17 minute read
What You Can’t See Could Hurt
Value Analysis Analytics
What You Can’t See Will Hurt You
Most of your new saving opportunities are below the water line
We like to equate supply chain expense savings to an iceberg! Above the waterline are your price and standardization savings, which are easily identified. However, your robust savings opportunities (67% to 79%) are below the water line where they are hidden from your view. More importantly, these hidden utilization savings can and will hurt your healthcare organization’s bottom line if not eliminated, rectified, and controlled.
Scientific Approach
That’s why a more scientific approach is called for to root out your utilization misalignments before they damage your healthcare organization’s bottom line. This approach is called value analysis analytics
or the new science of savings. With this said, I’m sure you realize that your hospital, system or IDN’s senior management is looking to its supply chain professionals for even more savings to help them meet this unprecedented and unanticipated challenge in the healthcare marketplace that we are facing; lower revenues, demand of higher quality, and more patients.
Unfortunately, these new supply chain savings won’t be achieved with price and standardization alone. New sources of savings must be discovered to bridge the savings gap that you will experience with the erosion (if you haven’t already)
Value Analysis Analytics
of your price and standardization savings in the very near future. This is because most healthcare organizations aren’t employing a scientific approach to identifying the best value analysis target, beyond price.
Value Analysis Analytics
That’s where value analysis analytics comes into play. It’s the art and science of measuring trends, patterns, anomalies, and variations in your supply chain spend to quickly uncover savings opportunities. For example, we identified with our Utilizer® Dashboard (which does all the value analysis analytics work for our clients), that one of our client’s transcription service utilization cost was $1.64 per CMI adjusted patient day higher than their peers, or $211,888 based on annualized savings.
When our client investigated this anomaly in their supply spend they not only discovered that they were spending too much on their fragmented and decentralized outsourced transcription services, but also decided after a thor
ough analysis to outsource all of their transcription functions for an additional savings of $66,999 annually (or $278,887 in total).
It’s not an accident that we uncovered this big transcription savings, and 96 other utilization misalignments, for this client. It’s because we employed value analysis analytics to do the difficult work for us that never would have been uncovered by the naked eye or even intuition.
Measuring Over Time
Because some of our clients have employed value analysis analytics for several years, we are able to trend their purchases over a two or three-year period to
Value Analysis Analytics
identify additional saving opportunities that they weren’t aware of until our Utilizer® Dashboard led the way to these savings.
Since “things change and people change”, this always brings about new savings opportunities when you look at your data retrospectively. This was the case with a 98 bed hospital we worked with which reduced its contrast media cost by $43,632 the first year, after it identified this utilization misalignment. Then, the hospital had to revisit this same commodity two consecutive years thereafter when its contrast me
dia utilization cost spiked repeatedly. The reason for these lapses in protocol was that the radiology staff members kept falling back to their old habits and had to be re-educated about the best practices that were keeping costs in line in the first place.
It is a worthwhile effort for you to refresh all of your purchasing data on a quarterly basis to ensure that your utilization trends, patterns, and variations are within acceptable limits and have not spun out of control. A reversal in your supply chain expense performance metrics can easily happen, especially when your hospital’s census has a large variance.
Up Your Value Analysis Game
It should be understood that since your value analysis team members have limited time for value analysis studies, their energies can’t be needlessly wasted on dry holes. Your value analysis candidates must be real, quantifiable, and irrefutable before you even consider them as targeted savings opportunities. This precision in identifying your value analysis candidates can only happen if you are assisted in this effort by the new discipline of value analysis analytics. It will give you the process, metrics, and competitive intelligence you need to uncover the high-value savings target that have eluded you for years. If you are looking to up your value analysis game, value analysis analytics is the correct path to follow to repeatable savings.
Evidenced-Based Value Analysis
Good Evidence: The Missing Link
Dee Donatelli, RN, BSN, MBA, Sr. Vice President, Provider Services, Hayes, Inc.
There’s no question that great advances in medicine have been made over the last century. Still, not every medical technology,
service, and intervention that we have at our fingertips is safe or works as well as or better than existing options. That’s what clinical trials are for: to figure out how well a product or medical technology works and compares with other approaches, to identify when and for whom it should be used, and, ultimately, to determine its clinical value.
