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Article: Putting the "Value" in Value Analysis

Originally Published in Materials Management in Healthcare Magazine-Sept 1998 issue.

Value analysis had lost its edge as a cost-cutting tool at Albert Einstein Health Network , Philadelphia.  Committees that carried the name added no real value, simply OK’ing blanket orders and the occasional product trial that came their way.  The process was a perfect rubber stamp:  “Fewer than 1 percent of the blanket orders were denied,” say Jim Rapier, director of materials management.  But in the meantime, a fate $150 million in annual non-labor expenditures sat untrimmed.  Things went from bad to worse as the network expanded to include 15 entities, ranging from hospitals to long-term nursing and behavioral health centers.  Each did its own thing—or nothing at all—about value analysis.  “It was a complete waste of time.  I knew there had to be a better way," Rapier said.  He found it.  With the help of an outside firm, Albert Einstein reinvented its value analysis process.  Less than a year later, reorganized teams had uncovered more than $3 million in savings network-wide—with as much or more identified and waiting to be tapped in coming months. 

Customer focus  The new process begins and ends with customers and their needs for product functionality.  In the middle are six programmed steps that keep projects on track.  Special software helps identify candidates for analysis, keeps tabs on progress and documents savings.  The software merges data from the materials management information system with a program designed to support value analysis.  Five teams, each targeting a specific product group, have replaced the haphazard array of committees.  A Total of 40 people, called from each of the network’s 15 entities and given two full days’ training in value analysis, work to meet their particular teams’ objectives.  Each team has a designated leader and a facilitator/recorder.  A 15-member steering committee oversees it all.  None of the five leaders are experts in the team’s products.  “People who have ‘ownership’ of a product should not manage the analysis.  They’re so close to the matter, they can’t be objective,” says Robert Yokl, president of the HCP Group, Skippack, Pa., which helped reframe Albert Einstein’s value analysis process.  In the same vein, the product expertise of other members is less important than their ability to influence others, their open-mindedness and ability to work on teams.  “We want team members who don’t have preconceived ideas,” Rapier says.  People who do know the ins and outs of a particular product are included on an ad hoc basis. 

Six-step program  Although product users don’t hold permanent spots on analysis teams, their input is central to the process.  In the first step, teams develop complete understanding of users’ needs.  Team members meet with users, do thorough research on the product in question, and create a “functional analysis diagram” that charts every single activity related to the product—from receipt, distribution and storage to activities of use.  Volume and associated costs are included.  Step two is investigative.  Teams and users collaborate to define a product’s primary and secondary functions, and its aesthetic characteristics.  They boil down each function and characteristic to a descriptive noun-verb phrase.  For example, the primary function for paper towels might be “hand-drying.”

The secondary function might be “spill cleanup.”  Characteristics such as size and color are also described.  The purpose: to refine thinking about a product and emphasize basic needs.  “It can be hard to come up with a two-word description.  But it is possible—even for complicated clinical devices,” Rapier says.  For example, a team studying guidewires struggled, but eventually came up with “vascular access” and “catheter exchange” to describe the functions.  The next four steps in the process: 

• Speculation: team members and users analyze various product options 

• Analysis: functional requirements are balanced with cost information 

• Planning: pilot studies and evaluations take place 

• Execution: a chosen product is launched network-wide, along with education programs and policies and procedures for the product’s use 

The process may sound like a lot of effort—and it is.  But the payoff has been substantial for Albert Einstein.  “This process gets at the true concept of value,” Yokl says.  “People get the functions they need at the lowest possible cost, without compromising quality.”

 

Albert Einstein Proves Product Analysis Theory

PRODUCT	ANALYSIS	SAVINGS
Computer-fed laboratory forms	Sloppy paper-feeding process and unnecessary three-part form created enormous waste.	$63,000
Enteral feeding	Functions and features proved that CPO-contracted products would cut cost.	$32.000
Glucose test strips	Cumbersome system often required several tests to get readable results.	$42,000 projected
Oxygen sensors	A written protocol for frequency of changing sensors would cut costs.	$25,000

 

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