Healthcare Value Analysis & Utilization Management Magazine - Volume 10- Issue 1

Volume 10/Issue 1

Healthcare

Leading Cost and Quality Strategies for the Healthcare Supply Chain

Magazine

Featured Article:

Bringing Major Value with Podcasting An Interview with Power Supply Chain Podcast Team

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Contents

Healthcare Value Analysis & Utilization Management Magazine

4 FROM THE PUBLISHER’S DESK

By Robert T. Yokl

Is Your Healthcare Organization Really Practicing Value Analysis?

Healthcare Value Analysis & Utilization Management Magazine is published Bi-monthly by SVAH Solutions®

6 FROM THE MANAGING

P.O. Box 939, Skippack, Pa 19474

EDITOR’S DESK

Phone: 800-220-4274

By Robert W. Yokl

FAX: 610-489-1073

The Worst Number in the Savings Game is One

bobpres@ValueAnalysisMagazine.com

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

8 FEATURED ARTICLE Bringing Major Value with Podcasting: An Interview with Power Supply Chain Podcast Team

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

16 VALUE ANALYSIS 101

————————————

By Robert T. Yokl

Value Analysis: It’s All About Function

Managing Editor Robert W. Yokl

20 UTILIZATION MANAGEMENT

ryokl@ValueAnalysisMagazine.com

By Robert W. Yokl

————————————

If You Don’t See Big Clinical Supply Utilization Savings, Does That Mean They Aren’t There?

24 VALUE ANALYSIS ADVISOR (FOR SALES REPS)

By Robert T. Yokl

Become a Welcome Guest, Not an Annoying Pest

Patricia A. Yokl ————————————

Editor and Graphic Design Danielle K. Miller

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.

27 PERSPECTIVE

By Robert T. Yokl

Team-Based Project Management Model

Volume 10/Issue 1

Senior Editor

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From the Publisher's Desk Is Your Healthcare Organization Really Practicing Value Analysis?

Robert T. Yokl

Our surveys show that only 1 in 10 healthcare organizations is really practicing the classic tenets of value analysis and none have taken a strategic approach in this discipline, thereby missing the opportunity to slash 7% to 15% off their non-salary expenses annually. This is because although they think they are performing value analysis studies, they are really doing something else, such as bidding, comparison shopping, vetting group purchasing contracts, or negotiating - and calling it value analysis.

It's our observation that most healthcare organizations have now picked "the ripe fruit" in their healthcare organizations through group purchasing, re-negotiations of contracts, standardization, and prime vendor contracts, thereby obtaining the lowest price for the commodities that they purchase. With little savings left in this vineyard, now is the time to drive out all of the hidden costs in your products, services, and technologies by employing the classic tenets of value analysis as espoused in this magazine.

Value analysis by definition is the strategic, creative, and analytical study of the functions of products, services, technologies, and their value streams. Its objective is to determine the lowest cost of providing an equivalent or better performance of a required function at the lowest possible cost. If the tenets of VA are applied consistently and scientifically, it will enable your healthcare organization to dramatically reduce the total cost (not just purchase price) of your products, services, technologies, and their supply/value chains by millions of dollars a year and also improve your safety, quality, and outcomes.

Value analysis is a powerful savings tool, but if it isn't applied strategically or NOT BEING PRACTICED AT ALL, then only meager savings will be generated by value analysis practitioners. On the other hand, if the right people, having the right tools, training, and a proven VA process are deployed by a healthcare organization to look at the right things, then millions of dollars can be saved for your healthcare organization annually.

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From the Managing Editor’s Desk

The Worst Number in the Savings Game is One

By Robert W. Yokl, Sr. VP, Supply Chain & Value Analysis — SVAH Solutions The number one strategy for saving money in healthcare is by saving on price. When you look at contracting and strategic sourcing, it’s all about price. Standardization is a function of consolidating volume towards a common vendor(s) to attain a better tier or negotiate a better price. When an organization changes their group purchasing organization to another or joins a regional cooperative, it is to get a better price. Let’s face it, the healthcare supply chain has always been heavily leveraged towards saving with price. Price is King, but is this the only savings opportunity we have?

You Are Doing Everything Right with Price, But… In a perfect healthcare supply chain world, you would only need to keep focusing on price year after year and keep switching GPOs or following a new regional cooperative that has created the next big approach to consolidating volume. Even the national GPOs are recruiting their own members into their regional super-cooperatives. Why? Because they know that the regionals can drill down better from the national contracts to better leverage price savings for members. Yes, you will gain savings when you join a regional cooperative, but the savings moving forward will be marginal at best because you have already wrung the towel dry from the national to the regional level with consolidated committed volume.

How Long Do We Keep Grinding Savings Out on Price?

Do you continue to grind on price savings and rely on one strategy to drive out all of your savings, or do you start to develop new and better strategies that will help you focus on the total cost of supplies that will include removing waste, inefficient use, product value mismatches, and life cycle shortfalls?

