Healthcare Value Analysis Hospital Consulting and Benchmarking for Supply Chain Savings

Factoid! There have been a number of studies conducted on giving customers too many choices that result in customers either picking the highest cost product out of confusion or becoming frustrated to the point where they select the wrong product just to make some kind of decision.

What does this have to do with value analysis? In my opinion, giving your customers too many choices is at the epicenter of most value analysis misadventures and contributes greatly to the unnecessary escalation of healthcare supply expenses!

Here’s why! It is the common practice in value analysis circles to send numerous products (i.e. IV sets, trays, kits, dressings or what have you) to our customers for what we call in our industry “trials”. Then we ask our customers to pick from a wide-assortment of similar products and then rate the ones they like the best to the least favorite. As I just stated, studies have shown (the most recent study was conducted by researchers and authors Noah J. Goldstein, Steve J. Martin and Robert B. Cialdini) that this is a recipe for abject failure and ever increasing supply expenses.

What should you do? In the classic value analysis model, developed by G.E. in the 1940s, there is no such thing as “TRIALS” to determine your best value products, services or technologies and for good reason. The goal of VA is to select the lowest cost functional equivalent match to your customer’s agreed upon functional requirements, not have them comparison shop to select them. In classic VA, we then have our customers perform a “pilot” study (an in-depth evaluation of only ONE product, service or technology that has been selected by a VA project manager as an exact match of our customer’s functional requirements) to determine if the new product, service or technology indeed hits the target dead center. Based on our customer’s rating of the product, service or technology we either buy it or start our VA study over until we get it right, based on specific measured feedback from our customer.

See the difference? Can you now see the differentiation between a “trial” and a “Pilot” study and how it works with the classic value analysis model? It’s a whole NEW MINDSET about how and why we evaluate and select our new products, services and technologies based on the concept of value.

Remember, value analysis isn’t just a term that has high name recognition in healthcare. It’s a proven, repeatable and scientific process to determine the right functions for the hundreds of products, service and technologies you buy annually. IT’S ALL ABOUT FUNCTION!

The question I have for you is this, “Are you really practicing value analysis or doing something else and just calling it value analysis?” If you’re not really practicing value analysis based on my brief description above, to avoid the one or more of these pitfalls I just talked about (e.g. too many customer choices) you might want to consider some advanced value analysis training to get you and your VA team(s) on track, on target and on the money in 2010!

P.S. If you would like to learn more about the classic value analysis model, you might want to download my white paper “Strategic Value Analysis®: Savings Beyond Price”. Find out what I believe is the #1 strategy for taking cost out of a healthcare organizations supply chain.

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March 4, 2010

Healthcare Expense Reduction: A Systematic Approach

The phrase “Healthcare Expense Reduction” can have many different interpretations. It could mean getting the best price, benchmarking to find the best practice, searching for the best value products, services or technologies or reducing your inventory levels to near zero. However, I would suggest that “Healthcare Expense Reduction” if done correctly needs to be all of these things and much more.

In point of fact, from our empirical experience it requires a systematic approach to reducing your healthcare organization’s supply chain expenses to get it right. This concept is analogous to what the insurance industry calls BLANKET COVERAGE, a single unifying policy that covers any and all of your risk or exposure to unforeseen calamities. This BLANKET COVERAGE idea holds true with “Healthcare Expense Reduction”; To get it right you need to cover all of your supply expense categories of purchase – all at one time.

To get you started on this journey, we have listed seven core elements of a successful “Healthcare Expense Reduction” unifying system. We advocate these core elements for you to obtain the highest return-on-your-investment of time, effort and resources in order to attack ALL of your supply expense savings simultaneously.

You will notice that these seven core elements described herein are actually interconnecting programs which you should have in place which cover the total spectrum of your “Healthcare Expense Reduction” efforts as follows:

1.   Utilization Management Program

2.   Value Analysis Program

3.   Contracts Administration Program

4.   PriceCheck™ Program

5.   Inventory Management Program

6.   Linen Management Program

7.   Forms Management Program

As this list suggests for your “Healthcare Expense Reduction” to be effective you need to have complementary and synergistic expense reduction programs in each of your supply chain disciplines, not one-time events. This way you can be assured that you have “Plugged all of the leaks” in your supply expenses before they become mile-high gushers or raging rivers.

This isn’t just a theory, but the actual system that we have employed ourselves over the last 23 years to assist hundreds of healthcare organizations in reducing their supply expenses to absolute minimums, and then to keep their expenses under control -- going foreword.