3 minute read
Big Savings in Retrospective Value Analysis Reviews
By Robert W. Yokl, Sr. VP, Supply Chain & Value Analysis SVAH Solutions
chain issues, pricing increases, and bottom lines. As a value bucket when a good amount of our efforts are related to new products, product problems, contract conversions, and recalls? The answer is, retrospective value analysis reviews (RVAR).
Retro-What?
When I first entered the healthcare supply chain world 30+ years ago, there were many firms, including SVAH Solutions, that offered the set-up of value analysis programs at hospitals and health systems with the sole premise of dramatically reducing costs. The teams back then did not even bother with new products at that time, as those were thought of as things that would increase costs and the focus of these new value analysis teams and programs was to reduce costs in the eyes of the CFO.
What we did with these reviews was find large dollar categories that were clearly running over where they should have been and then the team would perform a retrospective value analysis review of all the major products within that category. Value analysis is the study of function and the search for lower cost, functionally equivalent yet reliable alternative products, services, and technologies. The VA methodology was originated in the name of reducing costs back in the 1940s at General Electric, so why not use it to dramatically reduce costs in our major and minor categories? That is exactly what would happen and we would help organizations reduce their costs by millions of dollars because they had never done RVARs previously so there was a good amount of low hanging fruit.
Turning Doubting Thomas’s into Believers
The savings opportunities found were due to the hospital using feature-rich Rolls Royce products in their vendors’ product lines when the Ford or Chevy version would meet the clinical requirements reliably. Or, products were being wasted, using two or three of a product when they should have only been using one or two at the most. What was unique was that when we first formed the teams and trained the department heads and managers who would be part of the process, we found that they were all Doubting Thomas’s and did not believe that there were any substantial savings to be had. But then as they themselves worked through the value analysis projects for their teams, they became believers in the savings.
If you don’t perform any type of retrospective value analysis review for your organization on all of your major categories with the belief that there are no savings to be had or that it is a waste of time, then I caution you to think again. Granted, there could be some dry holes in which you would be totally optimized with the right product mix meeting your exact functional requirements on a few projects. What we found, though, was that 8 out of 10 RVARs did bring about major savings that they would never have gotten if they did not perform the review.
Fast Forward to More of a Sure Thing
Through coaching clients in our value analysis process, we have realized that time is ever so important to the department heads and managers who sit on the value analysis teams. We needed to make sure that any RVAR would have to be a sure thing for them and that it was not a waste of their time to be part of the process, nor would it be a waste of your VA and supply chain teams’ time. We were able to ensure this with the use of key performance indicators in the form of peer cohort, historical, system-wide, and national benchmarks. In essence, we are triangulating the savings objective and then the end value practitioners on the team just need to focus on the value analysis process to search for the waste or inefficient use of the products, services, and technologies that they are reviewing.
In a perfect world, your supply chain and value analysis teams would be able to perform retrospective reviews on all of your categories, but the sheer number of categories and products would be time and labor prohibitive. When you employ KPIs, you know which categories need to be addressed first based on the savings opportunities at hand and can strategically plan your RVAR around them.
It is Okay to Look Back On the Past if There are Big Savings to Be Had
The bottom line here is that these retrospective value analysis reviews are valuable to healthcare organizations who are in dire need of big savings which will go directly to improve their bottom lines. A good example of a RVAR was in our previous issue of this magazine where Shaneka Demps’ Team at BayCare Health saved millions of dollars on just one retrospective review. Imagine if you formalized that process and began continually performing RVARs on an ongoing basis; it would be huge savings that you could bring about in a short amount of time. This is exactly what your CFO and organization are looking for!
