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Is Value Analysis Your Responsibility?

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I was paging through AHRMM’s 2009 Material Management’s survey to look for trends that might be of interest to my readers.  One trend that jumped out at me was that only 28.7% of the survey’s respondees reported that they were responsible for value analysis for their hospital.  This is an astounding statistic when you think about it:  71.3% of MMs aren’t responsible for VA at their healthcare organization!

My first reaction to this eye-opener was that this must be a typo, but then I realized that this number was consistent with AHRMM’s 2007 (30.7%) and 2008 (36.5%) survey results, so it must be right. I also know that many hospitals, systems and IDNs don’t have active value analysis teams, so that’s one reason why this number is so low. Another reason it’s low is that not all supply value analysis programs report to material management. I have often seen this vital function reporting to nursing service, not materials management.

My thinking is that even if this number is a little off, it still shows a dangerous trend in healthcare: Material management isn’t 100% in charge of their healthcare organization’s supply value analysis programs or there is no VA program is place to do so! 

As I see it, VA is a mission-critical function of materials management.  Every hospital, system and IDN should have a supply value analysis program and it absolutely should report to materials management.  This is because price is the smallest factor in the total cost equations (about 21%), while 79% of your product, service and technology cost is attributed to the in-use cost of the commodities you are buying. Based on our empirical experience, only VA teams can drive out these unnecessary and unwanted utilization costs…period!

In brief, if your hospital, system or IDN is to get ahead of the wave in the new healthcare economy that is upon us, you will need to embrace the value of value analysis in controlling your total supply expenses. This means, in practice that you will need to take charge of your VA program if it reports to another department or establish VA teams to get this hard work done. 

The alternative is to either ignore this proven cost-cutting methodology or leave it to someone else in your hospital, system or IDN to get this important work done. This doesn’t seem like a plan to ensure your job security to me, so I would suggest that you take charge of your VA program today or get your VA program started to protect your turf and to keep your paychecks rolling in for the foreseeable future.  It doesn’t take a whiz kid to see this as the road you should travel.

Comments (2)

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  1. Bob,

    I, like you, am mystified by the lack of focus on value analysis by hospital systems. I worked for years at a hospital that was one of the first (in 1984) to have a clinical presence on their supply chain staff. I can’t imagine working without one or at least working successfully.
    The proper structure for a value analysis system requires buy-in at all levels including the C-suite. It also necessitates their continued support and participation. All too frequently that dissipates soon after the inception. It is not an easy process to keep fresh and active, but the results are there when you do.

  2. Robert Yokl says:

    Mike, we could not agree more and especially now that Value Analysis is more important than every before to the health bottom line of healthcare organizations. Value Analysis is not just product evaluation it is much more, it is a disciplined approach just like Six Sigma, CQI, Lean Management, etc.

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