By working towards eliminating these very real issues, you can start to add an additional 3%, 5%, 7% or even as much as 15% in annual budget savings on top of what you are saving with price.

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From the Managing Editor’s Desk

Robert W. Yokl

Aliens Have Landed Outside Your Emergency Room When I try to educate supply chain leaders and their teams in looking beyond price for major savings opportunities, many times the conversation starts with them looking at me like I just told them that aliens landed outside their ER. They acknowledge that savings beyond price might exist (the aliens) but then when I show them a benchmarking report on pulse oxisensors’ cost per adjusted patient day, they look at me like the aliens have landed because they just don’t get it. Inevitably, someone on the supply chain team or even the leader will say, “Wait a minute, our pulse oxisensor price is more than $1.80! How can this report be right?” Oxisensors are used in the inpatient and outpatient environment. Some are used for quick reads in the Emergency Department and others for long term inpatient care like ICU, and everything in between. Some departments do not require their use at all.

Keep in mind, sensors have a longer life than just one per patient per day. You can admit a patient and keep an $8 sensor on them for up to two weeks, which would put the sensor life cycle cost at $0.57 per day.

What the report I shared in this example showed is that the consolidated use per inpatient and outpatient departments per day is an average of $1.80 for the entire organization and there are other like-sized organizations that have a lower cost per adjusted patient day of $1.30, or 28% better than your cost. You may still have the best price at the best tier with the best value selected products, but something else may be going on that needs to be investigated. There is no doubt that there is some waste, inefficient use, product value mismatches, or life cycle shortfalls which are making up the 28% savings opportunity which is substantial.

Saving Big Is Still Within Your Grasp In the example above, we find these types of things every day at healthcare organizations and the first reaction is one of disbelief (aliens again). But the reality is that if your organization does not have any type of utilization reporting or benchmarking, then you probably have no way of knowing that there could be a big savings sitting right in your supply chain. Yes, you know you have the right price in your ERP/purchasing systems but there is more to saving big than just gaining the best price. Remember, price times the quantity purchased/used is the total cost. Even though you have 100% certainty in your pricing methods and strategies there are other major determining factors that can drive costs, namely the use patterns of your end customers.

There are Bigger Savings Hidden in Your Supply Chain If you still think that price is the only savings option for your health system, then you may never realize that there are huge savings sitting right in your supply chain that will fill up the coming years with big savings numbers like we used to have 8-10 years ago. These numbers are about attacking your in-use costs beyond price which will net as much as 7% to 15% in overall budget savings. You have to first acknowledge that these saving are real and start down the strategic road to attaining these savings for your healthcare organization. When done deliberately, you will start to make major savings gains for a minimum of the next 5-7 years or more. The time to start is now!

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Featured Article Bringing Major Value with Podcasting: An Interview with Power Supply Chain Podcast Team Hays Waldrop, Founder & President, Council of Supply Chain Executives Justin Poulin, RN, Founder & Lead Host, Power Supply Chain Podcast Garry Skinner, Partner & Transformational Leader, Discover S3

I had the great experience of being one of the guest speakers on Power Supply Chain Podcast a few months back. In preparing for the podcast, I thought I would listen to a few of their podcast episodes to get a flavor for how my talk would go with them. Well, not only did I listen to a few podcasts, but I ended up listening to all of them and could not wait until the next podcast was published. I was an instant fan and was happy to finally have a healthcare supply chain podcast that spans the entire space of our industry with relatable topics, some of which I knew a little about but now know so much more. I felt that it was worth letting our readers of Healthcare VA & Utilization Management Magazine know about these amazing podcasts and the team behind them.

and is even more important to the healthcare supply chain world than ever before?

HW: I think one big reason is timing. The last 18 months to two years with Covid-19 have dramatically impacted our industry. Of course, it directly relates to the entire healthcare supply chain and the speed that it is moving right now.

That includes a faster pace of learning and people’s desire know, to go out and learn and find other ways to educate themselves. Podcasting has been around for a long time, but I do think in the last couple of years, it’s certainly turned the corner. That desire to learn more is really the reason I enjoy podcasting. It has been a lot of fun for me. People are starting to just find our podcast. It's another way to learn while you're HVAUM: Podcasting is huge in most working, working out, driving, whatever. It's a industries, including the healthcare great platform for learning. supply chain space. Why do you think podcasting has finally turned the corner GS: It's a new avenue. It's another way to get

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Featured Article information. A new genre for millennials, if you will. The new individuals coming into supply “Power Supply Podcast helps to bring real chain want something like this. Now Power information out to the healthcare market.

Supply is one of those avenues. For me, the more I appreciate the fact that they’re trying to information that I can take in on a day-to-day target real users and everyday issues. I basis makes me smarter. The podcast is a fresh appreciate what I learn from this resource, and it has become a new quick source podcast!” too. The best part about it is that it’s free to the Suzi Collins, Market Director, listeners.

