What Happens When You Run Out of Price Savings?
Price savings are harder to find, contain, negotiate or even identify now that everyone (including your vendors) understands and has become highly skilled at how to play the price game. Wouldn’t you agree?
What happens when you run out of price savings, or as I like to say, “What happens when the fish stop jumping into your boat?” At a recent seminar that I conducted a MM’s answer to this question was “Look for a new job”. I don’t think that’s the right answer to this question — do you?
Reality check: Your vendors’ cost for transportation, energy, plastics, etc. (or 80% of the things your hospital buys) will continue to escalate. So who do you think your vendors are going to pass this cost along to?
Yes you got it right – YOU!
I was just talking to one of my major teaching hospital clients the other day who is scrambling to find more savings in their orthopedic and spine implants, but even after benchmarking his cost with us and bidding his implants using our benchmarks as a guide, he only shaved a few percent off his implant prices. By the way, this client belongs to two GPOs and still can’t get better prices even with his own custom contracts on implants
The next day I talked to another client of ours who is the Vice President of Purchasing for a six hospital system who is racking his brain on how to get better prices for his hospitals, when he never had this challenge before. Until recently, he always could find a new and better price savings on any commodity he was purchasing.
What does this all mean to you! If you are betting your career on finding new and better prices for the commodities you buy in the future you are going to be in for a rude awaking – it isn’t going to happen.
On the other hand, if you look beyond price you can make a quantum leap forward in utilization savings that are never ending and are right in front of your eyes just waiting to be harvested.
Five Myths Vs Facts
Savings Beyond Price -Weekly eNewsletter – June 10, 2009
Robert T. Yokl
President & Chief Value Strategist
Five Myths vs. Facts!
Greetings,
Over time we all develop a belief system that is based on our life experiences, biases, and traditions but are these viewpoints myths or are they facts? These collective perspectives or assumptions that we gather over time can relate to our supply chain world as well as our life!
From a supply chain perspective if these beliefs and assumptions aren’t tested, inspected and examined vigorously we could be overlooking big breakthroughs in our supply chain management. Here are five myths versus facts that you should be reexamining in order for you to remove any performance gaps in your supply chain operations:
1. Benchmarking Doesn’t Work
I can’t count the times a MM has told me that they believe that benchmarking doesn’t work because it is inexact science or we are different. By holding this belief, these MMs are missing the opportunity to save millions of dollars annually.
To the contrary, benchmarking is an art and science that has been proven in every industry, including healthcare, to be the best methodology to identify gaps in an organization’s performance. This leads us to search out best practices to fill those gaps that are costing us thousands, maybe even millions of dollars annually.
2. Price Savings are Forever
I hope everyone understands that “nothing is forever”, but too many MMs believe that this truism doesn’t apply to price savings when the facts inform us differently. With few exceptions, hospitals, systems and IDNs are just holding the line on inflation (3.9% for 2008) with their price savings, not beating it. This fact would lead me to believe that MMs should be searching out other sources of savings if they want to beat the inflation rate each and every year.
3. Utilization Management isn’t a Priority
Considering that price savings are slowly disappearing, what better source of new savings (7% to 15%) could there be than utilization (in-use cost)? How then can MMs IGNORE these big savings opportunities by stating that it isn’t a priority? Shouldn’t the highest level of savings available at a healthcare organization, with the best ROIs, be an uppermost priority to every supply chain manager?
4. Value Analysis is all About GPO Contracts
Every time we visit with a value analysis team we find them evaluating their new GPO contracts, with very little emphasis on the waste and inefficiency in their supply chain.
Value analysis ISN’T about GPO contracts; it’s all about functional analysis, which has nothing to do with GPO contracts. When will we get these two disparate supply chain activities designations right?
5. Purchases Services isn’t in our Scope
I was just told again last week by a value analysis manager that he doesn’t believe that purchase services should be in the scope of his supply value analysis program. Then I asked him who did he think should be functionally analyzing these contracts?