If the clinical trial evidence shows a clear benefit, then we need to make sure we’re using the medical technology in the way in which it was intended—for the appropriate disease and patient population. This is what we call evidence-based medicine, a common buzz word these days that everyone seems to be talking about. But as we know, talk doesn’t necessarily align with behavior, does it? Recognizing the need to incorporate evidence into our purchasing and utilization decisions is one thing. Being able to evaluate the quality of the evidence and understand how the data should impact our healthcare decision making is another. Once we commit to using clinically based criteria to make decisions about the items we use in the course of delivering medical services to our patients, the next step is to understand the evidence and to differentiate between good and not-so-good evidence. So what is evidence? Let’s define it simply as the outcome data derived
Evidence-Based Value Analysis
from formal, scientific research. That’s it. Ideally, we want the evidence we use to be of the highest quality and to be unbiased; that is, we want the researchers to report the results clearly and accurately without any influence or bias from the clinical trial sponsor or any of the stakeholders involved in the research. Don’t consider the slick marketing brochures that sales representatives hand you or the testimonials that appear on manufacturers’ websites to be unbiased forms of evidence.
Unfortunately, not all evidence from scientific research is created equal. Assessing the quality and strength of the evidence isn’t easy. It’s not enough to simply review the abstracts of a few studies that the librarian at your institution pulled when you requested a search. A host of factors (study design, sample size, patient population, study execution, data reporting, etc.) impact the quality of evidence and these factors often aren’t apparent in the abstract alone.
High-quality evidence begins with a suitable research design. The figure shows the basic hierarchy of clinical study designs. The weakest form of evidence comes from single case reports. These are the anecdotal reports of the outcomes seen in 1 or 2 patients. The strongest type of evidence comes from meta-analyses and randomized controlled trials (RCT) that enrolled enough subjects so that the results have meaning.
Keep in mind that we don’t always need an RCT to determine with reasonable confidence whether a health technology works and is safe. Sometimes other types of studies provide high-quality evidence as long as they are well designed, well executed, and applicable to the patient population in which we’re interested. Moreover, even the best study can be fatally flawed if it’s poorly executed. That’s why it’s important to review the entire body of evidence rather than just a few studies.
Evidence-Based Value Analysis
We need to look at all of the clinical evidence to establish an accurate perspective of a technology’s efficacy and safety. Cherry picking only those studies that support one position or opinion is a poor way to assess and compare the clinical value, and operational and financial impact, of new and existing health technologies. And since new studies are added to the body of evidence over time, any review of the evidence must be ongoing rather than a one-time process.
acquisition and utilization decisions. It’s time for a new approach. Let’s remove marketing considerations, vendor-clinician relationships, physician preference, hope versus proof, and revenue potential from the process. Let’s focus instead on evidence that documents improvements in patient outcomes or operational efficiencies. By integrating high-quality evidence into our decisions, we have the
reduce waste and unnecessary costs, and make more cost-effective use of our limited healthcare resources. Isn’t that what we’re all trying to achieve?
Ms. Donatelli has more than 30 years of experience in the healthcare industry, with expertise in the areas of supply chain cost reduction and value analysis. Before joining Hayes, Ms. Donatelli was Vice President of Performance Services at VHA, Inc., where she provided executive leadership and direction for VHA’s consulting services, including Clinical Quality Value Analysis. She is a Certified Material Resource Professional
(CMRP) and a Fellow of the Association for Healthcare Resource and Materials Management (AHRMM). She was recently elected president-elect of AHVAP, the Association of Healthcare Value Analysis Professionals. Dee can be reached at ddonatelli@hayesinc.com for questions or comments.
Hayes, Inc. (http://www.hayesinc.com), an internationally recognized leader in health technology research and consulting, is dedicated to promoting better health outcomes through the use of evidence. The unbiased information and comparative-effectiveness analyses it provides enable evidence-based decisions about acquiring, managing, and paying for health technologies.
Benchmarking
The Search For Best Practices
It’s not the metrics that count, but how they lead you to superior performance
There is one overlooked fact about benchmarking; that it is the search for best practices that leads to superior performance.
This is accomplished by utilizing metrics to determine performance “gaps” in your practices and then to understand why you are different from you benchmark partners. Or, where are you now vs. where you should be to meet or exceed your peers’ practices!
This fact was brought home clearly to us a
few years ago when we were benchmarking a client’s forms’ cost. Our client’s cost per patient day was $1.26, but the best-in-class benchmark
in this category of purchase was .09 cents. Or, a gap of $1.17. We couldn’t believe this was possible until we contacted the best-in-class hospital to understand what they were doing differently.
This mystery was quickly solved when we uncovered, by way of a discussion with their peer hospital, that they had gone 98% paperless. This then become our best-in-class best practice for forms that we recommend to our clients. Therefore, it’s not the metrics that count in benchmarking, but how they can lead you to superior performance at your own healthcare organization. That’s why blinded benchmarking studies never work; only customized studies can give you the right answers.
The Final Frontier for Supply Chain Professionals
The introduction to the wildly popular Star Trek
TV series and eleven movies, “Space…The Final Frontier:These are the voyages of the Starship Enterprise…to boldly go where no man has gone before” has much in common with supply chain management of the 21 st century. We as an industry, having conquered the world of price and standardization, are now looking for new worlds to conquer!