JP: From an education standpoint, people aren’t going to the professional trade organization meetings so there is a thirst recently for great information and speakers to learn from. Many are cutting the cord and becoming more comfortable with consuming media from their phones and other devices which gives them incredible accessibility to this great podcasting content.

What does Power Supply Podcast bring to the healthcare supply chain space as well as impacting the healthcare industry overall?

JP: A lot of people are tired of learning through the old methods like death by PowerPoint situations. They want creative ways, and they want to direct their own learning. One of the things that the Power Supply Podcast brings is this broad sweeping, everything is on the table type of conversations. We consistently bring these great speakers and informative conversations to our listeners and will continue to do so in the ensuing years.

Most importantly, we showcase two additional elements to the healthcare supply chain space.

Number one, we want to allow them to learn about products and services passively. People are

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Supply Chain (Arizona), Stewart Health Care afraid to reach out to potential solutions because they think they're going to get hounded by a sales rep. One element we can bring is that we can spotlight products and services as well as companies and the solutions that they deliver, but then the consumer gets to learn about that on their own terms and choose what they learn about. Supply chain professionals would like to understand the products from companies and suppliers, and what they have to offer without feeling like now they're on a call list and they're going to get bugged because they're already way too busy.

Secondly, we want to break down silos between supply chain and clinical departments. We've had several podcasts where we brought on clinicians to talk about the clinical view when it comes to things like preference cards for instance. We don’t just want supply chain professionals to listen to our podcasts, but we believe clinicians can be informed from them as well. We want folks in the operating room to listen to the considerations that supply chain has when they’re trying to help them make sure that they have their needed instruments and supplies for their cases.

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linkedin.com/company/powersupplymedia Volume 10/Issue 1

facebook.com/powersupplymedia Healthcare Value Analysis & Utilization Management Magazine 10

Featured Article How does Power Supply Podcast’s approach make it stand out from all the other podcasts that have come and gone in the healthcare supply chain over the years? Basically, why should nonlisteners start to listen now?

HW: Supply chain is not the most exciting topic on earth, but we're trying to elevate that and put a little fun in it at the same time for our listeners and us. I think we're getting better at that.

I listen to a lot of podcasts, particularly over the last two years. Some of them are absolutely boring me to tears. To get through podcasts faster, I listen to everything at about 1.8 to 2.0 speed. Even with that, some of them are still boring and I don't even get through them at that faster speed. We want to bring out the personality in who we're talking to and get them to hopefully share something that they wouldn't otherwise share.

“Not only is the team highly educated and passionate about sharing this information with others and improving healthcare supply chain, they are funny. There are not many in this industry that can take historically mundane supply chain topics and turn them into quality sessions with a flair for entertaining and engaging. The thing I can appreciate most is how this team is changing as times change. I have been in healthcare supply chain for decades and have seen the newer professionals steer away from traditional education sessions and in-person meetings. The inception of these podcasts has helped change the trajectory and skill level of the emerging leaders in this field and all who continue in healthcare will benefit from this. They are to be commended for their passion and efforts.”

Kelli McRory, Director, Clinical Strategic Sourcing, Jefferson Health

GS: There are some good podcasts out there and some good supply chain podcasts that I get a lot of information from inside and outside of healthcare. What I think the key factor that Justin, Hays, and myself bring to the table on Power Supply is our diverse experience. Justin being an RN, Hays’ work with Executive Leaders, providers, and suppliers, and my work with the vendor supply chain with a full circle approach.

We bring the dock to dock talk that our listeners want to hear.

going into supply chain, whether you're a distribution or inventory specialist, or you start getting into the supply chain side, or maybe you're even a brand-new nurse in the OR and you don't know what supply chain does. I think it's an opportunity to really let someone understand what supply chain looks like. I've had some recommendations where people have listened to a particular podcast and then taken it to their staff and had their staff listen to it and say, “I want you to listen to this 27-minute podcast on this specific topic, because I think it'll help you Who is your ideal audience for the Power understand the relationship between the OR and Supply Chain Podcast? (e.g., Who should supply chain.” There's definitely an opportunity be listening?) for education as we move forward as well as better understanding and orientation. Also, as GS: It's an opportunity for the new individuals newbies come into this field to really get a real life

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Featured Article “I think the Power Supply Platform is a new presence of what it looks like, they can study, they can go through the courses, which are all omni media opportunity that allows the user to connect, stream education, and curate their part of the process and the education. If you get learning process how and through the channel some real people who have been in the profession for a long time and hear their expertise, that's they best prefer. This leads to more cultivation of new types of perpetual self-starting learners and worth a lot. exposure and networking that really doesn’t You have published about 20 podcasts in have bounds. Point, click, learn, connect, and the past six months. What sort of feedback digest. It allows a cross pollination of sorts from have you gotten from your listeners about skills and thought processes across silos in the the Power Supply Podcasts? healthcare continuum.”

JP: The most flattering feedback we've gotten was from Brian Bartel, who's the Education Chair at AHRMM. He's a recent guest on our podcast.

Brian said to us, “I just love your podcast. I look forward to them coming out every single week.

