Healthcare
Volume 6/Issue 1
Leading Cost and Quality Strategies for the Healthcare Supply Chain
Magazine
Value Analysis & Utilization Tools Issue Featured Article:
Healthcare Can’t Afford to Not Look at Inappropriate Utilization
www.ValueAnalysisMagazine.com
Volume 6/Issue 2
Healthcare Value Analysis & Utilization Management Magazine
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The
RIGHT TOOLS make all the
DIFFERENCE
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Volume 6/Issue 2
www.SVAHSolutions.com
Healthcare Value Analysis & Utilization Management Magazine
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Contents
Healthcare Value Analysis & Utilization Management Magazine
4 FROM THE PUBLISHER’S DESK By Robert T. Yokl
6 FROM THE MANAGING EDITOR’S
Healthcare Value Analysis & Utilization Management Magazine is published Bi-monthly by SVAH Solutions®
DESK
P.O. Box 939, Skippack, Pa 19474
Gaining Recognition for Value Analysis
Phone: 800-220-4274
By Robert W. Yokl
Hands Down the Best Tool in the Healthcare Supply Chain
FAX: 610-489-1073 bobpres@ValueAnalysisMagazine.com
10 FEATURED ARTICLE
www.ValueAnalysisMagazine.com
By Gina Thomas
Value Analysis and Utilization Tools: Healthcare Can’t Afford to Not Look at Inappropriate Utilization
————————————
Editorial Staff Publisher
19 VALUE ANALYSIS LEADERSHIP INTERVIEW With Brian Shoenfeld, Sr. VP, Talon Controls
Robert T. Yokl bobpres@ValueAnalysisMagazine.com
22 VALUE ANALYSIS TOOLS
————————————
By Robert W. Yokl
10 Best Practices to Selecting Value Analysis & Utilization Management Tools
Managing Editor Robert W. Yokl ryokl@ValueAnalysisMagazine.com
24 CLINICAL VALUE ANALYSIS
————————————
By James Russell
Senior Editor
Value Analysis Tools
Patricia A. Yokl
29 VALUE ANALYSIS 101
————————————
By Robert T. Yokl
One of the Most Powerful Tools for Value Analysis Is Planning
Strategic
32 UTILIZATION MANAGEMENT By Robert W. Yokl
Rewind Then Fast Forward to the Next Big Supply Chain Savings
36 THE LAST WORD Do Patient Outcomes Trump Good Business Principles And Management?
Volume 6/Issue 2
Editor and Graphic Design Danielle K. Miller
Copyright 2018 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 FAX: 610-489-1073 E-Mail: ryokl@valueanalysismagazine.com for approval to reprint, excerpt, or translate articles.
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From the Publisher's Desk
Robert T. Yokl
Robert T. Yokl
Why is Productivity for Your Value Analysis Teams Vital to Your Long Term Success?
Almost every hospital, system, or IDN has value analysis teams, but how productive (i.e., the state of producing savings, quality, or safety improvements) are they? It’s been our experience that most teams aren’t as productive as they could be for the following three reasons: 1. No clear goals & objectives: Universally, we would guess that only 30%-to 40% of the healthcare value analysis programs nationwide have annual specific and measurable savings, quality, and safety goals and objectives for their value analysis teams. We have observed that without specific savings, quality, and safety targets, VA teams tend to underperform. 2. No one holds them accountable: Since it is very easy to look and act busy, only by careful measurement can you determine if your VA team members and teams are truly productive. 3. No peer pressure to do better: Unless you make your value analysis program a competitive game with VA team members and their teams competing against one another, your results will be meager and not as much fun. Now that I have provided some context on value analysis productivity, the answer to the question I posed in my headline, “Why is Productivity for Your VA Teams Vital to Your Long Term Success?” is that it all depends on the success criteria that you want to measure. Compare the criteria outlined above to the VA tools in the marketplace to see if there is a match. Given the growing dynamics and data enrichment of your value analysis program, more than likely a spreadsheet won’t be able to handle the next generation of tracking for you.
Volume 6/Issue 2
Healthcare Value Analysis & Utilization Management Magazine
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Schedule a Free 30-Minute Demo of SupplyValidator™ www.SupplyValidator.com or call 1-800-220-4271 Volume 6/Issue 2
Healthcare Value Analysis & Utilization Management Magazine
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From the Managing Editor’s Desk
Robert W. Yokl
Hands Down the Best Tool In Healthcare Supply Chain… Continual Benchmarking! Robert W. Yokl
Benchmarking is nothing new to the healthcare supply chain and clearly you are thinking right now that, “We Benchmark at Our Hospital/System!” So, you know the value of benchmarking from one level or another, but do we apply this to our supply chain and value analysis initiatives as much as we could? The answer to that question is a big no! Why is this? First and foremost, nobody wants to be compared to another organization and even worse, be told that you are weak or not up to snuff in an area that you should be or perhaps you feel you are. Yes, you have a choice, choose to ignore the benchmark or try to ask, why is this, why are we running high and what can we do to be the “Best Benchmark” instead of the lower comparative? Keep in mind, there are many types of benchmarks such as; local, regional, national, system-wide and historical. There are many types of categories of benchmarks/best practice comparables such as procedural evidenced based benchmarks, price benchmarks, operational, infection control, productivity, utilization and purchased service benchmarks and so many more. But what are the benchmarks that most benefit your supply chain organization? Price Benchmarks are Par for the Course The easiest benchmark that everyone in healthcare utilizes is the “Price Benchmark” which will tell us the best price for the category that we are working on or if you use a service to show where you could do better on your next round of contracting. These are great to have but they don’t always apply to your organization if your benchmark is coming from a 30-hospital health system pricing that has 500% more volume of spend than you do. I like to use these to know how much a contract can be pushed if you need to with your negotiations and bids as well as giving you a goal to shoot for, e.g., current coronary stent prices have averaged a price drop by 9% over the past 2 years and our contract is coming due so I want to target a minimum of 15% to 18% in my new negotiations. Who wouldn’t want these benchmarks…right? If Benchmarking Works in a Major Way In One Part of Your Supply Chain, Why Not Use It More? Many organizations will stop at price with their benchmarking even though it has been very fruitful in their savings programs from Physician Preference Items to day to day medical items such as exam gloves. But why should we stop there? The answer is, we shouldn’t and that is where the next big level of savings opportunities lies which is ongoing clinical supply utilization & purchased service benchmarking. Price is limited as it is well beyond its tipping point and at best can save 1% to 3% in overall savings from operating budget as a whole. Volume 6/Issue 2
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From the Managing Editor’s Desk
Robert W. Yokl
With utilization and purchased service benchmarks (represents 90% of total non-salary spend) you can go beyond price to a whole new level of savings because there is more going on with your products than just the price. There are the in-use costs that can fluctuate with many peaks and valleys but what you need to know is should these peaks and valleys be occurring? You need to recognize where you stand with your existing products consumption. Is it high, is it low or are we the best practice? In compiling hundreds of supply utilization studies we have found that between 40% and 50% of a hospital’s supply utilization and purchased services are out of line and need to be addressed beyond price. This means you are over-consuming your products or services beyond what your current volume levels should be. We’re Just Scratching the Surface with What We Can Do with Benchmarking A great example is a hospital client that saved 12% on new contract pricing on a major commodity but when benchmarked, it showed they were overconsuming that category by 36% in cost per operating metric. That means the client is still leaving 24% variance/savings opportunity on the table. If you are not continually benchmarking, then you may not even know this is happening. And that was just at the beginning of a contract, many times new contracts and product conversions tend to cause “Unintended Consequences” that further increase your costs on a contract even though you still have the 12% savings in place. The hardest point to grasp is that the over-consumption of products and services far outweigh the opportunities we are chasing in price. As in the example the total savings opportunity was really 36% but we only chopped off 12% and that still leaves a systemic 24% of the total savings opportunity flapping out in the wind with no one doing anything about it. Where Does Value Analysis Fit Into the Picture with Benchmarking?
