changes, staff going back to old ways, or the new product conversion causing unintended cost increases. If you were aware of these savings opportunities going away, you would do something about them right away, but how can you do something about this when you are not performing savings validation? In turn, we have also seen savings span much higher than savings projections, which you would also want to know about and take credit for. Either way, we need exacting reporting to let us know which way the wind is blowing on our now very precious savings.
The Pandemic Market Conditions Have Changed the Game Forever Of course, all your savings projections could get thrown out the window with what is occurring with the major volume downturns due to the pandemic crisis. Yes, your 8% price savings on wound care dressings or 7% on angiography catheters will still be in place, but with the volumes dramatically dropping your original savings projections can no longer be relied on.
What is a Better Way to Track These in the Future? The goal for any savings tracking program should be an exacting number that can be relied upon
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100% of the time. Think in terms of your total supply spend for your organization. You can quickly go into your purchasing/ERP system and find out how much you have spent on supplies since last year, but we cannot reliably call up these numbers (yet) when it comes to savings. Plus, you are not taking into account the patient volume swings in all of your clinical areas. Due to Covid-19, nonclinical areas such as Central Sterile and Environmental Services have had major cost increases with new levels of disinfecting and sterilizing. You need systems that incorporate volume swings that can measure through good times and challenging times to give you exact reporting on what your true savings are.
Patient Volume to Spend Validation System In a recent client review meeting, we provided reports to our client hospital on exactly how much the Covid-19 pandemic has cost the organization, in each area, so that they knew with certainty what their cost overruns were in supplies. Excluding the newly created Covid rapid tests that did not exist for anyone prior to April 2020, their costs increased on 14 major categories by 48% during this Covid pandemic period. These included everything from isolation gowns to environmental supplies to respiratory items, as well as 10 other major categories that are greatly affected by the pandemic. We were able to make this happen because we used a patient volume centric system to validate the spend to clinical metrics, which is the only true comparable. You cannot compare spend to spend because any previous period will not match up to the major patient volume downturns during the height of the pandemic.
Why Savings Validation Works 100% of the Time Savings validation works 100% of the time because the patient volume centric to total product spend is the true total cost regardless of the price discounts that you receive. We see, almost every day, that price savings only affects up to about 20% of the total cost of products, whereas there is another 80% that is made up of other factors such as what your customers utilize, waste, or when they choose feature rich products more often after conversions. So yes, you can lock in the price on 20% of your
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total cost, but you are still leaving 80% left to chance that your retrospective projections will still hold true, and the majority of the time they don’t. I recently reviewed a health system client’s pulse oxisensor category which had the best price I have ever seen to date for these sensors. This, combined with other value analysis procedural changes, should be netting them over 19% in projected savings. However, for the first three months after their pricing and value analysis implementations, they showed a net gain of about 7% in patient volume metric to spend. Not too shabby, but this is not even close to their projected 19%. Then, in the following three months they started swinging back to the red at 9.4% to the negative. This is a 16% negative shift that this organization luckily knows about and their value analysis team is readdressing. If they didn’t have exacting savings validation, they would have assumed that they saved the 19% savings, but they would have been losing money instead, and worse, not have known about this at all!
Savings Validation is Not a One-Time Event but an Ongoing Best Practice Given that hospitals and health systems change their contracts every one, two, and three years, it is necessary to have tracking in place to validate all the savings or whether the savings go askew. This may sound like we are chasing the negative and trying to degrade work that has already been completed but it is quite the opposite. We are trying to hold onto the gains that you and your supply chain/value analysis teams have achieved and give them credit for exacting results. We need to lock down all of our contracts, as well as value analysis and standardization initiatives, to ensure that they are meeting their projected results. If not, we need to revisit them with the vendors, group purchasing organizations, value analysis, or the department heads and managers of the product category in question. It can also be used to track your new products to make sure that they are not going beyond their initial spend projections when implemented. Savings validation should be implemented and automated to guarantee you that you have a patient volume centric system in place that you can count on for a true result of your savings program. There are too many categories, there are too many products, there are too many changes and too many customers to simply rely on a savings tracking projection spreadsheet any longer. The time for savings validation is now!
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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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Value Analysis Advisor (For Sales Reps) 4 Ideas On How to Deal With Radio Silence Make Sure Your Prospect or Customer Knows You Will Be Along on This Journey Robert T. Yokl, President/CEO, SVAH Solutions
I bet there isn’t one sales representative that doesn’t deal with radio silence (i.e., customer doesn’t return your calls or e-mails after a presentation or proposal has been delivered) on a daily basis. This can be very frustrating, but not fatal! Here are four ideas on how to turn this situation around: 1. Understand that Past Decisions Haven’t Worked Out for Them: Remember that your customer or prospect has been disappointed with the outcomes of products, services, and technologies that they have bought in the past, and therefore, are a little hesitant to move forward with your proposal. So, you must reassure them that you will guarantee your outcome and guide them through the process of implementing your solution. Make sure the risk is on your side, not on your prospect or customer. It is best to convey this information at the time you make your presentation or proposal, not at a later date. 2. Schedule a Meeting With Your Sales Manager: Sometimes, your manager can uncover the
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reason why your prospect or customer is hesitating to buy or can convince your prospect or customer he or she is making the right decision to buy from your firm. Even so, it will give you another opinion on why you aren’t closing the sale. 3. Have Another Peer Call the Customer or Prospect: If you know someone (internal or external) who knows your prospect or customer on a first name basis, have them call your contact to see if they can find out why they aren’t calling or e-mailing you back. I know from personal experience that this tactic can be very effective if you can find the right person to make the call. 4. Make Sure You Talk About It In Your Sales Presentation: As suggested in idea #1, make sure you talk about prospects or customers being hesitant to move forward with a purchase order until they heard about the success ratio that your customers were experiencing with the product, service, or technology you are selling. Make sure your prospect or customer knows you will be along on this journey and will be there if anything goes wrong to set it right! Radio silence is a fact of life for sales representatives but, as I said, it doesn’t need to be fatal. Try one or more of these tactics the next time you are experiencing “radio silence” and you will be surprised at how often you can turn around lost accounts.
