Strategic Value Analysis In Healthcare

As an active participant and observer (35 years to be exact) of the healthcare marketplace for many years now, I have seen many supply chain savings trends come and go. However, one movement that hasn’t caught on in healthcare is the attack on what I call “utilization misalignments” (the inefficient and wasteful consumption, misuse or mishandling of the millions of dollars of products, services, and technologies you purchase annually). Yes, I hear a lot of lip service regarding this idea, but very little action. That’s why in my lead article this week I will address this inexplicable phenomenon head on. I would also suggest an action step to you by which you too can become a big player in this untapped savings reservoir called “utilization”.

Remember, you have everything to save and nothing to lose with our “award winning” Strategic Value Analysis® System as your weapon of choice in your battle to manage and control your supply chain expenses.

We All Know That Price Is The Easiest Target For Supply Chain Savings, But It Is Also The Fastest To Be Cancelled Out By Inflation or Other Factors as well!

There is More to the Healthcare Supply Savings Puzzle Than Just Price!

Price Is The Path Of Least Resistance

Lets face it, if you can find a better price on a product and save the money you will be commended by your boss and your peers but if you try to delve further into the functional use (utilization) of a product the resistance and roadblocks mount. With a Strategic Value Analysis Approach you can overcome the resistance and roadblocks and quickly drive out 6% to 9% in additional savings beyond price™.

We have documented from our past 53 engagements that, on average, $18,719 per occupied bed in supply chain savings is left on the table at most healthcare organizations untouched! Some of our clients have documented these savings to be as high as $24,504 per occupied bed. Where are these savings coming from?

Did you know that supply utilization represents the biggest savings opportunity for your healthcare organization today? Why? Because healthcare organizations are so fixated on price (which represents less than 1% in savings annually), that they close their eyes to or unnecessarily complicate cutting and pruning the demand side of the equation utilization. In fact, after performing hundreds of supply chain performance assessments, we have documented that utilization represents 79% of what’s left in savings opportunities in any hospital’s supply chain.

Supply Utilization needs to be attacked aggressively to eradicate this destructive and costly virus. Supply Utilization misalignments (or the inefficient and wasteful consumption, misuse or mishandling of the millions of dollars of products, services, and technologies you purchase annually) are eating away at your bottom line and bloating your budget. It is now time for you to attack these wasteful and inefficient methods and practices that are hidden from your view at your healthcare organization. There are literally hundreds of thousands of dollars in savings beyond price to be mined!

The Bottom Line! Healthcare organizations are now at the “tipping point” with their price, standardization, prime vendor, capitation and sourcing strategies and tactics based on the “law of diminishing returns” (or the more time and resources you throw at a challenge, the lower your return on investment will be -- exponentially). This is opposed to moving on to the next level of supply chain savings – beyond price and standardization – if you want to continue to generate dramatic supply chain savings for your healthcare organization.

Wouldn’t you like to know how much is being left on the table at your healthcare organization? I bet you are saying to yourself by now that what I am telling you is all well and good, but “Show Me The Money!” And that’s what I can do for you with our “no cost – no obligation” supply chain performance survey ($3,500 value) that can be easily found and completed (SEE BELOW).

You have everything to save and nothing to lose by taking the survey! Once you have completed the online survey (it will take about 8 minutes) we will analyze it and return it to you within five days with your results.

By the way, we have had clients tell us that our “no cost – no obligation” supply chain performance survey “has given them as much information about their supply chain cost as surveys that would have cost them thousands of dollars elsewhere”. So, before we change our mind and we start charging for this survey (something we have been thinking about) I would recommend that you promptly take advantage of this offer while it is still FREE!

Find Out Where Your Supply Utilization Savings Are In Your Organization!

Complete our "no-charge, no obligation" online Supply Chain Performance Survey

Click Here to View the Survey

It will measure and identify your supply chain savings potential, and you will get your results within five short days!

I have just completed your “The Ultimate Value Analysis System”. I think it’s a great system that I can use to cut my cost…now. However, in the system you talk about setting a threshold of $25,000 annual spend for value analysis candidates. My question is how do I handle purchases under $25,000? J.F.

With purchases under $25,000 annually (hospitals under 100 beds should set their threshold at $10,000) I recommend that your purchasing staff (utilizing the same tools that your value team will learn by employing my system) perform value studies on these products, services and technologies too. For example, one of our client’s material management departments received a requisition from their ICU for new disposable blood pressure cuffs that had an annual purchase value of $6,200.20 if purchased. Then one of the hospital’s buyers performed a quick functional analysis and determined that the functions that the ICU was looking for could be met with a disposable blood pressure cuff disposable cover, which only cost $527.27 annually. Thus this buyer, by applying the concept of value to this purchase, saved her hospital $5,672.93 annually for 15 minutes of work. With this example in mind, here is the rule you should live by to make my system work for you, “every purchase that you make for your hospital should be analyzed either by your value team (if over $25,000 annual spend) or your buyers based on the product, service or technologies annual spend”. By religiously following this simple rule, over an 18 month period; you will drive out 80% of the waste and inefficiency in your supply chain.

P.S. If anyone else has a burning question that you would like me to answer, please call or e-mail me and I would be delighted to answer it.

35% Of The Handoffs That Your Hospital’s Employees Are Making Daily Are Costing Your Money

Studies Have Shown That Up To 35% Of The Hand-Offs At Your Hospital Are Wasteful Or Are Not Needed At All

Studies by the Murphy Institute have documented that inappropriate and wasteful hand-offs (revising, correcting, changing or handling a task more than twice) on your linens, drugs, food, supply, forms, etc. can be as high as 35% at your hospital. Information gaps (information not being available, accurate and timely when needed) can be as high as 68% because no one sees the “big picture”. What do I mean by this statement!

A case in Point: One of our clients that performed a value study recently on their urological product line found that when their patients went from a med/surg floor to their operating room with a drainage bag the existing bag was thrown out and was replaced with a drainage bag, with a uro-meter which precipitated a $4.36 up charge for each patient in this treatment category.

As you can see by this case study, this inappropriate handoff was costing our client thousands of dollars a year in unnecessary product cost (not to mention unnecessary labor cost), because of this glitch in their operations. This isn’t the only case study that I could cite for you about inappropriate hand-offs, since we see it in every category of purchase with every hospital that retains us to teach them our Strategic Value Analysis® System.

The lesson to be learned here is that if your hospital isn’t employing value teams to ferret out the waste and inefficiency in your supply chain and utilizing a functional approach to do so, then your hospital will continue to have inappropriate and wasteful hand-offs and information gaps that are costing you thousands of product and people hours annually.

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