I know a lot of value analysis professionals who are reading this think that benchmarking alone is their job but you must have systems in place to assist you as you cannot perform a spreadsheet on every category in your hospital or health system on an ongoing basis and still keep up with the day to day VA studies. You need to think proactively on how you will build ongoing benchmarking systems to continually track where your best in class, just good, not so good and outright bad are. The big idea here is to find out where all of these areas are, then sick your contract managers and value analysis teams after these and eliminate them and attack the new ones that will pop up. How will you win with benchmarking? Track everything from Ablation to Lab Products to Pacemakers on out to Wound Care and everything in-between. By doing this, there will no longer be any surprises and you will be way ahead of the pack with your costs and your overall supply and purchase service budgets too! Volume 6/Issue 2
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Featured Article Value Analysis and Utilization Tools: Healthcare Can’t Afford to Not Look at Inappropriate Utilization Gina Thomas—Chief Development Officer, Lumere
The January 13 New York Times article titled “Can Your Hip Replacement Kill You?” might seem dramatic, but it’s not an overstatement. If we don’t take a deeper dive into appropriate utilization from a clinical perspective—including indications and safety data— patient care will be negatively impacted. Dr. Tower, a patient mentioned in the Times article, is a great example. He’s an orthopedic surgeon who chose his own hip implant for his surgery, and it led to great harm. If healthcare organizations can align their strategies—whether margin improvement, quality initiatives, or transformation in performance to care variation—by leveraging utilization data to evidence, everyone wins, including the patient whose safety is improved. Professionally, I embrace this approach, but my passion also stems from unfortunate personal experiences. My own mom died
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Featured Article
Gina Thomas
48 hours post-op after an elective Nissan fundoplication surgery using a robotic laparoscopic approach. Evidence (that wasn’t easily at my disposal or understandable at the time) would have given us lifesaving insight. My mom was also a nurse and if her surgeon had more access to the data and evidence, he would have laid out the options, and her death might have been avoided. Utilization tools that bring in safety data with the evidence can help organizations make the best decisions for their patients. The FDA approval process as the default measure isn’t dependable since we know that approval is given as long as the manufacturer can show that the requested technology is like previously approved technologies. This is quite scary when you think about it. Let’s improve healthcare performance with appropriate and safe decisions with solid utilization tools and better protect patients like Dr. Tower, my mom, and many others.
What Makes a Great Utilization Tool? Healthcare organizations often try to approach utilization costs using price benchmarking tools that might give some insight into outliers of utilization by looking at volume. However, these tools lack many important factors. There is appropriate variation by different indications and patient populations, which standard price benchmarking tools can’t show. Challenges with many benchmarking tools: Comparisons are based often on manufacturer-recommended similarities rather than clinical indications of the drug or product in question. Some utilization tools compare the cost of what one organization pays to similar-size peers, while other tools compare utilization to quality indicators per procedure. Categorized data: As an example, a manufacturer may put antibiotic-loaded bone cement into its own separate category based on the components of the cement rather than leveraging the evidence around actual indications for all bone cement, whether antibiotic-loaded or plain. Categorizations shouldn’t default to manufacturer comparisons or product attributes only. A study in the Orthopaedic Journal of Sports Medicine details supply cost variation in rotator cuff repair at a single hospital. The article notes wide variation in total supply cost per case, with the most expensive repair costing nearly 12 times more than the least expensive. While some total-case cost variation is expected, the journal also highlights that “the variation in cost between materials that serve specific purposes is perhaps the most interesting and clinically relevant finding.” For example, the cost of suture needles ranged from $140 to $995—which is where many price benchmarking tools used in utilization projects stop.
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Featured Article
Gina Thomas
The challenges are complex. Spend must be categorized into clinically equivalent groups, with outliers identified at this detailed level. The comparators in a utilization tool require a few more details with outcomes and the relevant clinical evidence provided to relate practice to clinical evidence.
Applying Science and Rigor The ability to understand product groupings by indication—which can include attributes of the product, but more importantly needs to include the indications and supporting evidence—is essential for utilization tools.