Like Captain James T. Kirk, whose job it was to find new worlds and new civilizations, we too as supply chain professionals need to seek out new savings sources to maintain our hospitals, systems or IDNs’ competitive advantage in our marketplace.
Utilization management is that NEW FINAL FRONTIER to be conquered! Let us help you with our Utilizer® Dashboard. The only all-in-one power tool that will absolutely increase your savings yield by as much as 7% to 15% — almost overnight!
Utilizer® Dashboard to the rescue!
The Evolution of Value Analysis
Michael Bohon, Founding Principle, Healthcare Solutions Bureau
Twenty-seven years ago, I unexpectedly found myself working in the supply chain sector of the healthcare industry in Arizona.
For nineteen years prior to that I was also employed in the supply chain, but in the steel and electronic businesses back east. In some ways, the transition from electronics to healthcare was smooth. In others it was a challenge. I immediately took pleasure in the fact that everything my team and I did during our daily work had a positive effect, directly or indirectly, on another human being. I could not say that about my previous jobs.
What really was a surprise to me was the technological change that occurred rapidly and continuously with multiple new product lines and product changes being introduced weekly. That’s when I was introduced to a “Product Evaluation” system. In fact, the hospital where I was employed in 1986 was one of the first to have an RN on the materials staff, and she was the key to much of the success we experienced. It was a good process which provided some order in difficult situations. At least it of
fered a channel to have new products reviewed in a less subjective manner. Good decisions were made and dollars were saved. But was it the real answer to all the issues that the supply chain faced? Did it maximize all opportunities and make all the right decisions? Probably not!
Now in the 21 st
century we use a process called “Value Analysis”. Where did this concept come from? When I conduct seminars for the Institute for Supply
Management I ask people from industries, other than healthcare, if they use a value analysis process in their procurement. The most common response is the question, “What is value analysis?” This is surprising because the concept is said to have originated as “value engineering” during World War II by General Electric which is defined by SAVE International as:
Value engineering
is a systematic method to improve the "value" of goods or products and services by using an examina
tion of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvement.
The transition from Product Evaluation to Value Analysis has been a good one
that enabled hospitals to increase the breadth and depth of their programs. They have expanded their scope, and included broader and more consistent participation by key players. They are using new tools including software to document their processes, track their savings, and verify the correctness of their decisions. Hearing this, we can assume that we have finally reached nirvana. Hold on! Not so fast! As quickly as we progress, the world around us continues to change even more rapidly.
So what’s new? There is this new concept called “Value-Based Purchasing.” (There’s that value word again.) It states that not only cost and quality are important, but that now we must address outcomes. This changes our whole approach once again because prior to this it was advisable to have physician participation in our meetings. Now it is virtually required. How else are we going to address the outcomes piece of the formula? That will make for a different and certainly more effective means of addressing product and service selection. AHRMM recently
announced a new movement they are championing in the supply chain, CQO. Its symbol (below) shows the area of intersection of the three circles of focus. The point in which they all overlap could be redefined and referred to by the term we have heard before, VALUE. After all, that is our goal.
I attended a supply cently during which a how many used a val-
facility. He also asked regular meetings little is accomplished. responded that they or weren’t happy with chain regional meeting respeaker asked the audience ue analysis process at their
how many just attended
called Value Analysis where About half of the audience haven’t attended a meeting the results.
This being said, value analysis is a complex and arduous method, but when done correctly can provide immeasurable advantages to its users. Healthcare needs these
aids to improve its value platform. The wisdom that can be gleaned from publications like this is invaluable. Take advantage of it!
Michael Bohon, CPSM, CMRP, is the Founding Principal of HealthCare Solutions Bureau (HCSB), a healthcare supply chain consulting firm and speakers’ bureau. His extensive business background spans 19 years of work in materials, operations, sales, and administration in three industries (steel, electronics and specialty manufacturing) plus the last 24 years in healthcare supply chain management. Prior to founding HCSB, Bohon held positions as Director, Supply Chain Management at TMC HealthCare, and Director of Purchasing and Contracts at Health Partners of Arizona. He also worked as a consultant independently and for Perigon, LLC and OMSolutions. Among his accomplishments in consulting are the supply cost reduction of $4M+ at two major systems in the Northeast and leading successful facilities planning and design projects at expanding hospitals. Michael can be reached at bohon@hcsburea.com with your questions or comments.
The healthcare supply chain profession will be experiencing challenges never before envisioned over
the next few years. That’s because your bosses have even higher expectations for you and your department. We are at a crossroads as a profession, we can
either live or die with our price and standardization strategies, or embrace the new discipline of utilization
management to save more in less time -- the easy way.
