Volume 7/Issue 1
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Leading Cost and Quality Strategies for the Healthcare Supply Chain
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Contents
Healthcare Value Analysis & Utilization Management Magazine
4 FROM THE PUBLISHER’S DESK By Robert T. Yokl
“Excellence is an art won by training and habituation…” 6 FROM THE MANAGING EDITOR’S DESK By Robert W. Yokl
What is Your Single-Minded Purpose in the Healthcare Value Analysis World?
P.O. Box 939, Skippack, Pa 19474 Phone: 800-220-4274
9 VALUE ANALYSIS SYNERGY
FAX: 610-489-1073
By Michael Bohon
But the Healthcare Supply Chain is Different!
bobpres@ValueAnalysisMagazine.com
www.ValueAnalysisMagazine.com
14 VA PURCHASED SERVICES
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By Michael Maguire
Applying a Value Analysis Approach to Purchased Services: Case Studies in Clinical Engineering
19 CLINICAL VALUE ANALYSIS
Editorial Staff Publisher Robert T. Yokl
By James Russell
bobpres@ValueAnalysisMagazine.com
Where Do Value Analysis Professionals Come From?
22 HEALTHCARE VALUE ANALYSIS ACADEMY By Robert W. Yokl
————————————
Managing Editor Robert W. Yokl
What Top Skills Are Required to Make You Successful in Healthcare Value Analysis?
24 VALUE ANALYSIS ADVISOR
ryokl@ValueAnalysisMagazine.com
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Senior Editor
By Robert T. Yokl
Patricia A. Yokl
Are You Asking the Right Questions?
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28 SAVINGS VALIDATION
Editor and Graphic Design
By Robert T. Yokl
Why Validation of Your Savings is Now Mission Critical for All Healthcare Organizations
30 UTILIZATION MANAGEMENT By Robert T. Yokl
Purchase Cost is the Tip of the Iceberg!
32 VA PERSPECTIVE By Chase Johanson
The Supply Chain Stars of Tomorrow Understand This: Value Analysis
Volume 7/Issue 1
Healthcare Value Analysis & Utilization Management Magazine is published Bi-monthly by SVAH Solutions®
www.ValueAnalysisMagazine.com
Danielle K. Miller
Copyright 2019 SVAH Solutions. All rights reserved. Reproduction, translation, or usage of any part of this work beyond that permitted by Section 107 or 108 of the 1976 United States Copyright Act without permission of the copyright owner is unlawful. For permission, call, fax, or e-mail Robert W. Yokl, Managing Editor. Phone: 800-2204271 E-Mail: ryokl@valueanalysismagazine.com for approval to reprint, excerpt, or translate articles. 3
From the Publisher's Desk “Excellence is an art won by training and habituation…” Aristotle Robert T. Yokl
We all have a goal for our hospital value analysis programs to be the best they can be in the eyes of our senior management and peers. Yet, too often we forget that one of the keys of our value analysis success is training and habituation in the classic value analysis philosophy, principles, and tenets which will make value analysis teams superstars. Sometimes I hear healthcare value analysis practitioners say that they have developed their own value analysis process, not based on the hard-learned principles and practices of Larry Miles (the Father of Value Analysis) but built based on their own version of value analysis. That’s why I often say that “most healthcare organizations aren’t practicing Miles-Based Value Analysis, but are doing something else, such as, price shopping, comparison shopping, GPO contract conversions, new product evaluations, etc.” Unfortunately, in today’s healthcare marketplace these savings tactics won’t move the needle on our organization’s bottom line! Why is this important? Healthcare organizations are desperate to save more money on their supply chain expenses, but knowing that price savings are slowly disappearing, where are supply chain professionals going to find their next savings gains? The answer is by performing functional and utilization analysis on all products, services, and technologies you are buying now to root out all waste and inefficiencies in your supply streams. This can only happen if you and your value analysis teams are trained and then habituate the techniques you have learned in your classroom exercises.
Value analysis isn’t a generic name for cost management, it’s a proven multi-step process to understand the precise functional requirements of everything you buy so you can write specs for them. By doing so, you will be creating more clarity, buying only what you absolutely, positively need and
eliminating feature-rich products,
services, and technologies that are creating no value for your organization, but always add cost. Don’t wait another year to get better than good with your value analysis program; train and habituate now so your new value
analysis savings will flow much better next
calendar year. Volume 7/Issue 1
Healthcare Value Analysis & Utilization Management Magazine
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Sometimes It’s Hard to Ignore What An Automated System Can Do for Your Supply Chain Organization
Volume 7/Issue 1
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From the Managing Editor’s Desk What is Your Single-Minded Purpose in the Healthcare Value Analysis World? Robert W. Yokl
This may seem like a rhetorical question given we all have our defined titles, job descriptions, and assigned duties in our organizations, but how do you view yourself in your position? Forget about the activities, time you put in, and studies you have accomplished. What is the end result that you see yourself bringing about? A simple case in point from several years back: I was picking up the President of an up-and-coming physician preference item cost management company that we were considering partnering with. On the ride from the train station to our offices, I asked him how he viewed our unique cost management and value analysis worlds. Straight away he said boldly, “We save lives!” This took me aback as I did not think of our world that way as we were mostly in the cost management and value analysis business and he was in the cost reduction of physician preference items. Just to give a little more background on the President of this firm, he was still an active Surgeon at three different hospitals in the NY/NJ area as well as owning this new venture. Intrigued and perplexed with his answer, I asked him how we save lives in the cost management business. Plain and simple he stated, “Hospitals need capital and healthy bottom lines to continue to add new services, new instruments, expand their operations and pay their best people. Without us helping them to keep a healthy bottom line, people are going to die!” He blew my mind and made me think on a whole new level of the purpose of why we do what we do in the value analysis world. What is it that fires you up to do the very challenging job of value analysis? For me, it is helping clients save big in new and advanced areas like utilization management. Most organizations are totally price focused and are not even considering utilization management savings as anything substantial. Then, I help educate them and show them where the opportunities are beyond price and there are many. They then achieve the big results without having to change a contract or go through a painful conversion but instead better utilize their supplies (what a concept!). All while maintaining the efficacy of the products or technologies we are working on. Does it get any better than this? As we move further into 2019 and beyond, I think it is a great time to take a step back and to really ask yourself what your single-minded purpose is for performing the job of value analysis in the capacity you are in. Don’t just spew off some mantra or vision statement that somebody else wrote because that is not yours. Think about what aspects really make you excited to do what you do. Then, set your goals and objectives towards these single-minded purposes. You will then know your own purpose!