Why Is It So Difficult? So how do you take that science and apply it to actual practice without analysis paralysis? There is NO tool that will answer every question: What is the total cost per case pre-operatively, perioperatively, and post operatively? What are that patient’s comorbidities? What was the procedure time? Are we comparing at the DRG level or ICD-10 level? Did they seek other treatment after dismissal from the facility? What other factors contribute? Social status? Nutritional status? Other medications, overall compliance to therapy and follow up? What are the outcomes? What is the quality of life for the patient in their daily living? See what I mean? Don’t get stuck by trying to answer every question. GO: Start by understanding the greatest opportunities based on your healthcare organization’s goals. If your organization is focused on achieving a ‘Center of Excellence’ status in orthopedics, start there. If it’s a major margin improvement project, then start with that in mind. Thinking strategically before you start will drive how you leverage the best utilization tools and information. Ensure you have a tool that, at a minimum, can facilitate conversations between physicians and hospitals leaders around utilization that doesn’t start with price. A Center of Excellence focus could provide better overall outcomes with lower financial costs, physician costs, and emotional costs to patients. Volume 6/Issue 2
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Healthcare Value Analysis & Utilization Management Magazine
Featured Article
Gina Thomas
Patient expectations: • • •
The patient expects all of this without unnecessary waste and costs. The patient expects decisions to be in their best interest from a quality of care perspective, meaning efficacy and safety. The patient assumes those clinical decisions are made leveraging expertise and knowledge.
Case Study: Center of Excellence Orthopedics. A mid-size health system in the Midwest is establishing an orthopedic service line that could be marketed as a ‘Center of Excellence’. They collaborated with physicians, patients, and service line leaders to understand the perspectives of each stakeholder. Let’s break down the questions to be answered and criteria for the utilization tools that you will need as part of the Center of Excellence utilization component: •
•
•
•
•
What are my largest savings opportunities? What is already under review? What is not on my radar that should be? Utilization dashboards that keep these answers front and center give you guidance and prioritization. In my opinion, all tools should have an intuitive, easy-to-use search bar, like Amazon. Don’t
we all like to search in this manner? Let’s say you find opportunities in the category of total joints and want to dive deeper: a. Ortho>Arthroplasty/Trauma/Sports Med i. Arthroplasty>Knees/Hips/Shoulders Tools that can segment out drugs and devices to pinpoint the outliers and culprits would be advantageous. The utilization analysis should include the ability to drill into the specific procedures, as in this case and type: Knees>Primary/Revision Now comes the fun part where it’s easy to get lost in the data. (Remember my earlier point about analysis paralysis!) Find one area of drug or device utilization that varies the most in the data, which can be easy with good utilization tools that include case load, drug/device cost per case by physician and comparators to the physicians internally, and perhaps external benchmarks. Most organizations struggle with their action plans when the foundation of their plan is cost geared only. A number of organizations bring in quality metrics or other comparative Volume 6/Issue 2
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Featured Article
Gina Thomas
information. Many organizations have so much data that they end up in that paralysis stage or else fall into the vicious cycle of trying to answer every question, and they either don’t make a decision, endure lengthy battles and have scars to prove it, or they just give up and move on to something easier! Instead of getting stuck with many data points that take you off track, let’s stick with our utilization best case scenario that allows us to dive into opportunities. I will profile arthroplasty, where we see variation in bone cement and pain management therapies in hips and knees specifically. Overuse of medications lead to negative consequences. We’ve seen that the overuse of antibiotics has led to superbugs, making it more challenging to manage infections. Expert Guidance from the American Academy of Orthopaedic Surgeons: As diagnostic and treatment modalities improve, collaboration among surgeons from multiple disciplines is required to develop evidence-based clinical practice guidelines that minimize the effect of musculoskeletal infection and optimize clinical outcomes for patients • •
Utilization tools that can lead to action and productive conversations between physicians and healthcare leaders are grounded in evidence AND data, not one or the other. This Center of Excellence in orthopedics would not want to support therapies that are trending high in serious adverse events. Patients wouldn’t even think this was possible that a center of excellence might be using a therapy on them that has been reported with high adverse event rates or other negative consequences when there are other options. Good utilization tools should include this information. Physicians don’t have the time to research this information and even though it’s public data, it’s very hard to find and make sense of it when you are trying to compare categories of drugs or devices. Utilization tools should show alternatives that are categorized by the evidence, not by what one organization currently buys or what is on a contract. Without a broader lens, your negotiating power is limited. Your organization needs to see the evidence of other alternatives to compare them to what is currently used. In the case of bone cement, the indication and evidence is enlightening and gives you actual direction. Without the evidence included, the clinical decisions can be harmful to the patient. •
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Featured Article •
•
• •
Gina Thomas
Utilization tools should answer the following questions in this example: a. Is the evidence conclusive regarding the level of evidence, i.e., opinion versus random controlled studies? b. Is the evidence answering the questions of indications in primary versus revisions? c. Does the evidence cite indications by type of bone cement? d. Does the evidence cite alternatives? e. Can the evidence be applied to your physician’s utilization and show the outliers? f. Where is the cost comparable to your physicians and the evidence? There’s enough data in just this one example without the distraction of other data points. In this case, having the products and attributes of the bone cement. Again, when you have this information tied to evidence, you can take action. Utilization tools shouldn’t stop with just data and evidence but should give you actual insight and strategies on your course of action. A tool that can provide physicians insights specific to them and the aligning evidence and outcomes is invaluable. a. Physicians rely on their expertise but when presented more information that is grounded in science, the physician can apply their expertise and knowledge to additional information and everyone wins. Patients are treated most effectively. Physicians can have greater comfort when their decisions are made with a wider lens of knowledge. Organizations will reap the benefits from efficacy, costs, and patient satisfaction. MYTH: Physicians have all the information needed to be most effective in their selection of therapies for their patients.
•
•
FACT: How could they? Physicians are in the dark so often on the evidence aligned to costs. Physicians would have to read 5-7 hours per day every day to keep up with the peer reviewed evidence let alone try to match that to their own practice. In the case of bone cement, there are over 59 applicable studies, just on bone cement. Physicians have reported they are often “blind” to the actual costs of their clinical decisions and this happens on a daily basis. Multiply this by the number of drugs and devices used by an orthopedic surgeon. No wonder we see variation! Now let’s really go BIG. Why couldn’t you build utilization parameters into the care pathways? This is done in EHRs for other treatment choices. If you had the evidence for bone cement indications by procedure type, the care pathways could incorporate this and then you could measure the outliers when this didn’t happen. THINK OF THE POSSIBILITIES! Utilization tools with the right level of data and evidence can set you up well for negotiation strategies. Why purchase all types of bone cement when the evidence doesn’t align? Why purchase certain bone cement if the safety data is trending towards the red? Why pay more for one bone cement versus another when the evidence isn’t resulting in improved outcomes? Volume 6/Issue 2
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Featured Article • •
• •
• •
• • •
Gina Thomas
RESULT: If you do the right thing, the money will come! Selecting the utilization tool to use: a. Understand the normalization process of the data. Quality of the data is much more important than the quantity. b. How often is the information updated? Set expectations to reasonable updates. How often are you acting on the data? If your governance process or performance improvement processes with clinicians and service lines are consistent, monthly updates would be reasonable. Nirvana-build this into your EHR for real time use! c. Can your utilization tool track the decisions made? The utilization output should facilitate conversations with the physicians around their utilization from their perspective, meaning the outcome and quality of care delivered. The information should be easy to understand. And, the layout of the information shouldn’t be confusing. The information should meet the needs of different audiences, i.e., clinicians, service line leaders, executives, etc. Can you quickly navigate around the information? Do you have the answers to the utilization questions that are most opportunistic? For instance, if you were drilling into the bone cement example, can you drill into the outliers against the evidence? Can you compare physician use patterns by indication? By cost? Can you share the information easily? Or is it manual hard copy print and share? Can you export the information to a PDF file and easily send an understandable summary to other stakeholders? If the information is web-based, are simple graphics available to provide a picture of the analysis? A utilization tool should alert you to trends in the market and when utilization is outside the parameters set either by decisions made or certain indications.