Nobody's doing it the way that you all are doing it.” What was really great about the feedback we got from Brian is that it validated that what we just told you was different about us was what was perceived as different about us when Brian gave us that same feedback. It's one thing to have an idea in your mind about what you want something that you're producing to be, and what it could be. It's another thing for somebody to reach out to you, without you telling them that that's what you want to accomplish, and for them to be so synchronized with what you were hoping to achieve kind of organically. That's incredibly validating for us as a team. I just can't thank Brian enough for saying that and then being willing to come on. As we move forward and do more creative things, we hope to have more interactions with AHRMM in the near future.

Vin Matozzo, MBA, LSSB, CEO & Managing Partner, Paradigm Venture Group, LLC episodes. Once we hit year two, which will be April 1st, 2022, we'll start to go to a seasonal format as well as go weekly. At that point in season two, there'll be eight episodes. Then we will re-release five episodes from year one because we know that until about year three, we're going to have consistent growth. I've seen that growth in all the podcasts that I've done.

There's nothing wrong with repurposing episodes for those that have not listened yet or are just finding us in the second or third season of the podcast. So, year one is sort of season one, but season two will be in the spring. Then, the summer will be season three.

GS: We have so many opportunities to look at, so many different pieces that touch supply chain. I think there's a list of individuals that I've been tracking after that can bring their unique perspectives to our listeners. We are always What can we expect in the future from sharing our ideas - Hayes, Justin, and myself - on making this better. We are getting more Power Supply Chain Podcast? directional on some different yet very interesting JP: The plan for year one is to do episodes every bits and pieces that greatly impact supply chain, other week built around a baseline of about 32 like cybersecurity which has become a big issue.

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Featured Article

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For a Free Test Drive Visit Volume 10/Issue 1

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Value Analysis 101 Value Analysis: It’s All About Function Robert T. Yokl, President/CEO, SVAH Solutions

All of our customers want something to be done with the products, services, or technologies they desire. To put it a better way, our customers want functions to be performed reliably. They want the product, service, or technology to move, separate, clean, heat, cool, pinch, pull, lift, spin, or whatever. They also want it to be a certain shape, color, texture, firmness, style, length, etc., to be pleasing to the eye, touch, or hearing. This is all our customers care about - products, services, or technologies that meet their functional requirements precisely and reliably. This is why the study of function is the ideal tool or technique in defining our customers’ performance requirements.

Larry Miles, the father of value analysis, tells us that there are two types of functions: USE FUNCTION and AESTHETIC FUNCTION. Use function entails some action that our customers want to perform, and aesthetic functions are designed to please them or their customers. He further states, "Many products and services (and technologies) require both use and aesthetic functions.

Some require only use while some require only aesthetic functions. A refrigerator, automobile, computer, printer, copier, or cell phone all require both use and aesthetic functions in varying ratios.

The nail within the walls of the building, the concealed wire in the motor, and the oil in the automobile require only use functions. The "Rembrandt," the diamond, and the perfume (you use) have only aesthetic functions."

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Value Analysis 101

Robert T. Yokl

Identifying, Clarifying, and Naming Functions The foundation or pillars that your value analysis studies are built on is the identification, clarification, and naming of the USE and AESTHETIC functions required by your customers. It all starts with describing the function(s) your customers want using an active VERB and a measurable NOUN to describe the function, such as deliver fluids (IV set), pace heart (pacemaker), extract blood (vacutainer), draw blood (lancet), etc. This naming process seems simplistic at first glance but naming them accurately can be difficult if done carelessly without much thought or investigation. It is important therefore to have your customers agree to the functions that you have named to ensure that the Key Value Analysis best descriptions of their functions have been identified precisely.

Questions     



What is it?

What does it do?

What must it do?

What does it cost?

What else will do the job?

What will that cost?

The accurate naming of functions is also important so that they can be quantified and measured. How much fluid needs to be delivered? How many beats of the heart need to be paced? How much blood needs to be extracted? How much blood needs to be drawn? This enables you to begin building more precise specifications for the USE and AESTHETIC functions required by your customers, which Larry Miles refers to as, "unifying the function and its specifications,” with the result that you will be able to predetermine the worth or appropriate cost of any function under investigation.

Naming Aesthetic Functions Or Features The technique used in naming aesthetic functions is identical to naming a use function, but in most cases these functions are SUBJECTIVE in nature and can be called PEOPLE PLEASERS! Some examples of aesthetic functions are to provide appearance, provide color, provide convenience, reduce time, etc. Our job as Value Analysis Practitioners is to identify these aesthetic functions and provide them, only if it can be demonstrated that they add value to the product, service, or technology being specified.

Classifying USE Functions As Either Primary or Secondary As we had mentioned, value analysis is an organized, creative approach to cost management and quality improvement. It could also be called functional analysis of products, services, and technologies since its focus is on what a product, service, or technology does. All products, services, or technologies have a primary function or reason for being. The first rule of value analysis is to

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Value Analysis 101

Robert T. Yokl

define a product, service, or technology’s function or its element of usefulness. Without this element of usefulness, the performance of a product, service, or technology would be useless. For example, a vacuum cleaner that doesn't DEEP CLEAN would be useless as a vacuum cleaner.