The way I see it your department heads won’t, your supply chain department is too busy, and your administration doesn’t even have these multi-year million dollar purchases on their radar screen. That’s why purchase service contracts MUST, in my opinion, be in the scope of your supply chain department and evaluated by your value analysis teams. To do less is to relinquish hundreds of thousands of dollars of savings annually.
These five myths vs. the facts should raise your consciousness to the possibility that all commonly held beliefs and assumptions aren’t always factually true. That’s why you need to challenge not only your own beliefs and assumptions, but those held by others in your healthcare organization that might not pass the test of time.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. Don’t forget to sign up for this ONE-TIME-ONLY “How to Create, Manage and Maintain High Performance Value Analysis Teams” NO COST webinar on June 17th (Eastern) at 1:00pm (Eastern). This webinar is exclusively designed for those hospitals, systems and IDNs who are seriously looking for new and better strategies, tactics and techniques to take your supply value analysis program to the next level of savings performance.
How to Create, Manage and Maintain High Performance Value Analysis Teams
Healthcare Supply Chain Best Practices
How to Create, Manage and Maintain High
Performance Value Analysis Teams
Take Your Value Analysis Savings and Quality Improvement Program to a Whole New Level of Higher Performance and Quality Results
Webinar Objectives:
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Evolution of Supply Value Analysis Committees and Teams?
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Where They Came From
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Where They Are Going
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What Works
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What Doesn’t Work
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What Are the Results You Can Expect With A High Performing Value Analysis Team(s)?
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Teams Vs. Committees, Which Works Best?
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What Are the Key Components to a Successful Value Analysis Team?
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Structure
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Strategic Vision
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Management Backing
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Fueling the Savings Fire
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Team Dynamic
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Solid Leadership Model
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Repeatable System
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Strong Reporting
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How Do You Set Up a Win-Win Value Analysis Program/System?
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Convincing Senior Management that this is the Right Way to Go
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Creating A Value Analysis Strategic Plan
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Gaining Peer Participation and Buy-In
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Making it Happen!
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How Do You Manage Team Members with Competing Priorities?
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Lean Management
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TQM
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Six Sigma
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Service Excellence
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Managing Their Departments and Jobs
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Other Special Projects
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How Do You Break Through the Barriers that Hold Value Analysis Teams True Performance Back?
Thursday, June 17th – 1:00pm Eastern
All Registered Attendee’s Will Receive a Copy of the Webinar Slides and Audio Replay at No Cost to You!
PLUS...You Will Also Receive a Copy of SVAH’s Value Analysis Strategic Planning e-Workbook
Strategic Supply Chain Webinar Series Leader – Robert T. Yokl, President/Chief Value Strategist and Robert W. Yokl, VP of Operations, Strategic Value Analysis in Healthcare
Remember…The Webinar May Be FREE But The Information is Priceless
Are You Getting Serious About Value Analysis?
We are seeing a very positive emerging trend in healthcare today: hospitals, systems and IDNs are getting serious about value analysis. The question I have for you is “Are you getting serious about value analysis too!”
For years value analysis was something we told our bosses and colleagues we were doing to make them think we were on the cutting edge of supply chain management. We knew however in our heart of hearts that our team(s) or committee(s) weren’t generating the savings and quality improvements that they could or should be. We knew our team or committee members weren’t attending meetings, that we weren’t getting management support that we needed to be successful and that our department heads and managers too often placed barriers in our path that prevented us from making savings happen.
That was then, this is now! We are now seeing hospitals, systems and IDNs providing formal advanced training for their senior management and value analysis teams in the classic tenets of value analysis, organizing their teams to save and seeking out new power tools to manage, monitor and control their supply value analysis program. They are hiring professional trained value analysis coordinators, managers or directors to manage their supply value analysis program.
Why Now, not then? No hospital, system or IDN, with their dip in revenues due to the recession, can leave a significant 7% to 15% in utilization supply expense savings on the table untouched. In the past this 7% to 15% seemed nice to have, but now is critical to their survival. That’s where value analysis comes to the rescue!