Appropriate utilization and the data around the decision is challenging, but it’s worth it, just ask Dr. Tower.
Gina Thomas, RN, MBA – As Lumere Chief Development Officer, Gina spearheads commercial strategies and helps guide product vision. With over 35 years of healthcare experience, starting as an emergency room nurse and later becoming a nursing executive, she brings a wealth of knowledge to the company, including strong expertise in preparing for new payment models, aligning clinicians, service line best practices, and executive-level approaches to resolving fragmentation in healthcare. She is passionate about patient advocacy. On a personal note, she has been married 32 years; has 2 daughters who she adores; and she says they have even found great guys whom they married!
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What is Value Analysis?....It’s All About Perspective
Learn How to Get More Value Out of VA at the Value Analysis Academy Now Volume 6/Issue 2 Open! at www.ValueAnalysisAcademy.com Healthcare Value Analysis & Utilization Management Magazine 18
Leadership Interview
Value Analysis Leadership Interview Brian Shoenfeld, BSME, MEng, Senior Vice President, Talon
Brian Shoenfeld, BSME, MEng, is the Senior Vice President at Talon. Brian joined Talon in 2014 to bring his experience with product development, systems engineering,
and
continuous
improvement
to
healthcare. He’s been in both staff and leadership positions
in
the
defense
and
manufacturing
industries. Brian is a lifelong learner who encourages questions and comments. You may contact Brian at bshoenfeld@taloncontrols.com. (VAMag) How did you get involved in the healthcare supply value chain? Brian: On the surface, Talon is a medication management equipment vendor, which has given us the privilege of being exposed to a wide variety of hospital operating models. This experience has shown us that the impact of our products goes beyond product function and lifecycle costs. Over time, we evolved toward an inevitable alignment with the healthcare supply value chain, which caused a necessary shift for the Talon team to position themselves as trusted advisors first, equipment vendors second. During this journey toward alignment with the healthcare supply value chain, we became a student of Lean to ensure we are recommending
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solutions that are best for the hospital instead of what’s best for a single stakeholder at the expense of another. For example, one product we were selling for years optimizes pharmacy operations, but it became apparent that this workflow directly contributed to nurses spending less time at the bedside and more time at the medication room. At the time, we were only collaborating with pharmacy directors, but we now know that downstream departments can also be affected and that we need to understand the impact to those stakeholders as well. Lean emphasizes that value is defined by the customer (external or internal), the importance of discipline around continuous improvement, and focus on the overall effectiveness of each value stream.
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Leadership Interview
Brian Shoenfeld
While we are new to the healthcare supply value chain community, there seems to be similarities between Value Analysis and Lean principles. (VAMag) How do you see the clinical medical equipment world evolving in the current healthcare environment?
As hospitals become more aligned with Lean and Value Analysis principles, they will apply pressure on vendors to address product lifecycle and process deficiencies associated with clinical medical equipment. Hospitals will demand flexibility from vendors to the effect that equipment evolves in conjunction with clinical value stream improvement initiatives. As a parallel example in the blood donation industry, phlebotomists at Gulf Coast Regional Blood Center were spending a significant amount of time manually moving protective cases, which contained equipment and supplies, from box trucks into buildings where they were hosting blood drives. The blood center decided to evaluate this process to see if high labor costs and workers compensation claims could be reduced. They realized that if they had the
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warehouse stock equipment and supplies in mobile storage carts, then their phlebotomists wouldn’t have to manually carry, unpack, and repack the heavy and bulky protective cases. There was no product on the market available that met their specific needs, so they collaborated with Talon to modify an existing medical cart design. As a result, this solution saved 74.5 minutes of setup and teardown time per blood drive, while virtually eliminating workers compensation claims. By evaluating a deficiency in the process (phlebotomists manually carrying and unpacking protective cases) and measuring the impact from a small pilot with carts, they were able to make an educated procurement decision about the value of current equipment (protective cases) versus alternatives (mobile storage carts). Similar situations will arise in hospitals as value stream analysis and process improvement become more ingrained in organizational cultures. (VAMag) The key facilitators of value analysis in the healthcare supply chain are the Value Analysis Coordinators, Directors, and Managers. Why should they take an interest in clinical medical equipment? To fully comprehend the value of clinical medical equipment, it is imperative to know the functional impact to all affected stakeholders. This includes downstream stakeholders whose processes are affected by the equipment.
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Leadership Interview
Brian Shoenfeld
Returning to the pharmacy & nursing medication chainof-custody example from earlier, nursing is a downstream stakeholder (pharmacy’s internal customer) who is impacted by a pharmacy director’s decision to buy equipment that works best for pharmacy. When the buying decision for equipment is made, the pharmacy director might not be thinking about nurses who line up at the automated medication dispensing cabinet at 9AM every morning waiting for their turn to dispense medications, and nurses might not think about there being any other way to get medications to the patient. Additionally, the pharmacy director might not think about nursing’s need to increase Direct Care Time at the patient’s bedside, yet they could make an equipment decision that directly results in nurses saving >10% of their time retrieving medications. The function and true value of medication cabinets and carts is not fully understood if evaluated from a pharmacy perspective without considering the downstream impact to nursing. This mindset is especially important for cross-departmental workflows. (VAMag) Where do you see the key value points in clinical medical equipment today that value analysis professionals should be focusing on to gain the cost, quality, and outcomes advantage?
