Price Doesn’t Equate To Cost!

Strategic Value Analysis® in Healthcare ^{A Firm You Know and Trust with Over 20 Years of Quality Results in the Healthcare Supply Chain}
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- May 23, 2007 *Robert T. Yokl* *President & Chief Value Strategist* Greetings! *Price Doesn’t Equate To Cost!* I just talked to a client who had very competitive prices on his surgical mesh, but I also made him aware that his *price to cost ratio per procedure* on this same product line was 2,617:1 or a $57,837.32 missed opportunity. This was just one of 29 occurrences that we identified in which this client’s excellent prices didn’t equate to outstanding savings for his hospital. I’m happy to report that it didn’t take this client more than a New York minute to realize that he needed to dedicate more time investigating his utilization cost, rather than his pricing. Based on our studies, it’s rare for us to find a healthcare organization that isn’t obtaining the best prices for the products, services and technology that they are purchasing. On the other hand, we have never found a hospital, system or IDN at which prices equated favorably to their cost. Isn’t it time we all start giving equal time to reducing our in-use cost of the commodities we purchase as opposed to only putting the spotlight on our price savings? Your Partner in Supply Chain Savings, Robert T. Yokl President & Chief Value Strategist P.S. By the way, have you listened to our new Podcast “Strategic Dashboards: Why Do You Need Them?” This Podcast will give you real examples of how your colleagues are deploying these dashboards to make their life easier. Click here to learn more about strategic dashboards *Technology Value Analysis Teams: Big Dollars, Big Savings And Big Results!* “Most Healthcare Organizations Aren’t Really Value Justifying Their Technology Purchasing, Because They Think What They Are Doing Is Good Enough” The average hospital spends $4, $12 or even $24 million annually on technology capital expenditures for new software, hardware, laboratory, surgery, monitoring, cardiology, radiation and imaging equipment (or whatever) just to stay competitive in the community they serve. Yet, with all this activity, most healthcare organizations in their rush to stay competitive, aren’t really value justifying their technology purchases because they think what they are doing to approve these expenditures is good enough. Good Enough Isn’t Good Enough Any Longer! With rare exception, healthcare organizations have limited financial resources to invest in new technology purchases. So every dollar saved on these investments can stretch your capital dollars by as much as threefold. These savings aren’t going to happen, however, if healthcare organizations continue to employ tired, defective and outdated capital expenditure approval processes to value justify their new technology purchases. This happens when their department heads rush to get their capital expenditures identified, priced, prioritized and documented so that they can be included in the capital budget for any given year. Then, after the hospital’s executive management team has pruned the capital expenditures to an acceptable dollar threshold, maybe these capital expenditures will be reviewed by a capital equipment committee. I have been told by CEOs, CFOs and COOs on these committees that they don’t really know what they are approving -- but do so anyway! Does this sound like a scientific, methodical, systematic and foolproof money-saving process to you? Technology Value Teams Are The Answer! It’s been our clients’ experience that if they slow down their capital expenditure approval process and add one more step, a Technology Value Analysis Team (cross-functional team trained in functional analysis), to value justify their capital expenditures -- 26% more dollars can be saved – before the bidding even begins. At a hospital with a $12 million dollar capital budget this savings equates to $3.1 million in savings. It just gets better! Our clients have found that 18% of the capital expenditures on any given year -- that were more often than not approved in prior years -- weren’t needed at all. Often a lower cost alternative was found by their Technology Value Team to meet the functions that their customers were looking for but didn’t have the time, resources or wherewithal to investigate. It all comes down to this. If you, in fact, want to value justify your new technology expenditures you need the time, talent, resources and advanced value analysis processes to do so. This can be best accomplished by establishing a Technology Value Team that places every capital expenditure under a microscope to insure that your healthcare organization is receiving the “best” value for your limited capital expenditure dollars. To do less than this is tantamount to throwing away millions of dollars annually that could increase your capital budget by 1, 2 or even 3 fold. Click here to view the scorecard	*Sign Up for Our FREE Weekly Savings Beyond Price* eNewsletter to Receive Exclusive Content Not Found Anywhere Else** PLUS as an added Bonus, we'll also send you our SPECIAL REPORT "The 10 Lost Secrets of Savings Success" Sign up today!
	© 2007 - The Strategic Value Analysis in Healthcare, P.O. Box 939, 3887 Skippack, Pike, Skippack, PA 1-800-220-4271 About SVAH - Blog - Press Releases - Technology Value Analysis - Clinical Value Analysis - Events & Speaking Engagements - Case Studies and Success Stories - General Hospital Consulting and Supply Chain Management - Value Analysis University - Supply Best Price Analysis - Supply Chain Scorecard and Dashboard - Supply Six Sigma - Strategic Supply Chain Management Planning - Value Analysis Software - Value Analysis Services - Healthcare Supply Expense Reduction and Analysis - Value Analysis Team Training Programs - Supply Chain Best Practice Series TeleSeminars Savings Beyond Price Newsletter - Strategic Value Analysis in Healthcare White Papers - Supply Chain Benchmarking - FREE Savings Beyond Price Weekly Newsletter - Archived Weekly Value Analysis Articles -Hospital Consulting Clients - Contact Us