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The Healthcare Value Analysis Academy Presents
Certified Value Analysis Advisor Program Finally, a Value Analysis Certification Program For Supplier Professionals to Add Value to the Healthcare Value Analysis Process When Customers See You Wearing Your Certified Value Analysis Advisor™ Label Pin, They Will Recognize that You Know Value Analysis and Can Assist Them With Their Evaluations
Robert T. Yokl, Exec. Dir.
For the past 31 years we have been training hospital value analysis and supply chain professionals as well as their teams, physicians and line employees in the methods, processes and systems of value analysis to great success. But I always thought their was a major component that was not being addressed that was mission-critical to the success of any and all value analysis programs. That component is the training of the sales professionals to be trusted advisors to hospital VA processes.
In order to close the loop on this major hole in the healthcare value chain, we created the Certified Value Analysis Advisor Program. This is a program that will make the value analysis process better for hospitals and their value analysis teams. Why? When you walk through your hospital client’s doors and they see you wearing the CVAA lapel pin, they will know that you can add value to their VA process and be a trusted part of the VA team. With being properly educated/certified in the VA process you can assist your client organizations to reach the ultimate cost, quality and outcomes results, faster, better and easier. They can finally rely on you to be part of their team instead of a questionable outsider.
Learn More and Get Certified Today!
https://valueanalysisacademy.com/certified-value-analysis-advisor/ Volume 7/Issue 1 www.ValueAnalysisMagazine.com 7
Learn How to Get More Value Out of VA at the Healthcare Value Analysis Academy Beginner, Intermediate and Advanced Programs Available
Featured Programs
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Value Analysis Synergy But the Healthcare Supply Chain is Different! Michael Bohon, Managing Director—Healthcare Solutions Bureau
How many times have you heard someone say the above statement as to why ideas, concepts and practices from other industries will not work in healthcare? Personally, I cannot count the times that I have. I have worked in the supply chain world in three industries; steel, electronic and healthcare for 40+ years. The majority of that time was in healthcare. For the past 20 years I have also been involved with the development and presentation of supply chain educational material. These have been delivered in lecture, seminar, workshop and online formats, and about half of them have been through the auspices of the Institute for Supply Management (www.ism.ws). This work has provided me the opportunity to observe, ask about and learn about the differences between the supply chains in different industries. The ISM programs are made up of participants that are from other than healthcare over 98% of the time, and those from healthcare are from the supplier side with only a couple of exceptions.
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Value Analysis Synergy
Michael Bohon My purpose here is to compare some of the aspects of a supply chain operation between those in healthcare and those in a variety of other industries. My thoughts and comments are from my 30+ years of knowledge from my work in healthcare and from observations and discussions I have experienced during my interaction with supply chain professionals outside of healthcare.
I have selected a number of topics or areas of the supply chain activity. I will explain how they are dealt with outside of healthcare and how they compare to healthcare.
Recognition of Supply Chain’s (SC) Criticality Naturally, this varies by industry and size of the organization. However, generally in non-healthcare industries the supply chain is recognized as a key part of the firm’s structure. They are represented in the leadership level usually in the C-suite. They are included in the decision-making process in most every aspect, especially those with a financial impact on the success of the company. It is not surprising to find that the mid and lower levels of the SC feel that their involvement should be increased, and their authority be strengthened. The healthcare SC has made good progress in this area in the past 10–15 years. More and more examples are found of VP–Supply Chain and even CSO (Chief Supply Officers) throughout the country. However, there is much more progress to be made as there remains far too many cases of the Director level being the highest. This can only be corrected by SC professionals taking a proactive stance and proving to their leadership the benefits that can be derived from their knowledge and experience. One significant remaining problem is healthcare’s lack of understanding of the importance of educational programs for those in the key support departments. People have heard my mantra that supply chain education is an investment, not an expense. Unfortunately, the leadership and those who control the purse strings fail to appreciate that fact.
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Value Analysis Synergy
Michael Bohon
Value Analysis The concept of value analysis (VA) has been in healthcare for over 30 years. I worked at a hospital in 1986 that was one of the first to have an RN reporting to Materials Management. The progress was slow at first, but when the benefits of this approach began to become more obvious and meaningful, the interest began to grow. Now, when I talk to a hospital that is having difficulties controlling supply and inventory costs and contract compliance, I usually find that their VA system is either weak or in some cases non-existent. When I ask my class participants from other industries if they utilize VA, they looked puzzled and shake their heads. When I change the question wording to value engineering (VE), the majority responds, “Of course!� VE is defined as a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be manipulated by either improving the function or reducing the cost.
Value Engineering/Value Analysis is defined as a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be manipulated by either improving the function or reducing the cost.