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The key value points in clinical medical equipment are the functional requirements, as defined by the system or process, and the product’s total cost over time (non-recurring and recurring). Does the equipment meet all functional requirements? Does the equipment offer more functions than required (i.e., buying a jetboat when a rowboat is sufficient)? What is the expected life of the product? What is the expected recurring cost for service contracts and maintenance? Does the vendor prevent flexibility by requiring a minimum term length in the contract? There will always be premium and budget options for equipment, so it’s important to balance the functional needs of the application with cost to achieve the best value.
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Value Analysis Tools
Robert W. Yokl
10 Best Practices to Selecting Value Analysis & Utilization Management Tools Robert W. Yokl, Sr. VP, Operation—SVAH Solutions Attaining the Most Value Out of Your Tools The value analysis (VA) and supply utilization management (SUM) world is becoming more challenging day after day. The biggest challenge for supply chain and VA professionals is to find the true tools to free up valuable time to focus on the tough areas in our value analysis programs. With over 16 years of providing such software systems to the healthcare marketplace, I thought I would share a few rules that would assist you in acquiring the best tools to aid in your challenge. 1. Get Over the Shiny Things – Marketing materials, “over the top” PowerPoint slides and glitzy charting does not make a good or even great software tool. When you are paying good money for these tools, it has to be software that is functional and easy for the end-user. Look for tools that give you the competitive edge in supporting your VA Program’s goals & objectives. 2. Audit Yourself and Your Program – What is chewing up most of your time in working with your value analysis projects and teams? For example, if you are spending most of your time on detailed value analysis analytics using spreadsheets, then look for tools to automate these processes for you. If you are spending the majority of time in managing meetings, then look for features that will help you manage your agenda, minutes and action items. 3. Don’t Be a One Feature Buyer – Sometimes software systems do just one thing but in the case of value analysis and utilization management systems there are multiple functionalities that you should be looking for in your software selection criteria. Remember, if you buy software for just one feature, you will eventually end up buying multiple solutions for all the VA tasks you need to manage. The result is that you pay more money and must log into 5-7 different systems. To top it off, none of these “solutions” talk to one another and you end up spending more time piecing together data to just get through one value analysis study. 4. What else do you get with the software? – What other benefits does that software company provide you beyond the implementation of the system? What value added knowledge, features, coaching and/or support can they provide as part of their contracted software. Easy way to find this out, ask. 5. Figure Out What You Need Not What You Want – Psychology books related to “why people do what they do” often conclude that people do not buy what they need but in many cases they buy what they want. This is great in our personal lives where we can get leather seats with seat warmers in our upgraded SUV’s. Unfortunately, when it comes to healthcare, every dollar is a challenge to get approved. Take a moment to step back and determine “what is a value added spend that will result in short/long-term outcomes resulting in sustainability”? 6. What are your absolute “must haves”? – Don’t bother looking at software systems on the marketplace that don’t meet all of your functional requirements---Must Haves. Would you buy a car without wheels or a steering column? The same applies to your requirements for a software system to achieve your goals. Don’t waste money on a system that only meets 2 of your 5 required functions. If you fail to plan, then you plan to fail.
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Value Analysis Tools
Robert W. Yokl
7. Don’t Worry About Software Replacing What You Do, There is Always More in VA – A Senior Level VA Professional from a large IDN approached me after a recent regional educational program about integrating several advanced modalities into the VA programs at their hospitals. We talked about all the modalities that I presented but the ongoing theme was, “oh that’s my job to do that, and that is my job to do this, etc.” I got the impression that this person came to the presentation to chart out the areas where they could protect their turf instead of trying to implement new forward-thinking strategies. 8. Enlist a Subject Matter Expert (e.g., “Techie Guru”) to Assist in the Selection – Many value analysis and supply chain professionals do not have a technical background in order to efficiently and adequately assess software vendors. What sort of database does this system run on? What is the programming platform you are using? Do you program this from scratch or use a purchased tool? How is our data protected? Do all the users have to log onto the system to put in a new product request? Can your system be customized and if so in what way? Again, enlist a colleague who can help you navigate these “technical” waters. 9. Envision the Pot of Gold at the end of the Rainbow – Step back and visualize the perfect tool(s) that you have chosen - what will they be doing for you? How much time will they be saving you? Will the system fast-track savings opportunities for supply utilization? Visualize using these tools every day to automate and enhance value analysis and supply chain evaluations. 10. What are your Stretch Goals & Objectives for the Tools? – It is always good to have stretch goals for any initiative, such as a module or reports that can find price savings for you compared to the marketplace. Once your minimum requirements in a software tool have been met, then broaden your requirements to all aspects of value analysis and supply utilization to find the perfect software tools for you. These are just a few key areas that you should be thinking about as your leaders want you to improve your programs to enhance your analysis and improve the quality and bottom-line savings at your hospitals and health systems. To do this, you must start to think about the areas where you can automate your VA program to easily identify new and better areas for savings and quality improvement. Would you rather walk to your destination or would you rather drive or even fly to that destination? Automation is the path to take to improve value analysis and easily find supply chain savings. Remember, you must have the right tools to launch you to a new level. Why continue to be limited by the world of manual spreadsheets and word documents? Others have found that pot of gold at the end of rainbow – why not you?
