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Strategic Value Analysis Planning
Value Analysis Strategies
Strategic Value Analysis Planning
Thomas Carlyle once said, “Nothing is more terrible than activity without insight.” Yet, most value analysis initiatives are launched, re-launched or tweaked with much activity, but with little or no planning.
Then, to everyone’s surprise, the inevitable happens a few months or a year down the road –the value analysis initiative fails to meet its stated goals and objectives. Or, worse yet, is perceived by your clinicians as a cost cutting vehicle that is dramatically reducing the quality of the hospital or system’s products, services, and technologies. How can we avoid this activity trap?
To avoid this eventuality, it should be your goal to develop a comprehensive “Based on our experience, this journey Strategic Value Analysis Plan (SVAP) starts with finding a champion to sponto be utilized as a roadmap to sor your new or refined supply value establish, refine or reinvent your
analysis program”
supply value analysis program. It’s important to understand that while bottom up VA initiatives are commendable, what works best is when a hospital or system’s executive management team buys into, is committed to, and sets the tone and direction for any VA initiative.
Based on our experience, this journey starts with finding a champion to sponsor your new or refined supply value analysis program from within your healthcare organization’s executive management team.
Value Analysis Strategies
Executive Management Connection
Typically, the best champions are your CEO, COO or CFO because of their clout and status in your healthcare organization. If, for some reason, it is impossible to enlist one of these top executives in your campaign, then any vice president can be a strong candidate for sponsoring your supply value analysis program. The key here is that you must find a high level executive to fight for, defend and support your supply value analysis initiative in the short and long-term, or you could quickly find the doors to your executive suite closing on you and your ideas before they even have a chance to take hold. Let me give you an example of what I’m talking about.
A 350-bed community hospital engaged our firm to assist them in refining their current supply value analysis program (and even paid their first payment on our fee), but when we arrived to give the hospital’s executive management team an orientation on what to expect from their new supply value analysis program, the only reactions we got were blank stares and no questions. Shortly thereafter, the new initiative was cancelled by a phone call from their materials manager. After investigating what went wrong with the start-up of this supply value analysis program, we found that although the hospital’s material manager was promoting this new program to her executive management, she did not enlist one member of the hospital’s executive management team as a champion to prepare the way, defend or fight for her new program.
When she found that there was little or no interest in reinventing her current supply value analysis program, she was left to her own devices to try to resurrect her old supply value analysis program, with little or no success, because she had the doors closed to the executive suite before she even got her program off the ground.
Value Analysis Strategies
It All Starts with Finding A Champion
The good news is that one year later, the hospital’s executive vice president visited the office of this same material manager and asked what happened to the new supply value analysis program she was promoting, since he now needed this type of program to save money on his next year’s budget. After she got off the floor from the shock, she told him she was still keyed up on the program, but she did not think anyone else was. He told her that attitude would change, since he was now sponsoring the new supply value analysis program. Further, he asked that she call my firm and get us back to the hospital as fast as possible for a new start-up orientation to the executive management team. He told her if there were any further issues to be dealt with regarding this new program, she was to come to him for any decision or guidance necessary to make this new program successful this time around.
Let me repeat again, your value analysis planning always begins with finding a champion within your healthcare organization’s executive management team to sponsor your new or refined program. Without a champion on your side, it will be next to impossible to move forward with your supply value analysis program. All you can do is wait for the right opportunity to begin your campaign with a strong champion on your side.
How to Gain Management Commitment
Now that you have found your champion, it’s time to obtain the commitment from your executive management team by giving them ownership over the planning, administration, measurement and management of your supply value analysis program.
Value Analysis Strategies
The Strategic Value Analysis Planning process provides the vehicle to obtain this ownership. The SVAP begins with an invitation by your champion, or your hospital or system’s executive management team members, to a one-hour orientation meeting as the first of three steps in the buy-in process as delineated below:
Step 1: Executive Management Orientation:
The orientation session starts with an exercise to determine if your executive management team is ready for the challenge of introducing your new or refined supply value analysis program initiative at your healthcare organization. The exercise that we
use to open a dialogue with the participants is to ask them what roadblocks or barriers they envision politically, culturally, operationally, attitudinally and transformationally that would hold back their new or refined supply value analysis program. The answers to these questions are listed on a flip chart and discussed until all participants have found answers to avoiding the roadblocks and barriers that are identified in our discussions.
With few exceptions, we have found that with just this short dialogue between executive management members, the buy-in process for your new or refined supply value analysis program will start to germinate. However, if for some reason you find that your executive management team members cannot gain consensus on how to overcome roadblocks and barriers, or there is no enthusiasm for the supply value analysis program you are introducing, it is time to regroup with your champion. You should determine what the next step would be in reintroducing your program, assuming the timing was right.