Sound familiar? VE was originated during World War II by General Electric (G.E). Because of the war, there were shortages of skilled labor, raw materials, and component parts. G.E. looked for acceptable substitutes. They noticed that these substitutions often reduced costs, improved the product, or both. What started out as an accident of necessity was turned into a systematic process. They called their technique "value analysis". The name morphed into value engineering when it became mandated in federal agencies and programs. VA in healthcare had a similar start when DRGs became a major force in reimbursement and hospitals had to improve the value ratio of the products they used in their operation to lower their costs and improve their outcomes. Its importance has been realized through the efforts of proponents such as Bob Yokl and others.
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Value Analysis Synergy
Michael Bohon
Contracts and Contract Management There is another area where healthcare has made major improvements in the last 20 years and that is in the realm of contracts and contract management. When I used to tell my classes that healthcare generally allowed suppliers to write the contracts, they stared at me in disbelief. Very few of them would ever consider allowing that to happen. Then, I explained that it was as a result of upper management’s lack of understanding of the value of good contract management in the supply chain and, therefore, they often would not provide the department resources in staffing and educational opportunities. Then they would shake their heads in dismay. There has been a significant change for the better in healthcare. This is in part due to hospital systems doing more direct contracting with the suppliers and, to a degree, less dependence on group purchasing organizations (GPOs). Also, there has been a realization of the negatives that occur when the selling side controls the writing on the paper. This is another case of those SC departments with limited staff not having the tools available to optimize their contracts.
Contracts’ legal terms and conditions are an essential part of all contracts. Healthcare has made substantial advancements in their methods of addressing them. Other industries are heavily focused on addressing them in advance to ensure their legal and organizational goals and objectives are met. They work with the legal counsel to ensure that all critical issues are addressed in a manner that deals with the suppliers’ concerns while protecting themselves should any problem develop during the documents’ lives. If this is your methodology in the healthcare environment, you are to be commended. If not, perhaps you need to confront this situation. While those outside of healthcare are shocked by the power that surgeons and physicians have in the contracting process, they often face a similar burden of working with engineers and R&D departments. The primary difference I have noted there is the willingness of their senior management to get involved and listen to the SC’s side before a final decision is reached. In the area of negotiation other industries’ SC people are more schooled and trained to carry out this key function. They are also more empowered to represent their organization. They are just as frustrated as healthcare SC professionals with internal negotiations. In fact, over the past 20 years when asked, 100% of them respond to my question and say that internal negotiations are consistently more difficult than the external ones. Like healthcare, they use a team approach on a regular basis with the internal departments, but limit the participants when facing the suppliers’ representatives.
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Value Analysis Synergy
Michael Bohon
There are four areas where healthcare and other industries are vastly different. These are: • Group Purchasing Organizations (GPOs) – Outside of healthcare they are referred to as buying consortiums and are very (!) limited in number across all industries. While their people seem intrigued by the concept, they remain wary of it as they express concern about losing some of their management’s control with contracts and supplier selection.
• Benchmarking Services – Such tools are virtually unheard of outside healthcare. When I mention them in my classes they display an interest in the details. When I provide more information, they express envy that such means are available elsewhere and wish they had access to something like them. They do, in some cases, benchmark pricing within their own company and its multiple sites, but have little or no access to the blind pricing from others in their industry. They also question the breadth, depth, and accuracy of the information. • Multi-site Operations – Yes, healthcare is gradually morphing into more hospital systems that have sites in many areas across the country; Ascension Health, for example. Again though, the examples of this type are a relatively small number when you consider all the 5,500 hospitals around the country. On the other hand, it is common for many other industries to have sites not only across the US but also in multiple countries around the world. This can lead to significant issues both in number and complexity. • International Operations – In the polls I take of my class participants, about 70% acknowledge that they are involved in international business dealings, either with suppliers or within their own company. In healthcare, there are a few of the largest systems that have an international presence, but they are a small minority. International commerce adds a whole new and complex layer of required knowledge and skills necessary for successful conduct of business. It is so relatively common in many industries that the Institute for Supply Management includes questions on international business issues in its exam for certification as a Certified Professional in Supply Management (CPSM). Many of the readers of this missive will quickly say that what was stated here does not apply to their or their company’s situation. That may well be true. Remember, the statements here are simply a summary compilation of years of my observations and information collected in a relatively unscientific manner. It is a taste of comparisons and by no means all-inclusive. Should any readers wish to provide their comments or ideas, please contact me via email at bohon@hcsbureau.com. I will be glad to respond. www.hcsbureau.com
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VA Purchased Services Applying a Value Analysis Approach to Purchased Services: Case Studies in Clinical Engineering Mike Maguire, Senior Vice President and Chief Supply Chain Officer at PartsSource
The U.S. healthcare system is the most costly across the globe. Seeking to cut waste from the system, American healthcare organizations are under ever-increasing pressure to optimize their performance and drive value to their bottom lines. As a result, hospitals are laser focused on three goals: 1. Improving the quality of healthcare 2. Reducing the cost of healthcare 3. Increasing operational efficiencies
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VA Purchased Services
Mike Maguire
One of the most critical areas of focus is Medical-Surgical spend, which is largely driven by a health system’s formulary, the product of agreements between Clinicians and Supply Chain. To contain costs, and ensure standardization and quality, clinical preference items are increasingly sourced through a value analysis process. The model has worked well. Yet, the value analysis process could also be used to address the cost, quality, and efficiency of purchased services in an often overlooked area of the health system: Clinical Engineering. Managing cost, quality, and efficiencies comes with numerous challenges in supply chain, and specifically within Clinical Engineering departments. Clinical Engineering has a mission critical role within the health system to ensure that the equipment that supports patient care is available (“uptime”) and working optimally per the manufacturer’s specifications. Their work includes both regularly scheduled maintenance as well as unplanned repair work. The procurement of a wide variety of parts supports their mission but is often handled in what Procurement would call an “unmanaged” fashion. To streamline the process, what’s needed is a simplified, collaborative supply chain process that delivers on-demand products and service to clinical engineering. Such a process is critical to the high level of efficiency required for the survival and health of large organizations, and to ensure that medical equipment is ready when and where patients need it. Yet, large-scale quality issues, service deficiencies, and increased costs are among a plethora of factors that continue to negatively impact profits.