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Get Your FREE Value Analysis Software Today — www.AxiaValueAnalysis.com Volume 6/Issue 2 Healthcare Value Analysis & Utilization Management Magazine 23
Clinical Value Analysis Value Analysis Tools James Russell, RN-BC, MBA, CVAHP, Value Analysis Program Director, UW Health, WI
As I get more experienced in the field of healthcare value analysis, I get more and more exposed to various tools and techniques intended to assist with the value analysis process. I’m quite certain I’m not the only one who’s noticed that the volume of these tools is steadily increasing. I find it somewhat ironic that software companies are “selling” me on products that will help me reduce my health system’s annual spend on purchased services…for a monthly subscription fee. Isn’t that a little bit like selling me organic, sustainable, free-trade coffee in a little plastic pod that’s not biodegradeable? Okay, that might be a stretch. And actually, these companies serve an important purpose. Who wouldn’t spend a little on a tool that enhances, improves, or even creates from scratch a process that saves many multiples of itself? It just seems like a new one pops up every day. I have a bit of experience with some of these commercially available tools and some are excellent. It can be incredibly helpful to have a value analysis process standardized and outlined from step 1 to
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Clinical Value Analysis
James Russell
step 12, available for all of my customers to see. I have, and still do, use some of these tools because they simply make my life easier. I, like most of you, can perform a certain number of value analysis projects on my own, with my own “homegrown” templates (mostly in Microsoft Excel®). Let’s just say for kicks, I can handle 6 in-depth projects on my own. I’m defining “in-depth” as a major project that takes between 8 and 12 weeks to complete. With more people in my department (we call them Value Analysis Coordinators here), our impact can spread to more projects, let’s say six more for each Coordinator. Add a dedicated Data Analyst and we can stretch our “bandwidth” even larger. Perhaps two Coordinators, an Analyst, and I could handle 25 projects at once. The right tool can easily double that. Think about how much time you spend sending, receiving, and replying to project related e-mails with vendor representatives, customers, leadership, GPO representatives, contract experts, etc. The right tool can consolidate all of this minutiae, categorize it, and archive it so all interested folks can reach it easily. It can also automatically “escalate” things that are lagging. How often do you have to “nag” some folks to remind them to do a task? I used to keep a “Nag Log” that I updated once per week, color-coding and putting dates in when I e-mailed or called someone and reminded them that I needed something for a project to move forward. Eventually, after three tries, I start including their boss in the communications. How annoying (for everyone)! The right tool can do this for you. Simply set up parameters on escalation (repeated e-mail every 3 days until the task is marked complete, escalated to their supervisor on the 3rd notice) and that “nag” work gets done for you. Plus, it’s coming from software, not you, so you’re not irritating your customers (much). The right software can streamline your processes as well. How many of you run monthly or quarterly updates on project data, exporting it to Excel®, and hitting “refresh” on your pivot tables? If you’re as inept as me, you then are manipulating your charts to include the new data so you can send out updated follow-up reports to your project members. I’m not complaining. I actually really enjoy the follow up…showing my colleagues how much their practice changes are really impacting whatever
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Clinical Value Analysis
James Russell
metrics we’ve decided to use to measure the project’s Return on Investment (ROI). It’s one thing to estimate our impact; it’s another to show actual data. The right software can do this for you, without exporting, refreshing, and manipulating! How much time would that save you? Obviously, I’m not advocating for any particular vendor. That would be inappropriate. It would also be uninformed, since I haven’t tried them all. I have, however, served as an unofficial beta-tester for several different companies’ products and have been delighted when they take my critique to heart and make changes to their product. That’s been a lot of fun.
Let me change to a non-software tool…the value analysis decision grid. Don’t we all have one? Here’s an image of mine. It actually shows better in PowerPoint, where I can make the wording appear as I talk about the particular block in question, but you’ll get the idea. I’m very interested in hearing from you about what you use. Its premise is pretty simple: Every new product request will impact our finances or our quality in one of three ways…positive, negative, or neutral. That gives me nine blocks for every new product to fall into. Some are hardly worth mentioning (decreasing quality and increasing costs…why are we talking about it?). Some are a little harder to assess (increasing quality for higher costs requires quality evidence, not somebody’s opinion). One I made up is the “Pain of
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Clinical Value Analysis
James Russell
Conversion,” and it’s a moving target. Saving 15% of $30,000 isn’t nearly the same as saving 10% of $1 million. But the core of the “Pain,” is simple…I’m not training 2,000 nurses on a new widget to save $10,000 a year. I’d get flogged! Last point on tools. They can help you formalize things for your customers. I have this mantra that I stole from a colleague (Neil Horton from Sentara):
Healthcare is almost constantly changing. It is rarely the same today as it was just a few short years ago. Resistance to change is somewhat normal. However, at some point, to steal from a beloved old TV series, “Resistance is futile.” Healthcare change is like a train. It’s rolling down the track. You can jump on board and help figure out where it’s heading and what’s needed to manage it. You can stand aside and watch it go by without you, lamenting that “The way we’ve always done it” doesn’t work anymore. Or, you can stand in front and try to stop it (and most likely get run over). Regardless (not irregardless) of what you do…it’s moving on down the line. The right tools can help you navigate the constantly changing world of healthcare value analysis. They can also help you explain it to your customers and increase your bandwidth. When people I work with say they can’t change, or that learning new things is too hard, I ask them to pull out their smartphones. They (almost) all have one and know how to use it. Ten years ago, not so much. Change happens, whether or not we notice (or like it). Using the right tool can help it be a little less painful. So we can get back to what we really enjoy, changing exam gloves!
James Russell, RN-BC, MBA, CVAHP, is the Value Analysis Program Director at UW Health (the University of Wisconsin). Jim has 3 decades of nursing experience; a third in critical care, another third in psychiatry, and the last 10 years in healthcare value analysis. He’s been in both staff and leadership positions in the for-profit, community healthcare sector, as well as in several Academic Medical Centers. Jim has published dozens of articles on value analysis and nursing leadership, and speaks regularly at national conferences. You can contact Russell with your questions or comments at jrussell@uwhealth.org
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Value Analysis 101 One of the Most Powerful Tools for Value Analysis is Strategic Planning Robert T. Yokl, President/CEO, SVAH Solutions
“Nothing is more terrible than activity without insight.� This quote by Scottish Philosopher, Thomas Carlyle, is at the core of why you need to develop and then revisit your Strategic Value Analysis Plan (SVAP) before you establish, reinvent, or set a new direction for your value analysis program. It is one of the key ingredients that holds your value analysis program together, year after year, and decade after decade. Think of the SVAP as Gorilla Glue! Benefits of Strategic Value Analysis Plan We often talk to value analysis leaders that are looking to establish, reinvent, or set a new direction for their value analysis program, since their VA program has gotten stale, is dysfunctional, or is not meeting their stated goals and objectives. This is when we ask the VA leader if he/she has an updated Strategic Value Analysis Plan. Volume 6/Issue 2
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Value Analysis 101
Robert T. Yokl
Most often, they tell us they don’t, which is a clue for us as to why this hospital, system, or IDN is having growing pains. They hadn’t taken a long-term, systematic view of their value analysis program, and then revisited their SVAP annually, or as needed, to keep their VA team(s) well oiled, on a critical path, and operating at peak performance. An SVAP has many similarities to long-range planning in that it is a systematic and defined planning process. This enables a healthcare organization to appraise the strengths and weaknesses or GAPS in its value analysis program, then, devise new strategies, tactics, and techniques for reducing and controlling supply chain expenses going forward. If properly developed, your SVAP will provide supply chain/value analysis leaders with a road map for their value analysis program for many years to come, thereby, increasing its probability for success. This is a better course of action than letting your value analysis program just happen in an unplanned and disorganized manner.
