Strategic Value Analysis® in Healthcare
Dramatically Improve Quality While Reducing Supply Costs
Did You Know...?
That Value Analysis Was Developed Back In the 1940's After World War II as a Way to Find Lower Cost but Higher Quality Alternative products and methods. This was Due to the Lack of Material Resources At The End of The War.
Savings Beyond Price -Weekly eNewsletter- March 14, 2007
Robert T. Yokl
President & Chief Value Strategist
Greetings!
Why The Future of The Supply Chain Is Focusing On “The Long
Tail”!
If you read Chris Anderson’s book “The Long Tail” then you know that it’s all about the economics of abundance. Or, why huge opportunities exist at the end of the long tail’s demand curve for more business (or savings) for everyone.
Translating this brilliant concept into terms that make sense for the supply chain professionals I see “The Long Tail” in healthcare as the future of the supply chain.
Let me explain what I mean!
Right now healthcare care organizations are scrambling to reduce the cost of their physician preference items (14 categories by my count), which represent 33% of a healthcare organization’s supply spend. While they are neglecting to focus on 67% (162 categories) of their supply spend (The Long Tail) where 76% of their new savings reside.
If supply chain professionals would only redirect their efforts from just focusing on the “head” of the demand curve to also targeting savings in their “long tail”, they will quickly uncover 9x, 12x or even 17x the savings they are generating from their physician preference items.
Now doesn’t “The Long Tail” make good sense to you?
Your Partner in Supply Chain Savings,
Robert T. Yokl
President & Chief Value Strategist
P.S. If you would like to know the savings that you have in your “long tail” just take a few minutes to complete this scorecard and we will get back to you within 48 hours with your detailed savings results.
BEYOND BENCHMARKING: Forward To Activity-Based Measurement
“Any Change In Your Volume or Intensity Is An Opportunity For Savings But Must Be Done With Pinpoint Accuracy to Insure Believability and Correct Actions Are Taken!”
Benchmarking has become a major industry in healthcare today. Numerous companies and alliances will provide your healthcare organization with just about any comparative data you could ever want, but, are they really the right metrics for your organization considering the data dump that is required to generate these statistics? This could lead us to question of the accuracy of these measurements. Most healthcare organizations only use them as a guide, not a precise measurement tool, because they don’t know how to relate them to their own operations or they can’t convince their department heads to buy into them.
Isn’t there a better way to get these metrics right?
The answer is yes! There is a better way. I call this better way “Activity-Based Measurement” or, the measurement of the changes in the volume or intensity of the things you buy, the services others provide for you or the work you do yourself.
For example, one of our clients was purchasing secondary IV sets for years, but all of a sudden they didn’t show up on their utilization management reports any longer. After some investigation it was found when our client changed over to needleless IV sets a year ago their vendor forgot to provide them with secondary sets. Hard to believe, but true! This oversight was costing our client $102,929 in excess cost annually because their staff nurses had no other option but to use their primary sets (at twice the cost) instead of the lower cost secondary sets until our client fixed this problem.
You too have these same kinds of utilization misalignments in your supply chain right now that are hidden from your view, but can be quickly and easily detected if you have in place your own “activity-based measurement” system to identify these outliers. On the other hand, without such a measurement system you are “flying blind” and will probably never -- ever find these ready to be harvested savings opportunities.
That’s not all! Based on our studies 67% of your new savings opportunities will be dependent upon your having the ability to recognize any and all volume and intensity fluctuations in your supply chain. Since most healthcare organizations we talk to are running out of savings ideas, don’t you think an “activity-based measurement” system should be “job one” on you priority list when you are planning for this year’s budget?
Where is the utilization savings in healthcare organizations today?
From our detailed client engagements, 77% of all remaining supply savings opportunities reside in Supply Utilization (Waste, Inefficient Use, Over-specification, Under specification, etc.). These savings opportunities account for more than 5% to 8% of your entire supply expense budget as compared with only .5% to 1% savings in price related areas.
Hospitals and health systems have been increasingly reliant on their Peer Benchmarking Reporting which does shed some light on which department of your hospital may have savings opportunities but that is about as far as it goes! Your C-Suite is looking at these reports and turning around and asking you to delve further into these supply categories ASAP! But, where do you go when a benchmark tells you you can save $868,000 in your Surgical Services Suite? Or $578,998 in savings on your Med/Surg Supplies?
It's like trying to find a needle in a Haystack!
It doesn't have to be that way any longer! SVAH has a fast an easy way to find out where all of your Utilization Savings opportunities reside without all the guess work or missed steps. AND, these savings will literally come to you on a regular basis!
To learn more about the UtilizerTM - The Next Generation of Supply Performance Benchmarking Tool or to take a TEST DRIVE of the system call today 1-800-220-4274 or fill out the test drive form below.
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