Function can usually be reduced to a two-word definition using an active verb and measurable noun, e.g., dry hands (paper towel), inject medication (syringe), provide warmth (blanket), keep time (watch), circulate air (fan), protect mattress (underpad), etc. Next, we want to define the product, service, or technology’s secondary functions, since they may have none, few, or numerous secondary functions. Meaning, in addition to its primary function, the product, service, or technology may also have a secondary function(s) or use such as, a paper towel could also be used to pick up spills, or a blanket could be used to position patients for surgical procedures. We still ask the same question as we did with the primary function to get the answer, using an active verb and a measurable noun, which is, WHAT OTHER FUNCTION(S) OR PURPOSE(S) IS THIS PRODUCT, SERVICE, or TECHNOLOGY USED FOR in our healthcare organization? Defining secondary functions is a critical success factor in your VA studies due to the fact that we must understand all of the uses and aesthetic functions of the products, services, and technologies and how our customers are utilizing the products, services, or technologies under investigation if we are to suggest lower cost alternatives (down the road) in our speculative phase of the VA process.

Classifying Aesthetic Functions or Features We now want to define the product, service, or technology’s aesthetic functions or features that are ABSOLUTELY required IN OUR CUSTOMERS’ EYES to meet their requirements with an active verb and a measurable noun. It is rare that a product, service, or technology doesn't have one or more aesthetic functions or features. The question to consider then is, do we need them?

A product, service, or technology feature is something added to it that has no usefulness in and of itself. While the feature may or may not provide some convenience or aesthetic value, it always adds cost to the product, service, or technology being purchased. Our healthcare world is too feature rich! It's our job as a Value Analysis Practitioner to study and eliminate as many non-value-added features as possible.

Why Defining Functions Should Be Important To You One of the secrets to having the lowest product, service, and technology expenses in your peer cohort is for value analysis practitioners to specify function, buy function, and eliminate unnecessary functions. This is the crux of the value analysis methodology. This is because your department heads and managers are catalog buying or following the recommendations from their sales representatives when they requisition new product, service, or technology purchases. Be alert that your customers don’t need everything they say they need, and sometimes don’t need the things they are requisitioning at all.

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Finally, A Proven Supply Chain Integration System That Engages Clinical Department Leaders to Save Money & Improve Quality Why Do Clinical Departments Need Only Clinical Departments Can More Proof Than Just Total Spend? Control Their Clinical Departmental Supply Utilization Supply and Value Analysis Managers have been challenged with providing evidence to show where clinical departments’ supply costs are running over.

Normally, when the supply cost overrun is brought to the clinical department managers’ attention in the form of spend totals, their first reaction is that patient volumes or acuity was high for the period. That is where the conversation usually ends and that is where huge dollars are tied up in your hospital’s supply chain. How do we provide the proof clinical departments need when it comes to supply cost overruns?

Clinical Departments Are Not Cost Management Adverse Clinical departments are not cost management adverse.

On the contrary, they will help manage costs & quality but require solid evidence when it comes to their major and minor product category overspends. Supply and Value Analysis Managers have been able to keep costs low for many years with various value analysis and contracting strategies but there comes a time when the clinical departments must learn where they need to do better.

Clinical departments have traditionally managed the supplies that are used for care on their patients but they have been doing this without a solid reporting system to tell them where they can do better based on patient volumes and acuity. With a system in place, clinical departments can now visualize all of their major supply categories and make the necessary adjustments which in turn will save big dollars (11% to 23% supply utilization savings per clinical department) for the hospital.

$3.8 Million for 350-Bed Hospital Recently, a 350-bed hospital reported clinical departmental savings of over $3.8 million. Why so much savings? Because they had never taken the clinical supply reporting to the department level and thus the savings were low-hanging fruit when it was brought to the clinical department leaders’ attention. Clinical Integration Supply Manager software made it easy to pinpoint the exact category in the exact nursing unit and the exact products that were causing the overspend. Prior to this, they did not have any idea where to look or how to prove the savings to the clinical department leaders.

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

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Drill Down to the Exact Product that is Causing Your Cost Overrun and/or Quality Issues

Sign Up for A FREE Test Drive Today of the Clinical Department Utilization System

www.ClinicalIntegrationReporting.com A Software-As-A-Service brought to you by Strategic Value Analysis in Healthcare, Skippack, Pennsylvania Volume 10/Issue 1 www.ValueAnalysisMagazine.com 19 34 Years as a Trusted Leader in Supply Value Analysis and Utilization Savings Strategies—Making Savings Easy for You!

Utilization Management

If You Don’t See Big Clinical Supply Utilization Savings, Does That Mean They Aren’t There?