It All Begins with a SWOT Analysis Your Strategic Value Analysis Plan begins with defining your vision, mission, and goals and objectives for your new or refined value analysis program in terms of what your aspirations, aims, or mandates are one, two, and five years out. It shows savings and quality goals are real and achievable and what policies and procedures are required to align your goals and objectives with your new or reinvented product, service, and technology evaluation/selection process. It reveals what steps you need to take to develop or reinvigorate your value analysis teams that will be creative enough to meet the challenges of your hospital, system, or IDN over the next few years. It helps find the problems or hurdles that can be anticipated that would threaten the success of your value analysis program and where you would get started to make change happen.
Don’t Make a Move Without a Strategic Value Analysis Plan All of us prefer to act first as opposed to planning first, but as the quote I just talked about says, “Nothing is more terrible than activity without planning,” because action without planning leaves out critical steps that can spell success or failure of your value analysis program. I know this to be true because even with an SVAP that I developed for a hospital, system, or IDN client, I would often need to revisit the SVAP once we took action because I forgot a key success element of the plan (i.e., meeting with key influencers to discuss the SVAP before announcing it to all who are involved in the new or reinvented value analysis program). This occurrence rarely happens now, since I don’t make a move to change a VA program without a properly developed and bought into Strategic Value Analysis Plan. You can have the same SVAP success too! Volume 6/Issue 2
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Why Is the Right Value Analysis Tool Important?
Robert T. Yokl
When I formed my first value analysis team decades ago, there were no value analysis tools available, not even an electronic spreadsheet. Everything we used to manage our VA program (agendas, minutes, value analysis requests, project management, etc.) were all manual systems. Did my VA team save money, improve quality, and provide safe products, services, and technologies to our end-users without the right tools? The answer is yes, but we didn’t know what we didn’t know at the time.
Fast forward a few years (circa mid to late 1990’s), and we developed software that did all the time consuming manual value analysis work I just talked about in addition to providing online access to all a healthcare organization’s purchases, by commodity group, for a one-year period. The benefit of this system was that VA team members could slice and dice their hospital, system, or IDN’s purchasing data searching (e.g., perform a ABC Analysis) for savings opportunities without once talking to their materials management department, which was always time consuming to do so. We later developed a value analysis tool to identify (i.e., value analysis analytics) the best value analysis savings candidates for value analysis teams to study. Thereby, eliminating dry holes that were associated with prior value analysis savings tools we created. Now, a value analysis team had a 96% chance of saving money on each value analysis project they decided to undertake without needless time searching for savings opportunities. All the savings VA teams need now can be gotten with three clicks of their mouse. Today, we have value analysis tools that do all the above while they can also map a team’s value analysis savings opportunities right back to a procedure, surgeon, or department. This again, saves time and effort for overworked value analysis team members. Why is the right value analysis tool important? Because time, money, and resources are scarce in any hospital, system, or IDN today, you therefore need to have the latest value analysis productivity tools that can do the heavy lifting for you. Otherwise, you will never get all of your value analysis jobs done that need to get done on time, efficiently, and in an expedient manner. Robert T. Yokl President/CEO, SVAH Solutions
Learn More About Value Analysis Tools by Visiting www.SVAH-Solutions.com Volume 6/Issue 2
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Utilization Management Rewind Then Fast Forward to the Next Big Supply Chain Savings Robert W. Yokl, Vice President/COO, SVAH Solutions
Revelations Eight Years Out from Our Publishing of “Healthcare Supply Utilization Revolution – The Future of Supply Chain Expense Management” Eight years ago, we self-published and distributed our free book, Healthcare Supply Utilization Revolution – The Future of Supply Chain Expense Management, and distributed over 2,300 copies throughout our supply chain industry. It was very popular, and we continue to receive requests for the book from time to time. Why did we write this book in the first place when at the time we were predominantly viewed as value analysis experts in the healthcare industry?
Why Would VA Experts Write About a Totally New Concept? In working with our hospital and health system clients, we saw that our industry’s primary strategy of Group Purchasing and Custom Contracting was starting to suffer from what we called, “The Law of Diminishing Returns.”
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Utilization Management
Robert W. Yokl
We were measuring the amount of overall price savings that hospitals accomplished year by year and dividing it into overall spend on contract. Astonishingly, we found that hospitals and health systems were only netting about 1% to 3% in overall savings. That was hard to believe back then, and I think it is still hard to believe today that with all of the hundreds of thousands, and in many cases, millions of dollars that are saved throughout the year, the net results are only 1% to 3% of overall savings. That isn’t enough to cover the cost of inflation most years, let alone the amount of new products that have been deployed.
Fast Forward to 2018 Let’s fast forward when a prospective client had told me that one of their main strategies for savings for 2018 was to join a cooperative group that was backed by their national GPO. Curious about this, I went to the regional GPO’s website and found their annual report where they stated that they saved over $100 million for their members and had billions under contract. The calculation was simple, and we divided the savings into the spend under contract and found that they were only saving 1.4% overall for their members. If you backed off the dollars for rebates, they were only saving 1% overall for their customers in contract-related price savings. This is the price model of the future, and what we see in the maturity of these organizations is barely 1% overall savings or only about $550K per year per member hospital — now that is eye opening. If you had any doubt that price savings are dramatically diminishing, here is the proof on a national and regional scale.
Ignore These Facts at Your Own Supply Chain Organization’s Peril This particular regional extension of a national GPO has been around for many years. This tells me that they have a high level of maturity and compliance which is the model that is being espoused as the next level of big savings over the past 8-10 years. Some newer, some older, but most are national GPO based and extending the savings with customized contracting for their regions. By the way, I am not a disbeliever in these regional cooperatives. As a matter of fact, I believe that every healthcare organization should belong to regional cooperatives. My regional GPO clients take advantage of not only price and volume-based savings but also employ a strong value-based supply utilization system for their hospitals to gain the highest level of savings at the 7% to 18% levels.