How can supply chain apply value analysis for purchased services to improve the efficiency of clinical engineering? The answer may be found in some of the nation’s high-quality leaders. Organizations such as the Mayo Clinic, Cincinnati Children’s Hospital and HCA have all found a viable solution for evaluating quality vendors and products and applying a process to standardize the workflow and costs of clinical engineering purchases. Results include efficiency through consolidation, and significant cost savings to help reduce the total cost of ownership of medical equipment.
Dartmouth-Hitchcock Dartmouth-Hitchcock Health (Dartmouth–Hitchcock), a leading nonprofit academic health system serving a population of 1.9 million in New England, implemented this approach for their clinical engineering department.
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VA Purchased Services
Mike Maguire
“I was in need of a parts procurement solution that allowed me to leverage my team’s time in a positive manner, while at the same time provided visibility to everything that was going on with ordering parts,” said Dartmouth-Hitchcock Director of Clinical Engineering, Jon Kocurek. “As a manager, I wanted to start finding areas of low-hanging fruit and doing a better job of saving my organization valuable resources.”
The challenge for Dartmouth-Hitchcock was that limited access and the inability to get historical spend data meant they had to rely on a manual record keeping process. It was vital to their strategy to have the right technology in-house to store purchasing data for future analytics and reporting. “Not only would we receive parts that were dead on arrival, but we would also receive parts that worked okay on installation, and then failed two weeks later. In the event of a failure, my team would have no way of really tracking warranty terms on parts. Many times, I would find we purchased a new part only to realize later that it should have been covered under warranty by the manufacturer. Additionally, I had no way of knowing or seeing metrics regarding lead or backorder times from different manufactures and vendors. The inability to truly understand these performance indicators was a substantial limiting factor in understanding how I could make my team as efficient as possible,” said Kocurek. So Dartmouth-Hitchcock introduced a resource management program using a cloud-based software platform to standardize process for order entry, management and reconciliation from multiple OEMs and suppliers. Visibility into spend and supplier performance are achieved through evidencebased best practices, process automation tools and reporting and data analytics. “My team now follows a process that allows them to make confident quality and cost decisions when acquiring parts. It also provides visibility of their impact on driving costs down for the organization.”
Dartmouth– Hitchcock Results Prior to implementing the resource management program, Dartmouth-Hitchcock’s estimated time spent in procurement was 730 hours over a six-month period. After implementation, time spent in procurement dropped to 112 hours over six months and resulted in a cost savings of 27%.
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VA Purchased Services
Mike Maguire
UCHealth Another top health system in the U.S., University of Colorado Health System (UCHealth), was looking for a way to improve process and workflow in Clinical Engineering that could easily be integrated into their current system. They wanted to manage service reports and tracking and shipping of product orders and assets in one centralized program. After an exhaustive search for the best option, the team chose a resource management program to help achieve their goals.
UCHealth Results The software solution proved popular with UCHealth’s clinical engineering team, driving rapid adoption, said Tori Kennedy, Vendor Services Manager. Within 6 months of the program’s start date, 95% of UCHealth’s 40+ team members were using the program across 26 modalities and 9 facilities. While cost savings is always an important factor, it was a secondary goal for UCHealth. Still, in less than 6 months, UCHealth saw a 43% cost reduction in spend, and consolidated 160+ vendors. In addition, the program connected various departments and sites as an unintended outcome of the program. As these examples demonstrate, implementing a formal process for the sourcing and procurement of parts to support Clinical Engineering’s mission can have a profound impact on a health system’s bottom line. If the process incorporates the operational needs of Clinical Engineering with the sourcing expertise of Supply, it can identify opportunities to consolidate vendors, gain visibility to quality outcomes and supplier performance, and identify future opportunities. Such a process can pave the way for developing a fine-tuned centralized system using value analysis in purchased services for better financial outcomes and patient care.
