Value Analysis 101 Robert T. Yokl

for their products, services, and technologies. For example, standardizing your pacemaker features for all your cardiac patients instead of customizing (planning ahead on what customers actually require) their features. Customizing can save, on average, 48% on your most common pacemakers. This concept is best visualized with a standard normal distribution graph (figure 1) which shows that the normal distribution pattern of your pacemaker purchases should slope on both sides of the scale as opposed to following a straight line if your pacemaker features are customized vs. standardized.

3. Wasteful and Inefficient Methods and Practices: Every healthcare organization has embedded methods and practices that are wasteful or inefficient because things change and people change in any given year. For instance, a 500-bed university teaching hospital we worked with was spending $382,000 more in IV sets annually because every time one of their 12-year-old IV pumps alarmed the nurses change the IV set, when the real problem was that the hospital needed to buy new pumps.

4. Value Mismatches (Lower Cost Alternatives Available): The true essence of value analysis (Cost/Function = Best Value) is to determine the most appropriate products, services, or technologies for their intended purpose. Why buy patient slippers at a cost of $3.66 when a $1.29 pair meets your customers’ requirements exactly, or use a silver catheter when an off-the-shelf catheter will suffice?

5. Utilization Misalignments (Wasteful Consumption, Misuse, and Misapplication of Products, Services, and Technologies): There can be many reasons why your healthcare organization has utilization misalignments. The most common reason is that your hospital, system, or IDN is not embracing the use of key performance indicators to track, trend, and then compare your healthcare organization’s practices with your peer cohort. Like a 150-bed community hospital that saved $52,000 annually by discovering that the community standard was to draw the exact amount of contrast media needed for the patient CT/MRI with the injection syringe and only use prefilled syringes later in the day. This eliminated waste because larger containers opened later in the day could expire.

Envision every category of supply and purchased services having their own key performance indicators so that you will know where you stand on every one. This way you can focus your attention on the areas that need attention and maintain/sustain the areas where you are a best practice.

As we have described above, savings beyond price is an art and science that is best employed by using the technique of value analysis to study how your products, services, and technologies are employed once they are in the hands of your customers. This way you can attack your cost drivers below the waterline where your biggest cost savings reside.