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

Ninety-five percent of hospitals and health systems have no way of knowing where their clinical supply utilization savings opportunities are right now and thus are not worried about these major savings opportunities because they are out of sight and out of mind. That does not mean that these savings opportunities are not there. They just don’t have a mechanism to report them out meaningfully and given the challenging times, probably don’t want to be bothered with going after new savings opportunities anyway. But there are those progressive supply chain leaders who do recognize that these savings are real, and their CFOs are looking for the next big thing when it comes to major savings. That next big thing in savings is savings beyond price or what we call clinical supply utilization management (CSUM), and it will blow your mind how much savings is hidden from your view.

Is Not Knowing What You Don’t Know Good for Your Supply Chain Budget?

Price savings is not a complex animal today as we have group purchasing organizations that have set the path for the tier-based opportunities that most healthcare organizations purchase from. And yes,

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Utilization Management

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there is custom contracting, but most vendors/manufacturers tend to extend their custom pricing from the pricing they give to the GPOs anyhow, so the logic and savings is all straight forward. This price savings method follows a standard model that has come to a high level of maturity over the past 10-15 years.

What this maturity means to healthcare organizations around the country is that the savings is not what it once was when you used to save 5% to 10% in overall supply chain budget every year. That was great while it lasted. The reality is that, as our studies have shown, hospitals and health systems are lucky to save between 1% to 2% of overall supply chain budget in any given year. What does this mean? Healthcare organizations are proficient in the price game but now need to move on to the next big saving area and there is only one place to go - CSUM.

Imagine the Next Big Savings Area That You Could Spend the Next 5-8 Years Achieving with Great Success To paint a picture for you, like the now mature price aspect of our marketplace, success did not come overnight with price.

It took the better part of 10-20 years of the group purchasing organizations making their contracts better and better for health systems across the country. CSUM is no different. The potential is 7% to 15% new savings opportunities from your total supply chain budget, but the savings will not just happen overnight. Rest assured, the great news is that some savings can happen overnight when you start to put together your CSUM program and associated reporting. This is because there will be some glaring areas that will pop up right away and you can get immediate wins with big savings. The best part about these savings is that you don’t have to wait a year or two until the contract comes due to do anything about these. Most CSUM opportunities are contract neutral. You can save big within your current GPO and/or custom contract portfolios.

To Achieve the Next Big Savings in CSUM, You Must Assess Where You Are Now In order to assess where you are now, you must have a guide (Figure 1) to show you all the different maturity levels of clinical supply utilization management as well as help you set goals for where your program should move next.

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Utilization Management

Robert W. Yokl

Figure 1: Supply Utilization Management Maturity – Assessing Where You Stand

Most supply chain organizations tend to bump into or fumble upon one or two of these major savings from time to time and are at first embarrassed that these major dollar increases have been going on right under their noses for so long without being discovered. What if you had a mechanism in place in your supply chain organization that would alert you and give you a strategic vision on which supply utilization areas you need to focus your value analysis and supply chain departments on? As the adage goes, “Knowledge is power, and knowing where all of your supply utilization savings opportunities are (big and small) is extremely powerful.”

In Figure 1, you will notice that the savings potential is the same throughout all the maturity levels (7% to 15% of overall supply chain budget for supply utilization) but your results depend on your maturity level of the program you have in place. The time has come to realize that your value analysis team, supply chain analysts, and contract managers are not engaging in utilization management in a formal fashion, if at all. Yet, they may feel that this new big thing, CSUM, which is a buzz word in our industry, is part of their scope of work. I would hope they would feel that way. Let’s face facts, they don’t have the tools, time, or training to create and maintain a sophisticated and strategic CSUM program today.

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Utilization Management

Robert W. Yokl

Here are the Next Steps to Improve Your Savings Beyond Price Exponentially Today, Next Quarter, and for Years to Come Become a Believer: The biggest challenge I find with hospitals and health systems today is that they just don’t believe any substantial savings can come from supply utilization management. When I work with large hospitals and health systems, I normally have to give a number of examples or sometimes cue up a long list of savings that prove that these savings are real. That’s okay because leadership is now opening their minds to this new modality of savings. Once you start to understand that there will be significant savings opportunities in many of your supply categories regardless of how good your prices are, you can then address each and every one of these strategically.

Data, Benchmarking, and Year-Over-Year Analysis Drives the CSUM Process: Many supply chain leaders think that their contracts or value analysis teams will somehow find all the savings beyond price. CSUM is constantly changing, and you have to have continual monitoring in order to find these savings. If you don’t have reports that are showing you where you stand on each major and minor product category (e.g., CSUM is good, needs work or urgent attention), how else could you speculate about CSUM? The Ultimate in Clinical Integration into Supply Chain: The new goal for supply chain leaders is to integrate clinical expertise into the supply chain process, and there is no better way to engage clinicians than to review their utilization of products, services, and technologies. There is no room for clinicians to engage in the pricing or contracting process, but when shown a report on their utilization of major product(s) you can engage in the nuances of use patterns, policies, and procedures to uncover the hidden savings beyond price. Clinicians don’t want to be bogged down with price but they can tell you why they are using the new/expensive absorbable sheets of surgical mesh or extra reloads for their endomechanical staplers. Remember, evidence is data!