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Clinical Value Analysis Where Do Value Analysis Professionals Come From? James Russell, RN-BC, MBA, CVAHP, Value Analysis Program Director, UW Health, WI
Whenever I tell people what I do for a living, about half just nod and smile (having no idea, or interest in, what Clinical Value Analysis is). The other half will look a bit skeptical and may even ask for an explanation. That’s fun! I usually say my short and sweet version: “I help my health system ensure that the ‘stuff’ we buy is safe for our patients, from a clinician’s perspective, and not just the least expensive thing on the market.” That will satisfy about half of the half. They didn’t really want to know, they were being polite. For the few that are left, they will ask even more pointed questions. Now they’ve opened Pandora’s Box…because I love to talk about what I do. They asked for it! In-between asking about why healthcare is so confusing and how come their hospital charges $5.00 for a Tylenol, there will be questions about how one becomes a Value Analysis professional. This can become muddy. I’ll tell them how I did it, but that is by no means the only path: I’m a Registered Nurse. I spent about a decade in Critical Care and another in Psychiatry (which one do you think I use more, when dealing with surgeons?). I’ve been a leader (manager or director) in both disciplines. I have gotten advanced degrees beyond nursing that focus on the “business” of healthcare. I’ve been trained in various project management techniques (such as LEAN). This background gives me a bit of clinical knowledge and experience (I’ve participated in literally hundreds of Code Blue’s) and also enables me to speak somewhat coherently about operational processes (having to create, balance, and defend my nursing department’s budget, variances, and capital needs). These two disciplines, clinical and operational, have provided me an excellent precursor
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Clinical Value Analysis
James Russell
toward understanding the duality of healthcare value analysis. We want to keep our costs down and our quality up…we don’t want to sacrifice one area to boost another. I use a grid (published in a previous issue) that requires every project to find a home on both a quality and a cost scale. Every potential project involves some kind of change. That change will cause our clinical and financial metrics to either decrease, increase, or stay the same. Creating horizontal and vertical axes with these options, there are only 9 possible outcomes (or predictions) for every project. I’ve found that having intimate knowledge of both clinical and financial intricacies has been extraordinarily helpful. When talking to a nurse manager about her budget for next year, I know what it’s like to have to balance FTE needs like overtime rates and contract (agency) labor, but I can also help provide some insight into supply/implant costs and forecasting for capital equipment replacement. Additionally, I can talk the clinical talk, where we remind each other that everything we do should be based upon what provides the best outcomes for our patients. Again, my path is certainly not the only path. One question I often encounter is, “Do Value Analysis professionals have to have a clinical background?” My answer, which sounds like a lawyer’s response, is usually, “It depends.” I know some VA professionals that do not have clinical backgrounds, not many, but some. The role is much harder for them. Does that mean they can’t do it? No. But they will have a lot to learn and will have to put in extra time to acquire new skills (like translating medical terminology into English). I can’t imagine going toe-to-toe with a cardiac surgeon over their ventricular assist device (VAD) pricing and utilization without having intimate knowledge of what a VAD does. But that’s just me. Having a clinical background gives me some automatic credibility with other clinicians. I once had an ER chief demand a certain defibrillator, when all of our analysis and evaluation pointed us toward a different brand. Eventually, I was able to pull him aside and say, quite pointedly, “Look, you don’t even use defibrillators…nurses do. You didn’t even know they don’t come with paddles anymore. You really have no say in this.” Because I have used a defibrillator many, many times over the years, I was able to get past his resistance of, “But, this is the way we’ve always done it,” and bring him around to reality. I can’t imagine doing that if I’d never touched a patient before.
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Clinical Value Analysis
James Russell
As I said, there are VA professionals without clinical backgrounds, but they are a rare breed. I give them all the credit in the world, as their path toward gaining credibility is much, much steeper. One thing that’s absolutely critical, whether a clinician or not, is the willingness to learn new things. It took me many years to understand (a little) the intricacies of the Procurement process, the complexity of Materials Management, and the vendor jujitsu (negotiating) of Strategic Sourcing. These folks are immensely helpful in keeping me from making mistakes. They know their stuff and having them “train” me over the years has been really beneficial. But I’m pretty clear that their expertise is different from clinical value analysis. We work together, often seamlessly, but we do not do the same things. One of the best experiences of my VA training was to attend a six-month certificate course in LEAN. I did this with folks from my supply chain group (Materials Management, Contracting, Sterile Processing, OR Implants, etc.). It was a great experience and really helped us function better as a team. I’d encourage any team to do it. Learning their pain-points was invaluable. Along with learning new things is humility. I try very hard not to act like I’m an expert in everything clinical. I’m not. Even if I was the best bedside nurse on the planet (I wasn’t…really not even close), it wouldn’t make me an expert in everything clinical. For instance, I’ve never worked in the Cath Lab, or Interventional Radiology, or Labor and Delivery. I sometimes end up looking up the terminology they use, just like a non-clinician would! I try very hard to ask lots of questions and listen more than I talk. It may not sound like it (since I’m the only one “talking” here), but I’m really an introvert. I prefer listening to preaching. Really. Lastly, I think the best value analysis professionals master the art of relationship-building. This is where the good ones shine. If you can treat people with respect, maintain their dignity, and prevent them from getting defensive, all while you’re calling their baby ugly (pointing out their variation in practice), you got this! I try very hard (and am sometimes successful) to remember that I want longterm relationships with my customers. I want them to work with me again and again. Getting a quick win, at the expense of the relationship, is rarely the smart path for me.