Value Analysis Strategies
Assuming that you are getting a green light for your supply value analysis program at this juncture in your orientation, your next step is to review, with your executive management team, your new supply value analysis program’s philosophy, principles and practices, and answer any and all questions on how the new program will work at your hospital or system. At this meeting you will also ask your executive management team members to appoint a steering committee chairperson (your champion, if possible), a recorder, and up to ten members who would represent your hospital or system’s executive management team’s (e.g., CFO, CNO, CMO, etc.) interests by guiding and managing your new supply value analysis program. Your value analysis director, manager or coordinator would be an ex officio member of the Value Analysis Steering Committee. The steering committee would conduct hour-long monthly business meetings to discuss, monitor and guide your hospital or system’s value analysis program.
Step 2:
Strategic Value Analysis Planning Session:
Soon after the appointment of your Value Analysis Steering Committee, you would ask your chairperson
to invite his/her committee members to a three-hour Strategic Value Analysis Planning session where the members of the committee would design your new or refined program. This planning session will enable these members to be intimately involved (involvement = ownership) in the planning at a high and low level in the detail of your
program.
Step 3: Have Each Member Actively Involved with VA Teams: If at all possible, have each and every one of your Value Analysis Steering Committee members become actively involved with your new initiative by: (1) attending the value analysis training program, and (2) by volunteering as administrative champion for your value analysis team(s). This will enable them to see firsthand the challenges and opportunities that your supply value analysis team(s) are facing, which will enable
Value Analysis Strategies
them to make informed decisions at their monthly steering committee business meetings.
These three steps are the critical success factors in obtaining buy-in and commitment to your new or refined supply value analysis program by your executive management team in the short and long term, thus giving you the foundation that you will need to succeed and sustain your new or refined supply value analysis program for many years to come.
The SVAP starts with evaluating the strengths and weaknesses, or gaps, in your current supply value analysis program strategies and tactics and ends with the development of your Strategic Value Analysis Planning Document that will be used as the blueprint to ensure that your new or refined Supply Value Analysis Program is successful—the first time. This entails a three-phase process as follows:
Phase I: Evaluating your Current Sup
ply Value Analysis Program: The first step in your SVAP is to understand quantitatively and qualitatively the strengths, weaknesses or gaps in your current strategies, tactics, methods and practices. This can be an audit of your current program. The most critical part of this audit, beyond understanding what your current program elements are today, is to determine where your hospital or system’s savings gaps are in relation to best in class hospitals and systems. This can be determined by benchmarking your supply and purchase cost as a ratio of operating revenues with a peer hospital or system. The normal ranges for these rations are 13% to 15% for supplies and 24% to 28% for supplies and purchase services. If your hospital or system has a higher ratio than those shown above, the difference between your ratio and the normal range can be considered your savings opportunity gap.
Phase II: Development of your Strategic Value Analysis Planning Docu
ment: Your next step in the development of your Strategic Value Analysis Planning Document is to define your mission, vision, organizational and administrative structure, goals and objectives, policies and procedures, reward and recognition program, value analysis candidates, etc., for your new or refined program. This exercise will give you a blueprint that you will require to weather the problems and hurdles you will face over the next few years.
Phase III: Planning and Execution of your New or Refined Supply Value Analysis Program:
Finally, you have reached the point in your SVAP at which you are required to develop strategies, tactics, milestone metrics and an evaluation system to ensure that your goals and objectives for your new or refined program are met or exceeded on a timely basis. The Planning and Execution Phase of your SVAP is based on the philosophy that, “what is measured happens”. We strongly recommend that a Balanced Scorecard be utilized monthly to measure the success of your new or refined program, since it will enable you to measure a number of critical success factors instead of just one factor — savings. If your SVAP is developed carefully and properly it will increase your probability of success 10-fold.
Most healthcare organizations have 3, 5, or even 20 new products, services and technologies that their organization is evaluating at any given time. These clinical trials could easily add up to millions of dollars in new (and sometimes unneeded) expenditures — if left to chance. Yet, most healthcare organizations are “flying blind” when it comes to effectively, efficiently and systematically managing these high impact dollar clinical and non -clinical evaluations.
Too Little Time - Too Many Steps
The biggest challenge that we hear about, from our value analysis community on their evaluations, is that there are so many steps (one VA coordinator we talked to told us that she has a 17-step evaluation process) to be followed that it’s almost impossible to keep up with all of the paper work. We also know how difficult it is to find time to track, document, coordinate and communicate to multiple stakeholders (steering committees, VA teams, project managers, clinicians, purchasing, distribution, etc.) the various evaluations — in real time.
Are these your value analysis team’s challenges too?
We have also observed that most healthcare organizations archive their value analysis study data in either an Excel spreadsheet or Access database. That being said, if you tried to employ these tools for this purpose you will quickly discover that your study data becomes difficult to retrieve, awkward to manipulate and almost impossible to generate meaningful status and financial reports.
It Doesn’t Need To Be That Way!
After researching the challenges that value analysis teams are facing, SVAH has developed and is now licensing seats to our new CliniTracK™ Value Analysis Management System. Our objective with this new SAS product line is to provide you with the solutions you have been looking for to the annoying problems we have just talked about, as well as to speed up, streamline and reengineer the current value analysis management process at your hospital, system or IDN. FREE “test drive” @ www.strategicva.com
