Why Not Incentivize to Save with Value Analysis?
I have been fighting this battle for 22 years now to get healthcare organizations to incentivize their value analysis teams to save EVEN more money. Nonetheless, I seem to be loosing this battle, but not the war!
It has been proven beyond any doubt with our own clients that if you incentivize your value analysis teams to save MORE by giving them rewards and recognition you will increase your savings yield by as much 300+ percent. However, in the 22 years we have been working with healthcare organizations in the value analysis arena only one in eight of our clients has opted to do so.
The question is why? After thinking about this question for some time now, it seems to me that there is a “cultural Bias” in healthcare organizations against incentivizing any of their teams (LEAN, Six Sigma, value analysis, quality improvement, etc.). They believe that team members are already getting paid a salary to do this work so why should we give these individuals any extra incentive to do what they are already being paid for?
What is missing from this decision “not to incentivize teams” for their new, harder, different and time sensitive work (that they are assigned to do beyond their normally assigned duties) is that this work is a HUGE distraction from what these hospital employees think they are getting paid for. The result: Most staff members only give 40% of their time, energy and effort when assigned to teamwork – not 100%!
Change the paradigm! If you want to change this pattern of behavior in teamwork, you will need to change the perception of this work as burdensome by emphasizing that it is important, mission critical and essential to the financial health of your hospital. This is accomplished by incentivizing all of your hospital’s teams, including your value analysis teams, with rewards and recognition when they reach predetermined goals and milestones.
Believe it or not, by doing so you will quickly discover that your staff members will line up to become members of your value analysis teams (and all other teams), not avoid them. Better yet, it won’t cost your hospital a whole lot of money (about 3% to 5% of the savings) or time to establish and manage a team rewards and recognition program.
You will be repaid for your efforts with new and better savings that will generate as much at a 35:1 ROI on your investment. Doesn’t this sound like something your hospital and thousands of healthcare organizations around the country should have been doing for years? If not, why not…
DATA GAPS: The Data You Have Vs. Actual Use
Most supply chain organizations have at least three trillion bytes of data in storage but they only have the analytical capability to analyze two trillion bytes due to their data gaps (e.g. missing data, inaccurate data, unclassified data, vague descriptors or inadequate classification of data). In fact, most supply chain organizations have only the capability to execute Value Analytics™ to their completion on only one trillion bytes of data.
What does this technical lingo mean to you? Most supply chain organizations are only capable of analyzing one-third of their data, at best, to uncover hidden utilization savings opportunities. Just imagine what you could do if you had ALL your data analytics steps in place to uncover these new and better savings.
Just the other day a supply chain manager told us that his spend manager didn’t give him the visibility into his supply spend vs. our Utilizer Dashboard, since our Value Analytics™ went deeper and broader into his supply chain than his spend manager did. The bottom line was $7.7 million in utilization savings that were hidden from his view since he was looking at only one-third of his data
So if you want to move to the next level of savings performance beyond price I would encourage you to implement these seven steps:
- CLEANS your data so that it is usable and defect free.
- HARNESS the latest technology to make your job easier. If you tried to perform these analytic studies without software your job would never be done.
- DEVELOP or use a third parties’ Value Analytics™ methodology to hone in on your utilization misalignments.
- ANALYZE the data that your analytics system spews out.
- ESTABLISH and/or utilize your current value analysis teams to ferret out the savings you have identified.
- FIND an executive sponsor or sponsors to champion your initiative and to remove the roadblocks you will encounter along the way.
- INCENTIVIZE your team members to keep them at peak performance.
I know that you are thinking to yourself that “this seven step roadmap is a tall order when you consider I’m already swamped with work.” However, these seven steps only look overwhelming to you if you try to do everything I’m suggesting — at once.
It took Strategic Value Analysis in Healthcare almost 10 years to be able to have them fire on all eight cylinders. What we would recommend you do to get started with your own Value Analytics™ Program is test the waters, since Value Analytics™ in my opinion is the future of supply chain expense management.
Effectively Maximizing Your Saving Yields
We all have a tendency to forget about yesterday’s savings because they are history, but by doing so we are losing a big opportunity to effectively maximize your savings yields. Worse yet, we are not realizing that your savings have evaporated because they weren’t put into practice properly.