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 Volume 7/Issue 1
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Healthcare Value Analysis Academy What Top Skills Are Required to Make You Successful in Healthcare Value Analysis? By Robert W. Yokl, Sr. VP, Operations— SVAH Solutions
For most healthcare supply chain organizations, value analysis has become mission critical to the success of savings and quality improvement goals. The concept of value analysis appears simple and straightforward with lofty savings goals attached to it by most organizations. To accomplish these new goals for your organization you need new and advanced skills, systems, processes, and hard work to achieve great things in the job of value analysis. I thought it would be time to start writing about what you need to have in your tool/skill sets that will make you successful in the short and long-term. •
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VA Project Management – The value analysis world is filled with multitudes of VA studies, initiatives, and conversions. You must be ready to handle all the product, service, technology and process studies on an ongoing basis. You are the quarterback and you need to move all these projects through to completion with positive results in all cases if possible. The only way to manage this is to use specific value analysis project management along with a strong study process to make this happen. Embrace Advanced Analytics – It is a given that you must be an expert with a spreadsheet but that is only a small part of the reporting and analysis picture. You must start to embrace the world of relational databases that are the backbone of all advanced analytics platforms and reporting tools. Once you understand and use the database tools you will learn how you can make your best analysis automatic and repeatable with less work and better results every time. Maintain a Solid Value Analysis Process – We are not talking about the process where a new product request is filled out, then sent to the VA Coordinator and then the VA Committee; that is more of workflow. What we are talking about is the value analysis approach that is used for studies based on functional analysis. This is the process that will streamline and guide all your studies and help you get a better understanding of any and all products, services, technologies and processes without being a subject matter expert. Master Benchmarking – Most people do not like being compared to anyone else and told that they could do better in this area or that, but there is no better tool or skill set that will let you know exactly where you stand or where you should be. That skill is benchmarking or the search for the best practice with apples to apples comparisons in functional characteristics. Remember, there are so many different types of benchmarks that you can benefit from - historical, cohort, system-wide, pricing, utilization, etc. Volume 7/Issue 1
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Healthcare Value Analysis Academy •
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Robert W. Yokl
Leadership & Facilitation – You will be responsible for not only facilitating the value analysis teams but also interacting with the individual leadership councils and committees in the hospital/health system. You need to have solid leadership skills to keep your projects and your team moving forward in a positive manner. Good Interview Skills – You are not just walking products through a VA Team or Committee, but you are dealing with highly technical and extremely busy professionals such as physicians, clinicians, and other hospital technicians/professionals who are experts in their disciplines. The information you need is with them, your subject matter experts and product users, and you need to be able to ask good questions in order to bring out the exact functional requirements for your VA studies. Coach and Trainer – Just because the term value analysis has been around the healthcare world for over 35 years, you cannot assume that everyone knows exactly what you do, what a team does, or what outcomes are produced. Plus, there are always new team members, leaders, and support personnel that must be updated to how you do business with value analysis. The moment you stop educating your leaders, team members, and department heads and managers, you are inevitably going to be dealing with 15 to 30 different meanings of value analysis instead of the true meaning that you teach and know. C-Suite Manager –If the CEO, CMO, CFO, CNO and COO are behind your program and always fully understand what you are doing, then more than likely you will have great successes. On the other hand, if they are not behind your program and they feel that value analysis is undermining something else that they want to champion then you will become a sideshow to other initiatives in your organization. Your job is always to keep the C-Suite informed and encouraged about your progress throughout the year. Let them know your results and enlist their thoughts when you can on policy and challenges. Lip Service Sifter — With the role of change agent comes dealing with the inevitable, “We don’t want to change so I am going to talk you away/out from my area.” This can be at any level of your healthcare organization and you should expect it to happen on just about every study, contract conversion, or standardization initiative. Make sure your data, reporting, and analysis is spot on so to avoid getting shot down from clever customers, stakeholders, and experts in your organization. Try to punch holes in your own analysis first to avoid getting lip service.
After reading my preceding list of value analysis skills, you realize how dynamic the job of healthcare value analysis is. Not only do you need to learn and embrace all of these areas, but you must have tools and systems to help you through them each and every day. The alternative is a long, tough road through value analysis when it does not have to be. Sometimes, you do need to go up the elevator instead of taking the stairs every time. Volume 7/Issue 1
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Value Analysis Advisor Are You Asking the Right Questions? Robert T. Yokl, President/CEO, SVAH Solutions
Value Analysis Selling™ is all about asking the right questions, such as, what are the required functions (primary, secondary and aesthetic) for the product, service or technology under study? What functions are absolutely, positively necessary? Who are the customers, stakeholders and experts for this commodity? What are the family of products, services or technologies? Why are you changing now? What is the biggest problem you are facing with this commodity? What are the lower cost alternatives for this product, service or technology, etc.?
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Value Analysis Advisor
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Start with a Blank Piece of Paper The first thing that a sales representative must learn as a value analysis advisor is that when they receive a request for a new product, service or technology from a hospital, system or IDN customer, DON’T immediately look for a solution in your company’s catalog. Start with a blank piece of paper and then design the product, service or technology from scratch by employing the functional approach to questions listed above. For example, if your customer is looking for a new cardiac catheter, ask them the primary function or purpose for which they see this catheter being used. Will it be used for any other purpose (secondary functions) and what are their aesthetic functions (nice to have, but not absolutely required to meet your primary function), such as, color, packaging or extra ports. With these functional specifications in hand, you can now go to your catalog to match the required functions to a product in your inventory. Unfortunately, too often what typically happens is that a sales representative will be asked for a quote on a new cardiac catheter and won’t ask the right questions, thereby providing a value mismatch, not a match for their customer’s exact requirements. This sales technique too often leads to a feature-rich, over-priced product being quoted. Then the sales rep wonders why they lost the order.
Look for Opportunities for Improvement In addition to getting your customer’s functional requirements right the first time (no more or less than they need) you also need to look for opportunities for improvement for your customers. That’s why you ask the question, “What is the biggest problem you are facing with your current cardiac catheters?” And, if possible, observe how they are being used now. Trust me when I tell you that you will identify with this technique thousands of dollars of savings for your customers, along with scores of quality improvements, by doing so. This is another way to justify a higher price if this is a roadblock to your sale. Anyway, this is what a Value Analysis Advisor™ is all about; being a true partner to your customer, even if it hurts your sales in the short-run.
Undercut Your Competition by Providing Your Customers with Best Value Products, Services and Technologies The definition of “best value” is providing your customers with what they absolutely, positively need at the lowest possible total cost. By cost, we are talking about “total life cycle cost” of your product, service or technology, not the price at the pump. That’s why you must look at the total life cycle cost of any product, service, or technology for which you are asked to give a quote, not just what your customer says is important to them.