Source: Sales “Chalk Talk” by Nick Loise
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Perspective
What Do I Say to Supply Chain Professionals Who Don’t Believe in Savings Beyond Price? By Robert W. Yokl, Sr. VP, Supply Chain & Value Analysis — SVAH Solutions
What do I say to supply chain professionals who don’t believe in savings beyond price? I think the best way to answer this question is to talk about the history of how we got into looking at savings beyond price. Eventually, you may run into things that will help you to steer your organization to this next level of supply savings; but you should have a plan in place to do something about these savings sooner. Sit back and find out how we found this incredible gold mine in our clients’ backyards.
There is Value in Knowing the History of Savings Beyond Price For 33 years, our company has specialized in value analysis. More specifically, we teach, coach, and implement value analysis programs throughout the United States. We still consider ourselves a value analysis firm, but we have learned that there is more to the value analysis equation than just value analysis methods, teams, and program elements. When we first began working with hospitals and health systems, the group purchasing marketplace was not what it is today. There was a lot of low hanging fruit available that made value analysis a bit easy. In the late 1980s through the 1990s, value analysis was more about looking at high dollar purchases and finding waste and inefficient use for big
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savings. Many times, we assisted in customizing their contract portfolios for big savings with value analysis helping to evaluate these contracts and products.
Group Purchasing Price Savings Has Matured, Now How Do We Save Big Beyond Price? Fast forward a bit into the early 2000s where we now have committed national group purchasing, whereby our hospital clients are committed to the GPO’s price and contracts. We could no longer recommend new contracts, yet they still needed more savings. Interestingly, the teams we helped start, train, and coach weren’t as keen on just looking at their top spend categories to see if there were any savings beyond contract price. These teams needed more proof to look at than just being told to look into their pulse oxisensors because they were spending $440K a year on them. They thought they were fine because they were buying at the best tiered contract and thought that was all they should be doing. We would have to prove our case for these new value analysis teams to even look at pulse oxisensors or any other value analysis savings opportunity. This led us to look beyond price, which, in this case, was supply benchmarking. Since we had been working with so many customers and had their spend data and statistics already, we were able to share with them the proof that they were asking for. We could confirm that, yes, they had the best price on pulse oxisensors at the best tier for their GPO, but that they were spending $5.60 per patient day (early 2000 benchmark, much different today) and their peer hospitals were spending between $3.35 and $4.10. This resulted in a juicy savings opportunity with proof for the value analysis team of 27% to 40% in increased spend over their peer hospitals with similar operating characteristics. We then started working with the teams further to analyze and drive out the savings.
Price is Only a Small Portion of the Overall Cost of Any Product The key to these savings beyond price is that they are encompassing the entire spend of each product’s in-use costs which includes the price as well. Simple math tells us that if you save 10% on a product and lock in the price that you will save 10% on each and every product purchased. The challenge here is that the forgotten denominator is that the quantity purchased/used at the organization is the big X-Factor in savings beyond price. In the oxisensor example above, the hospital had their best price locked in but found that they were buying 35K in mostly disposable sensors only to find out that they should have been buying only 14K to 26K total in sensors instead.
Value Analysis Teams Now Require Savings Opportunities that are BulletProof Fast forward to 2020. Value analysis teams who are primarily made up of department heads and
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managers not only require proof that there are big savings opportunities, but also want proof that is bulletproof. I can’t blame them. To spend 2, 3, or even 6 months working on a big savings initiative only to have the savings fizzle out is very disappointing. That’s where the savings beyond price approach works best, especially as we are now reaching the point that we have already implemented the major committed volume contracts and have little or no room to negotiate further. The only thing you can really affect in these contracts is how much you consume/utilize. This is the hidden gold mine that we were talking about and has only been stumbled upon in bits and pieces (a category here, a category there). It does not have to be that way if you move towards a systematic approach to savings beyond price! Yes, Savings Beyond Price NonBeliever, there are huge savings in how much you consume, which entails waste and inefficient use of products as well as identifying feature rich products. In the case of oxisensors and most other products, if you choose a feature rich product when a lower feature/cost product could meet your clinical requirements, then you can substantially reduce your total cost within the confines of your locked in pricing contract. We don’t waste on price. We waste on how much we use/consume.
“The forgotten denominator is that the quantity purchased/ used at the organization is the big X-Factor in savings beyond price.”
How Much Savings Beyond Price is There? How much savings beyond price opportunities are there? Our studies over the past 10 years show that there is as much as 7% to 15% of total supply budget savings available to hospitals and health systems. How do you start to get to these savings? First, you have to establish a baseline and benchmark from there. This initial baseline will prove invaluable on your quest for savings beyond price.
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FAST-TARGET SAVINGS ASSESSMENT Value Analysis 101
Robert T. Yokl
Is It Time to Accelerate Your Supply Utilization Savings? 7% to 15% Savings From Total Supply Budget Is Available Beyond Price & Standardization!
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Learn More at www.FastTargetSavings.com Allow us to help you to uncover those hidden savings beyond price and standardization
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Sometimes It’s Hard to Ignore What An Automated System Can Do for Your Supply Chain Organization
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