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Utilization Management
Robert W. Yokl
Why wouldn’t we want to have the best of both worlds of price savings and utilization? Clearly, the evidence is before us, as we were seeing in 2009 we are now seeing played out right before our eyes. With even the most mature models of price and standardization savings, we are only seeing an overall return of 1% to 2%. We have to start moving towards the next big savings opportunities for our healthcare organizations.
5% to 15% in 2009 is Now 7% to 18% Savings from Supply Utilization in 2018 and Beyond! Our tracking of supply utilization for our customers back in 2009 (and published in our book) was 5% to 15% of overall supply chain budget in supply utilization savings. Supply utilization savings has climbed higher in 2018 to 7% to 18% while price savings has diminished to 1% to 2%. If you compare that to what price savings was netting for, say, a 250-bed hospital who had about $108 million in annual supply spend, that would give you $1.1 million in price savings versus $7.6 million or 7% in supply utilization savings ($19 million savings at the high end of 18%). With price savings topping out, you must now start shifting your focus to Supply Utilization Management which includes price, standardization, product mismatches, waste, and inefficient use of products. Yes it is about the overall cost of ownership of these products that is most talked about and by tracking utilization you can now cover this most important base too!
Let’s face the facts, our supply chain efforts have been ever maturing but mostly focused on getting better prices and standardization. However, as detailed above, where do we get our next big savings after we start experiencing “The Top Out Effect?” We could choose to go further down the road of price savings, bidding out the GPO we belong to, joining even more regional cooperatives, or we can realize that the evidence is clear that we are sitting on a gold mine of supply chain savings in supply utilization management. Using the mining terminology, we have exhausted the mine shafts of price and standardization and have cashed in all we could, but now we must start mining the pristine shafts that contain supply utilization savings opportunities. As we illustrate in the graphic above, we have only been focusing on 50% of the supply chain pillars of savings opportunity and are leaving the other 50% untouched.
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Utilization Management
Robert W. Yokl
What Do We Do Once We Recognize that Supply Utilization is the Way to Go Now? The good news is that you don’t have to give up any of your efforts that you have in place with your GPOs or your price or contract strategy. These are pillars of your success and must remain in place. What you need to now focus on is having the ability to track 100% of your supply chain to know exactly where your next savings opportunities are residing. This means better systems that are focused on Supply Utilization Management which means hospital volume centric measures compared to supply chain spend. Think, what is my cost per metric in ablation to pacemakers to wound care and everything in-between on an ongoing basis? You will be amazed by what this will tell you about your supply chain costs.
Isn’t It About Time that We Cover All Our Bases in Our Supply Chain Organizations? The best evidence in the fight to reduce supply chain costs on a wholesale level is utilizing your own data to its fullest in the form of a supply utilization system that tracks all costs per volume metric on an ongoing basis, so you can be alerted to savings opportunities at every level. Plus, you can strategize on how you want to attack these savings once they show true opportunity is at hand (VA, standardization, evidence based research, etc.). With mergers and growing health systems around the country, a solid supply utilization management system will help you better focus your attention on the hospitals that are your worst performers and also focus on the strengths and best practices of your best performing hospitals.
Don’t Underestimate the Power to Know with Supply Utilization Management Your opportunities are endless once you start down the road of supply utilization management. The best part is that you can finally see the results of your changes and the exact impact they have on your supply chain costs over the short and long term. The ultimate sustainable supply chain resides with the power to know! Volume 6/Issue 2
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The Last Word
Robert W. Yokl
Do Patient Outcomes Trump Good Business Principles and Management? Robert W. Yokl, Vice President/COO, SVAH Solutions
Sometimes the tough questions that people ask about value analysis decisions can be summed up in a simple client instance that tells the story perfectly while answering the question with professionalism, efficacy, and integrity. Below is a simple circumstance that answers this ongoing question in my eyes. I will always remember one of the first meetings for a large health system’s new clinical value analysis team that our firm had set-up, trained, and coached. There was a presentation for a new ostomy attachment system that was being pushed by the Wound Care/Ostomy Nurse Manager. She was really selling it in the name of better patient quality and outcomes, and this new ostomy product did not cost a lot of money (approximately $16K annually). While she was making her presentation and case for change, I asked the Director of Purchasing, who was the champion of the product currently being used, if the current ostomy product was inadequate and needed to be replaced. He stated that the same Nurse Manager who was pitching the new product made the presentation and pitch no more than six months prior for the current ostomy product which she in turn had gotten accepted and the product was contracted for and implemented. Now, six months later, she wanted to go back to the product that she had replaced. Volume 6/Issue 2
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The Last Word
Robert W. Yokl
The problem was that the hospital signed a two-year contract with a new ostomy vendor based on her fervent backing of this product six months prior. The Ostomy/Wound Care Nurse Manager was asking the value analysis team to break off the existing contract which still had 18 months left to run and start a new contract with the old vendor in the name of better patient quality. In further examination, both products met the functional requirements for the ostomy care of the patient, but the new system required three additional small steps on initial set-up that the nurse did not anticipate. She felt it made the patient feel uncomfortable waiting while these steps were performed to set up their ostomy system. The products cost almost exactly the same, so cost was not an issue. The challenge for this new product and the Value Analysis Team Leader, who was a Nurse Manager of a clinical unit at the hospital, was not whether this product was better than the other but whether patient quality and outcomes were enough to break a contract that the health system already had in place. A contract that was negotiated in good faith with the vendor. Plus, this was one of the first meetings of their clinical value analysis team in their revised value analysis program and would set an important example moving forward. The team leader who, being a nurse manager understood both sides of the equation, decided that it was not in the interest of their health system to operate outside of the realm of the good faith that they had developed with their vendors. She further stated that it would set a bad precedent if the new clinical value analysis team started breaking contracts with their vendors and that they would more than likely suffer penalties for breaking these contracts in the future. She then did not reject the new ostomy product but recommended that the Wound Care/Nurse Manager make her request closer to the end of the existing contract which she accepted. To me, this is why value analysis is more important than ever before to patient quality and outcomes. Why? Because the value analysis team leader was able to ask the right initial questions to ascertain that there was no risk to the patients or outcomes with the incumbent product. Further, the team leader realized that other than a small inconvenience on set-up, it was not worth breaking a contract and all the ramifications that go along with breaking a contract. Volume 6/Issue 2
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