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Savings Validation Why Validation of Your Savings is Now Mission Critical for All Healthcare Organizations Robert T. Yokl, President/CEO, SVAH Solutions
The Healthcare Financial Management Association tells us that that your free-standing hospital, multi-hospital system, or IDN’s payment systems are evolving from fee-for-performance to value-based purchasing, readmission restrictions, and bundled payments. This prediction should also mean a paradigm shift for your supply chain expense management strategies, tactics and techniques. State of Supply Chain Expense Management To understand the reason there is a need for change in how a healthcare supply chain department assesses, measures, and monitors the financial results of their GPO and custom contracts, you need to understand the state of supply chain contract expenses savings reporting today. Our studies show that 100% of the savings from these contracts are reported to senior management, but less than 28% are ever verified. Thus, we have discovered that as much as 64% is lost due to not monitoring, tracking, or verifying these savings. Luckily, 36% of this reported savings does hit the mark as not all savings goes off track but it is hard to tell this if you are not continually auditing your savings. Just imagine if 100% of the savings that were reported were actually saved. We estimate that 64% more savings would hit your healthcare organization’s bottom line. Isn’t that what we are all striving for - bigger and more sustainable savings yields? Volume 7/Issue 1
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Savings Validation
Robert T. Yokl
Little or No Accountability for Your Vendors When was the last time you checked to see if the savings improvements that were promised by a vendor occurred? Not often enough, according to our own extensive multi-year research. Almost daily, our automated supply expense savings auditor* uncovers that a savings that was promised by a vendor and then reported to a hospital, system, or IDN’s senior management either didn’t happen or increased a hospital, system, or IDN’s supply chain expenses.
Promises Are No Longer Good Enough It is rare that a vendor takes responsibility for missing a savings or quality target they have estimated in their proposals because they aren’t held accountable by anybody to do so. However, more and more of your hospital, system, or IDN’s contracts with third parties will be “at risk” agreements. Meaning, if your healthcare organization misses their financial and quality targets in these contracts, they will be held accountable and could lose money on these deals. Isn’t it time we, too, hold our vendors to these same standards?
Creating a Culture of Accountability The first order of business in creating a culture of accountability is to know your reimbursement formulas from your third-parties’ agreements for your cases, procedures, and tests. This way, you can determine if your vendors are in the ball park with their offers. Next, memorialize your suppliers’ offers, promises, and guarantees into your vendor agreements. For instance, if a vendor is guaranteeing a savings of $222,000 within twelve months in their proposal, show it as a guarantee and list the penalty for missing their promised savings goals. Finally, track, trend, and analyze the in-use cost of the product, service or technology, at least quarterly, under your new contract to determine if the supplier has met their guarantee. Without this last step, you have no basis for holding your vendors accountable for their offers, promises, and guarantees. This paradigm shift is mission critical for your healthcare organization to survive and thrive in the 21st century.
Are You Ready to Ensure Your Savings Hits the Bottom Line 100% of the Time? Every supply chain professional loses sleep over where to find more price, standardization, and supply utilization savings for their healthcare organization’s survival. Yet, what these same individuals don’t realize is that there are hundreds of thousands or even millions of dollars being lost annually because of not validating savings after implementation. When are we going to plug the holes on these mission critical supply chain expenses? Volume 7/Issue 1
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Utilization Management
Purchase Cost is the Tip of the Iceberg! What Happens After the Right Product, at the Right Price, at the Right Time is Delivered to the Right Person? Robert T. Yokl, President/CEO, SVAH Solutions
We all assume that when we buy a product, service or technology for our customers that it is used as intended, is appropriate, and has no added cost to it. The fact is, SVAH’s experience over the last 15 years in the new discipline of Clinical Supply Utilization Management is that anything can happen and does when you aren’t there to observe it. Here are six specific things that we have documented that routinely happen when you hand off these products, services and technologies to your customers:
Usage Patterns Change: All of a sudden, your volume or usage increases on a product by 20% over a three-month period without explanation. How would you know this is happening?
Users use the wrong product for the wrong patient care function: A four-port PICC Line is used when only a two-port PICC line is functionally required. This could represent thousands of dollars a year in unneeded and unnecessary expenses for your hospital, system or IDN.
Policies change, or users stray from procedures: Changing your bed linens daily vs. every other day, which is your hospital’s official policy, will increase your linen utilization cost by 50%. Just imagine the hundreds of other policies that are changed when users decide that they have a better way of doing things.
Products have quality issues and failures: Just the other day, a value analysis manager told us that she uncovered that every other lancet device that her hospital system was buying was defective and costing her healthcare system twice as much for months. Generally, you only hear about 1 in 10 quality issues or product failures before they become very costly to your healthcare system. This may seem like small dollars but everything adds up to big dollars if no corrective action is taken.
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Utilization Management
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Figure 1—Pulse Oxisensor Utilization Misalignment Example
© 2019—SVAH Solutions, Skippack, PA
Wasteful and inefficient bad habits: Using more than two pairs sterile gloves (double gloving), even though the procedure you are performing only requires one pair of sterile gloves, or, taking specific supplies (scissors) from a suturing kit and wasting the rest of the contents.
Vendors upsell their product lines to end users: Too often, when a vendor or manufacturer receives complaints about a product, (e.g. trays, electrodes, gloves) you are buying from them, they will substitute a higher cost product to solve a quality issue without compensating your hospital for the higher price item. This will then be reflected in higher utilization costs for this product. This happens more often than you realize.