Lastly, Start Your Program Now: We have been preaching about CSUM for the past 10 years and our clients who have adopted CSUM have reaped the benefits over that time in a big way. They still have savings opportunities to manage and control better, but the utilization misalignments have been knocked down to only the newest occurrences of which they always find new savings. The key takeaway here is that you have to start a CSUM program to find out where your savings opportunities are to then strategically attack them to gain results.

I cannot tell you how many times over the past year that CFOs and even a CEO from time to time are sitting in on their value analysis team meetings to hear about the latest savings opportunities that they so desperately want now. They are looking for their supply chain leaders to find that next level of major savings to alleviate the pressure on their organization’s bottom line due to the pandemic circumstances. The biggest and best savings are sitting virtually untapped at 95% of healthcare organizations throughout the country. It is now time to put your organization into the top 5% and gain the upper hand in savings beyond price!

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Value Analysis Advisor (For Sales Reps) Become a Welcome Guest, Not an Annoying Pest Robert T. Yokl, President/CEO, SVAH Solutions

Before I founded SVAH Solutions thirty-four years ago, I was a supply chain director and value analysis practitioner for 15 years, meeting with sales representatives just about every day to discuss and evaluate their offerings. Unfortunately, there were only a few sales representatives that I looked forward to seeing. These were the reps who brought me useful information or a value proposition that either made my customers’ jobs easier, or their products or services better, less expensive, or safer. Unfortunately, many of these discussions were often repetitive, boring, time consuming, and added little value to my healthcare organization.

Show Up with Useful Information or a Winning Value Proposition The secret to becoming a welcome guest and not an annoying pest is to show up with useful information or a well thought out value proposition. Every time you visit with a supply chain director, value analysis manager, or product or service owner, make sure you have new information (e.g., case study, research paper, relatable story, etc.) to enlighten them about your product or service category – not just your product or service. For instance, one time a sales rep gave me a conversion list of his products vs. his competition’s. Even though this information was confidential, it made my job easier as I started to convert to many products in his product line. Without this list, maybe I wouldn’t have ever even considered converting to this new company’s product line. This conversion list was very useful information for me. Do the same for your customers.

A value proposition is an innovative offering specifically tailored to your customer’s healthcare organization’s specific requirements. I would suggest that you ask your customer if you can perform a free survey to understand their exact functional requirements before you offer a value proposition to them.

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Value Analysis Advisor (For Sales Reps)

Robert T. Yokl

A value proposition is an innovative offering specifically tailored to your customer’s healthcare organization’s specific requirements.

By doing so, you will not only understand the environment that you are selling in, but you will also be able to provide the precise solution to your customer’s challenges. More importantly, provide the exact, not theoretical, benefits of your product or service. For instance, say that you sell electrodes and as you conduct your survey you observe that the hospital’s nursing staff needs to open two electrode packages to get one to work. Bingo…you just found a huge (50%) savings if your customer changes to your high-quality electrodes that are guaranteed to work the first time. This is what I call a winning value proposition!

The Era of Show and Tell is Over There was a time when you could show and then tell your prospect about your product or service and be rewarded with an order, but that time has come to an end. Your supply chain and value analysis managers are too busy, sophisticated, and outcome-oriented to be won over by this tactic. The best way to prove that your product or service is as advertised is to conduct a survey to gather facts, data, and proof that your product or service is superior to what your customer is utilizing now. This is because there is no better testimonial than to have a prospective customer agree with you that your product or service is a perfect fit for their healthcare organization. That’s how you become a welcome guest, not an unwanted pest!

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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 Team-Based Project Management Model Robert T. Yokl, President/CEO, SVAH Solutions

This teaming of America of the late 20th Century and now in the 21st Century becomes even more important as it relates to the evaluation, purchasing, and monitoring of the products, services, and technologies your healthcare organization is buying. No one person ever sees the negative or positive effects of how a product, service, or technology is impacting its internal and external customers. Yet, billions of dollars of products, services, and technologies are purchased by healthcare organizations annually that are controlled by a few individuals, many times with a narrow vision.

A better cost management system to manage and control the purchasing process (from acquisition to disposition) is for your healthcare organization‘s CEO to appoint a value analysis steering committee (VASC) for this purpose. In doing so, value analysis teams can be deployed by the VASC to involve all internal and external customers, stakeholders, and experts in the buying decision and subject all purchases to rigorous value analysis tests to determine the most appropriate products, services, or technologies based on functional requirements to meet customers’ wants and desires at the lowest possible cost.

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Perspective

Robert T. Yokl

Value analysis teams have unique characteristics to enable them to be effective in their sphere of influence. They must be in alignment with a healthcare organization’s compensation policies and also its culture, and they will need to develop creative strategies to align themselves with your healthcare organization’s goals and objectives. The best approach that we have found in the deployment of the value analysis methodology is a new team model, specifically designed for value analysis, which we call the Team-Based Project Management Model™ (TBPM).