We see this taking place all the time with clients of ours who believe that they have saved big dollars on a product, service or technology only to find, with the use of our Supply Dashboard that they either underestimated or overestimated their savings yields.
This reminds me of a client who thought they would save $52,345 on a disposable glove value analysis project, only to find they were spending $51,298 more than before the project because their food service department was now using the highest priced gloves available at their hospital. This blunder was due to poor communications in introducing our client’s new glove protocol and a lack of controls when the project was implemented.
On the other hand, we have had clients that have estimated their savings yield on a project to be $12,888 only to find with our Supply Dashboard that they actually saved $29,298 because they underestimated their savings by a mile. This is good news and bad news!
If you are to effectively maximize your saving yields you need to measure, manage and control your implementation outcomes. This can ONLY be accomplished by continuously tracking and trending each and every savings initiative that is reported on your saving reports.
This way of doing business will pick up on your radar screen any and all variances from your initial savings estimates and then, if necessary, you can take the appropriate action to get your savings projects back on track.
LEAN and Value Analysis Work Better Together
I would estimate that 79% of our nation’s hospitals, systems and IDNs have value analysis teams in place to evaluate the appropriateness and cost effectiveness of the products, services and technologies that they buy. However, is our job done when we complete these studies?
Not Quite! We still haven’t attacked the waste and inefficiency of these same products, services and technologies in our value streams. This can represent 7% to 15% in new and better savings for your healthcare organization if you add LEAN Management techniques to your value analysis model.
The LEAN Management techniques were introduced by Toyota into their manufacturing process in 1934 to eliminate waste from their production process. LEAN’s core concept is to “eliminate anything that doesn’t add value to your products or services”. LEAN techniques have been so successful that they are now being applied in every industry (including healthcare) in every country around the world as a waste eliminator.
It’s no longer good enough to just obtain the best price for what you buy because price is just the tip of the iceberg. You must now “LEAN” the products, services, technologies and the processes that support them if you are going to wring the towel dry on your savings.
A good example of LEAN thinking is when one of our clients eliminated all of their operating room custom packs, since they couldn’t VALUE JUSTIFY how they added value (time, labor cost or savings) to their surgical suites operations. This might seem like a radical change to you but I’m sure you will agree that it illustrates that “leaning” your operations means not accepting the “conventional wisdom” about anything that you are presently doing. It means thinking and doing differently!
We have proven over the last twenty-two years with our LEAN Value Analysis System that LEAN and value analysis work better together, since we have found that value analysis searches out lower cost alternatives to what you are doing now. While LEAN eliminates the wasteful and inefficient consumption, misuse, misapplication and value mismatches in your value streams. It is the perfect marriage of complementary tools!
So if you are looking for even deeper and broader savings with your value analysis program than ever before, may I suggest that you add LEAN Management techniques to your value analysis model to get the job done end-to-end.
Save Time and Money with Virtual Value Analysis Teams
Everybody’s busy, frenzied and swamped with work but this isn’t a good enough reason for not holding value analysis team meetings. It isn’t unusual for me to hear from MMs that they haven’t had a VA meeting in months, sometimes years because everyone involved in their VA process is too busy to have one. This always makes me flinch!
Think about it! VA meetings are where your customers, stakeholders and experts give their input, guidance and support for your hospital, system or IDN’s buying decisions that run into the millions, sometimes tens of million of dollars annually. Consequently, how can you eliminate, dispense with or skip these important VA meetings without risking the erosion of your credibility, saving yields and innovation?
No doubt about it everyone’s time is limited in our fast paced healthcare environment, but this doesn’t mean that you can’t carve out some quality time each month for your VA team meetings. One way to do so is with virtual value analysis team meetings that save time and money!
One of our multi-hospital facility clients has been conducting virtual value analysis team meetings for one of their VA teams for three years now, since some of their team members must drive an hour or more to attend their bi-monthly VA team meetings. They have one meeting a month face-to-face and one meeting a month that is virtual without missing a beat. In doing so, they have save hundreds of thousands of dollars in one year that would never have been captured if they decided everyone was too busy and had to drive too far to have VA team meetings.
If this client of ours can have successful virtual VA team meetings whose members are statewide, then you surely can have virtual VA team meetings right in your own facility. All you need to do is leverage the technology to do so. It’s a cheap, effective and efficient way to save time and money for everyone you need to attend your VA team meetings!