It is hard to argue that things change and people change over the course of weeks, months, and years. So, why should it be any different with the products, services, and technologies you are buying for your customers? That’s why you need to have a Clinical Supply Utilization Management System* in place to monitor, control, and when necessary, eliminate these utilization misalignments. That’s what elimination of variation is all about. (*) See video explainer of the CSUMS concept at www.SVAHSolutions.com Volume 7/Issue 1
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VA Perspective The Supply Chain Stars of Tomorrow Understand This: Value Analysis A Recruiter’s Perspective The Value Analysis Professional Vs. the Rising Cost of Healthcare According to projections, “Under current law, national health spending is predicted to grow at an average rate of 5.5 percent per year for 2017-26 and to reach $5.7 trillion by 2026.”1 The demand to more efficiently supply the healthcare industry has grown exponentially, and value analysis is no pawn in the chess match. Healthcare supply chain has been increasingly making its way to the forefront of hospital discussions over the past 10 years and for good reason. Managing the expense of healthcare is the number one challenge facing the industry. The shift from reactive to proactive sourcing and purchasing is a philosophy that many have adopted through initiatives such as category management and value analysis. What practices will the star supply chain/value analysis professionals need in their tool kit to adapt to the future of healthcare driven by technology? Supply chain is a service industry, in which the beneficiaries are the clinicians and, ultimately, the patients. One of the goals of supply chain is to establish a foundation for more positive patient outcomes at lower costs. But there is often a gap between the business side and the clinical side of healthcare organizations. The larger the gap, the more difficult it can be to understand the full picture of supply chain within an organization. So, how are health systems using clinical personnel to improve value and bridge the gap between the business side and the clinical side of supply chain? The price of healthcare continues to rise, and many organizations, although practicing value-based purchasing, still do not use it to its fullest potential. I suspect the remedy to this problem is the self-education of supply chain professionals and the personal desire to understand and take full advantage of the many moving parts within the supply chain machine.
The Balancing Act of Well-Rounded Value Analysis Professionals According to a recent article in a trade publication, “Determining the clinical efficacy of a product is Volume 7/Issue 1
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VA Perspective
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now a collaborative event with physicians, nursing, infection prevention, employee health and wound care specialists working together to ask the critical questions to thoroughly vet a product.” 2 This clinical experience allows supply chain professionals to facilitate multi-departmental collaboration about the efficacy of a product. Managing Physician Preference Items (PPI’s), actively identifying opportunities to renegotiate contracts, and bringing on more advantageous business relationships can be difficult while also trying to please practicing clinicians. Further, lowering costs by standardizing product offerings and eliminating waste within the supply chain, while maintaining positive patient outcomes, is a continuous uphill climb. The best value analysis professionals can juggle these tasks and communicate with doctors and clinicians, explaining the rationale for tough decisions that help create a competitive advantage for the hospital/health system. Finally, cultures and visions vary from organization to organization. This can be exacerbated by the continuation of mergers and acquisitions. The management of some organizations can be indecisive about what they want to achieve, increasing the importance of proactive decision making at the individual level. Finding the right individual for each organization’s unique position continues to be a struggle. One thing is certain: The Center for Disease Control (CDC) states, “Total national health expenditures as a percent of Gross Domestic Product is (about) 17.8%.”3 Of this expense, 50% stems from hospital care, physician and clinical services. This stat speaks to the importance of supply chain professionals taking on the personal responsibility of seeking out education in value analysis.
Best Practices The following value analysis practices can contribute to reducing cost and improving patient outcomes. VALUE-BASED PURCHASING
Value analysis professionals seek to drive costs down and improve quality of care in many ways. Three major activities include new product introduction, standardization of products, and value-based purchasing. Value-based purchasing (VBP) “is a form of payment that holds healthcare providers accountable for both the cost and quality of care they provide.”4 The transition from fee-for-service to the valuebased care model has changed the way hospitals are incentivized for the care they deliver. Healthcare organizations are now being reimbursed for the cost and quality of care versus the number of procedures or services performed. Many providers have found value analysis to be the answer to determining the cost and quality of products being used in their organization. Volume 7/Issue 1
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VA Perspective
Chase Johanson
Value analysis professionals are looking not only at the costs of products being used at an organization, but the data behind patient outcomes associated with these products. NEW PRODUCT INTRODUCTION New products are implemented constantly. Value analysis must weigh the benefits to both the supply chain and the clinicians. Cost savings stem from these and other decisions such as lowering return rates of patients by introducing a more hygienic product line. One thing is clear: Value analysis committees must have the proper data to support their decisions and effectively influence clinicians. Luckily, sources that provide insight to these data elements are becoming more readily available. STANDARDIZATION After mergers and acquisitions, health organizations can find themselves swimming in similar products from different distributors and sources. By standardizing products across the organization, value analysis can reduce costs and gain supply chain purchasing leverage. Physician Preference Items in perioperative services tend to be a common area where standardization is difficult, yet effective if handled appropriately. It is important for organizations to use value analysis to make these careful decisions that will benefit the supply chain and the clinical side.
Recruiter’s Advice Value analysis is an ever-evolving way of life within healthcare supply chain organizations. One solution to finding the right fit for your organization is emphasizing the importance of clinical and business interaction. Spending time in the clinical world reveals an understanding of what is necessary and what is preferred, to which many supply chain and business administrators never gain exposure to. The next generation of supply chain professionals must spend adequate time with doctors and nurses in order to add specialized strategic value to their organizations. This is essential and arguably the first place leaders should target to start to provide better healthcare for patients at lower costs. Supply chain must understand what is best for the patient, clinician, and the business side of healthcare. However, it must start at the individual level; walk the floor! Works Cited Hansen, Lynn A., et al. “Value Analysis: No Longer the Buzz Word in Healthcare, but a Way of Life.” Becker's Hospital Review, 19 Oct. 2015, www.beckershospitalreview.com/finance/value-analysis-no-longer-the-buzz-word-in-healthcare-but-a-way-of-life.html. “National Center for Health Statistics.” Centers for Disease Control and Prevention, Centers for Disease Control and Prevention, 3 May 2017, www.cdc.gov/nchs/fastats/health-expenditures.htm. “National Health Expenditure Projections 2017-2026.” Cms.gov, Centers for Medicare & Medicaid Services, 17 Apr. 2018, www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ForecastSummary.pdf “Value-Based Purchasing (VBP) - HealthCare.gov Glossary.” HealthCare.gov, www.healthcare.gov/glossary/value-based-purchasing-vbp/.
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