Team-Based Project Management Model There are many different types of teams (parallel, process, time-based, and hybrid) according to A Team-Based Project Steven Gross, Principal, with William M. Mercer Management Team™ is a Consultants, functioning in the marketplace today. hybrid team having many All of these teams are formed for different of the characteristics of a purposes within an organization. A parallel team parallel, process, and timeis a part-time team whose members have two jobs and two bosses. One job is the one they were hired based team, but having for and get paid for, in which they report to a some of its own unique supervisor. They also hold a cross-functional team attributes. position which they were appointed to and where they report to a team leader. These teams are temporary in nature and are established to solve specific problems that have arisen in their work environment in a matter of weeks or months, such as quality control issues, lost sales, etc. A process team is a full-time team that performs many functions across many boundaries to maximize productivity and customer satisfaction, such as an insurance claim processing team, customer service team, or a sales team. In some cases, a process team is self-managed and given the authority to hire, fire, promote, change, and implement new policies and procedures in their team environment. A time-based team is a team that is established with a specific purpose and time frame in mind to accomplish a specific task, such as designing a new computer system, accounting system, a new product line, or re-engineering a process or system. It can be either a full-time or part-time team position depending on the time requirements and urgency of the project. The emphasis is on speed to gain competitive advantage. A hybrid team is a combination of the characteristics of a parallel, process, and time-based team.

A Team-Based Project Management Team™ is a hybrid team having many of the characteristics of a parallel, process, and time-based team, but having some of its own unique attributes. It is designed specifically for use as the vehicle to plan, organize, support, control, investigate, study, and implement value analysis and value engineering savings and quality improvement opportunities in a healthcare organization.

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Perspective

Robert T. Yokl Team Members are Project Managers, Too!

Traditionally, teams consist of team members who work collaboratively and are selected because of their specific skills and knowledge or are process owners that work together on an assigned project, whereas historically, project managers are assigned, from conception to completion, to manage projects as sole practitioners. A blending of a team and project management model is the foundation of the Team-Based Project Management Model™. Team members morph into project managers as their team leader assigns them value analysis studies, which they are responsible for conceiving, defining, planning, implementing, and evaluating. They are concurrently team members responsible for adding value to projects by reviewing all project managers’ reports and findings for reasonableness and completeness. They are also responsible for giving final approval, prior to implementation, of all value analysis studies performed by other project managers. The advantage of the Team-Based Project Management Model™ over other team models is that the TBPM model is greatly enhanced by combining the synergism of team members’ skills and knowledge with the disciplined approach of project management. This ensures accountability, customer focus, and a scientific approach to lower cost alternatives and quality improvements that get it right the first time.

Projects are Process and Time Based in Nature TBPM teams are in many respects a process team since they meet twice a month and conduct value analysis studies on a parttime basis. They are also a time-based team in that they are established with a specific purpose (management and control of nonsalary expenses) and have a time frame of 90 days to complete their studies.

All of the above characteristics make the Team-Based Project Management Model™ unique, yet similar to many of the teams that you have been members of in your working career. The big difference is that the TBPM model is specifically designed as a continuous process to manage and control non-salary expenses in a healthcare organization. This sets it apart from other parallel, process, or time-based teams that have other charges and goals in forming and performing their given tasks and responsibilities.

Decisions are Made by Consensus One of the strengths of TBPM value analysis teams is that they make decisions by consensus, which

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Perspective

Robert T. Yokl enables the best ideas of project managers and team members to be filtered so that ill-conceived value solutions can be eliminated before they are proposed to a customer. This decision-making or filtering process ensures that the right product, service, or technology is recommended to customers with a high reliability factor that the lower cost solution will work the first time.

Get More Value Analysis Work Done In Less Time with Better Results The whole purpose of the TBPM is to help your value analysis teams to get more value analysis work done in less time with better results. It also holds one person responsible for each new product, service, or technology evaluation or retrospective study. This ensures that your value analysis projects are accomplished on time, on budget, and are utilizing your defined value analysis process. This TBPM methodology is preferred by all value analysis teams that have embraced it as the only way they do business. The alternative is to continue to employ traditional VA team models that actually slow down, impede, and distort your value analysis process.

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

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ADVANCED SUPPLY UTILIZATION MANAGEMENT SAVINGS REPRESENT 7% TO 15% SAVINGS BEYOND PRICE OPPORTUNITY FROM YOUR TOTAL SUPPLY BUDGET

THE TIME IS NOW TO DEPLOY A PROVEN SYSTEM TO UNCOVER, MANAGE, AND SUSTAIN THE BIGGEST SAVINGS OPPORTUNITIES THAT YOUR ORGANIZATION CAN ATTAIN NOW! The Future of Supply Chain Savings is Now! www.UtilizerDashboard.com Volume 10/Issue 1 www.ValueAnalysisMagazine.com

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