STRATEGIC VALUE ANALYSIS® IN HEALTHCARE

Advancing Healthcare Organizations to the Next Level of Supply Chain Savings

Savings Beyond Price -Weekly E-Zine- December 9, 2005

Greetings!

I just had an “A-HA!” the other day when I was explaining to a CFO (as integral part of our Strategic Supply Savings Analysis process) why her hospital’s prices were $217,404.17 over market for like hospitals with the same purchasing volumes. The “AHA!” was that 9 out of every 10 hospitals, systems or IDNs we work with have the same “Pricing Predicament” as this hospital because they don’t have the “competitive intelligence” to know if they are obtaining the “best prices” possible in the marketplace for their healthcare organization.

In my second article today I’m going to demonstrate, with case studies, that you still have 1%, 2% or even 3% in pricing savings still available to you if you have the audit resources with the right  “competitive intelligence” databases to find them.

 

Robert T. Yokl, President and CEO

 

P.S. Announcing a BRAND NEW SERVICE!  National Best Price Audit/Analysis  When was the last time you took all of your products (SKUs) and compared them to a National (GPO Neutral) Best Price Database to uncover hidden savings opportunities?  If you have not in the past year or ever (?) you may want to take a look at this exciting new service offering!

Its Fast, Thorough and Concise and Gives You Powerful Competitive Intelligence that is worth its weight in gold!

Look in the Mirror: Everyone Says They Are Performing Value Analysis, But In Actuality They Are Doing Something Else

Value Analysis Is A Discipline, Just Like Accounting, With A Philosophy, Principles, Practices And Rules That Must Be Followed If You Are To Call Yourself A Value Analysis Practitioner!

Value Analysis has a high name recognition in the healthcare industry, but that’s were the commonality ends. No hospital, system or IDN practices Value Analysis the same way.  In fact, when most healthcare organizations say they are practicing Value Analysis they are in actuality really doing something else like group purchasing, standardization or evaluations.

Look In the Mirror – Take The Value Analysis Test ü      Is your value analysis committee or team just a renamed version of your product evaluation/standardization committee? ü      Has your value analysis committee Or team received any formal training in the Classic Tenants of value analysis? ü      Does your value analysis process look more like a policy and procedure than a systematic step-by-step process? ü      Do one or two people (namely a va coordinator or purchasing person) do all the leg work for your committee/team? ü      Do you have master databases with all the detail of your studies or just a bunch of spreadsheets that are more price oriented than process oriented? ü      Do you know that Value Analysis has its origins from an engineering approach?  ü      Is your value analysis team price focused? ü      Do you think you need to be a clinician to perform value analysis? ü      When you perform a value analysis study, do you use the same methodology for each product, service or technology?  Or do you shoot from the hip? Draw Your Own Conclusions

80% of the time when you hear someone in healthcare say they are performing Value Analysis, what they are really saying is that they are performing an evaluation or the act of considering or examining a product, service or technology in order to judge its value, quality, importance, extent, or condition.  The problem is evaluations are subjective in nature and aren’t scientific. To be scientific (or your docs won’t believe your results) an evaluation would need to be a repeatable verifiable process. Since everyone does evaluations in a different way there is no way to replicate or verify them!

Value Analysis is in the truest sense an art and science with a 60-year history that is a proven, repeatable, verifiable, process with a philosophy, principles, practices and rules.  As an example, a Value Analysis Practitioner at one hospital can conduct a Value Analysis study on Pacemakers, and then have another Value Analysis Practitioner at another hospital replicate and verify this same study with a consistent, uniform and reliable outcome.  These same results can’t be duplicated if the evaluations are not done scientifically.

Like accounting, engineering, or medicine, Value Analysis is a discipline. Its tenet must be stringently followed if you are to call yourself a Value Analysis Practitioner.  If you haven’t been “certified” in this field of activity as a Certified Public Accountant is in their discipline, then you are not doing Value Analysis – you are doing something else!

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                          MAILBOX 

I understand that the prime involvement of physicians in regard to gain sharing was because they are ultimately the ones responsible for the biggest part of the expense due to the selection of the implant/device.   If so, this is why the physicians were incentivized and not the internal facility owned staff.  

As well, with Team oriented incentive plans, what is to keep the team from using inferior product just to save on expenses, knowing it will be part of their incentive in the future? 

Thank you in advance for your opinion. L.I.

You’re right that physicians are the prime decision makers on about 32% of your supply budget, but medicine is a team business (a caregiver team of physicians, nurses, technicians and specialist) and should be recognized as such.  Physicians don’t even order their own implants or supplies; one of the team members provides this service for them. So you see physicians alone don’t make patients well, a team of caregivers do. Why should one member of the team get all of the credit and rewards?  In addition, a caregiver team that is incentivized by rewards and recognition also must be measured by quality standards.  A saving isn’t a true saving if the product, service or technology that is selected is of poor quality, since poor quality costs your hospital money.

Good luck,

Bob Yokl, Sr.

Chief Value Strategist

Strategic Value Analysis In Healthcare

800-220-4274

bobpres@strategicvalueanalysis.com

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.

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There Is Still “Gold In them Thar Hills”

Did You Know That 1%, 2% or Even 3% Savings Is Still Available On Your Prices?

“Value Analysis Isn’t About Price, But I’m Sure You Don’t Want To Leave Price Savings On The Table Untouched Do You?

I have just come to the realization the other day that what is surely lacking at most healthcare organizations is “competitive intelligence” about what’s going on in the world outside of your hospital, system or IDN.  Especially when in comes to getting the best price for what you are buying!

What are hospitals, systems and IDNs in your region, state or throughout the United States paying for the same commodity? Am I getting the right tier level pricing for my volume? Am I getting the GPO pricing that I’m qualified to get?  Am I receiving the correct discounts from my distributors and/or manufactures that I contract for?  And, is there better pricing in the marketplace that I should know about for the commodities I’m buying?

This realization has come about after performing literally hundreds of Strategic Supply Saving Analysis for hospitals, systems and IDNs nation-wide only to find that only a hand-full of our clients were obtaining the “best pricing” available to them in the marketplace.

It all came down this: They didn’t know what they didn’t know, because they had no competitive intelligence to tell them differently!

On average, we are find savings of 1%, 2% or 3% for every client for whom we perform a Strategic Supply Savings Analyses.  Here are some examples of what we found recently:

 

$673,000 at a 300-Bed University Teaching Institution in Connecticut

$258,000  at a 150-Bed Community Hospital in Ohio

$408,000  at a 350-Bed Community Hospital in Connecticut

$275,000 -  at a 100-Bed Community Hospital In Indiana

$356,000 – at a 90-Bed Community Hospital in California

 

"We Pay Our Auditors Every Year to Audit Our Financials, but We Fail to Realize The Value Of Totally Auditing Over 15,000 Products That We Purchase that represents 30% of Our Operating Budget"

Quote From a Perspective SVAH’s Client

So while my mission in my business life is to teach and coach you how to reach superior performance with your supply value analysis programs, we have decided because of this “pricing predicament”, that almost every hospital, system and IDN is facing, to introduce a new unbundled service that we are calling a NATIONAL BEST PRICING AUDIT/ANALYSIS. With this service we hope to help our community of supply chain professionals have the “competitive intelligence” they unquestionably need to obtain the best pricing in the marketplace today.

To receive more information on this new exclusive service of SVAH that we guarantee will reduce your supply expense pricing by 1%, 2% or even 3%, in less than 90-days, please contact us at our website at www.strategicvalueanalysis.com/pricing/ to quickly resolve this “pricing predicament” at your hospital, system or IDN before it becomes an embarrassment to you.

 

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