Value analysis, if practiced patiently, fervently, artfully and scientifically is the vital savings engine that all healthcare organizations (large and small) need to make Savings Beyond Price™ quickly happen. But this budding success story won’t materialize unless your senior management, team(s) or committee(s) has the requisite tools, training and executive management support required to create, manage and maintain high performance value analysis teams.
So if your hospital, system or IDN is getting serious about value analysis just remember this important salient fact: value analysis isn’t about establishing a value analysis team or teams and then telling them to GO SAVE MONEY! It’s all about having highly trained, motivated and incentivized VA team leaders and team members that understand, internalize and vigorously apply the six-step value analysis methodology to uncover and then implement any and all savings opportunities for your healthcare organization.
Are You Really Different?
Savings Beyond Price -Weekly eNewsletter – May 27, 2009
President & Chief Value Strategist
Are You Really Different?
Greetings,
When we discuss our benchmark findings with our clients they often say, “My hospital is different”. This is frequently their first reaction to savings opportunities we have uncovered for them with our UTILIZER™ Dashboard. The question they should be asking themselves is, “why are we different?
Here’s why! Hospitals of the same size, type and with similar operating characteristics should be utilizing, within an acceptable range, their individual products, services and technologies at the same velocity and intensity.
If you find that you are NOT within an acceptable range (plus or minus 3%) through benchmarking, then you need to seriously question why not. In some cases, you will find that you are indeed different and your benchmarks need to be reset to account for your legitimate differentiation. Here are three reasons in which hospitals are genuinely different:
1. Unique Conditions – One hospital we worked with was utilizing a huge quantity of disposable bath systems only to find that they didn’t have showers in their patient rooms. This physical constraint required this hospital to use more of this product since they had no alternative.
2. Management Fiat – A client’s corporate office mandated that their four hospitals standardize on hyper-allergenic gloves throughout their facilities. Naturally, they would have more dollars in this category of purchase than their peers.
3. Operating Culture – It was decided by another client of ours that they would employ Oxisensors on their patients using PCA Pumps for Pain Meds. to make doubly sure they were safe. This substantially increased the volume of Oxisensors this hospital was buying.
4. Tradition & Rituals – Another client of ours placed logos on many of their products (coffee/soda cups, patient water cups, carafes, etc.) that increased the cost on all of these commodities. This certainly made them different than most of our clients.
So as you can see, there are justifiable reasons why your hospital might be DIFFERENT in the way you utilize your products, services and technologies. However, these outliers are not be construed as common practices in our industry. That’s why you need to measure and observe why you are different, before you can make the case that your hospital is really different!
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. Our clients find that our UTILIZER™ Dashboard is an easy way to indentify utilization misalignments, instead of just “skimming the surface” of their savings. Take a “test drive” today!
Supply Chain Mastermind Groups Percolating
I had a phone conversation last week with a vice president of a state AHRMM association who shared with me his idea of forming what I call a “mastermind group” of like-minded supply chain professionals who would meet regularly to talk about their challenges on specific topics, and then brainstorm to find answers to them as well as find support in a group setting.
Kayn Greenstreet of The Success Alliance says that “The concept of the “mastermind group” was formally introduced by Napoleon Hill in his timeless classic, “Think and Grow Rich.” He wrote about the mastermind group principle as:
“The coordination of knowledge and effort of two or more people, who work toward a definite purpose, in the spirit of harmony.”
He continues …
“No two minds ever come together without thereby creating a third, invisible intangible force, which may be likened to a third mind [the master mind].”
The beauty of mastermind groups is that participants raise the bar by challenging each other to create and implement goals, brainstorm ideas, and support each other with total honesty, respect and compassion. Mastermind group members act as catalysts for growth, devil’s advocates and supportive colleagues. This is the essence and value of mastermind groups.”
I have noticed that more and more supply chain “mastermind groups” have been percolating around the county at the national level, but not at the state or local level. I believe it is time for supply chain managers throughout the country to consider this “time tested” performance improving stratagem to move you to the next level of performance.
I have personally been involved in “mastermind groups” in my career and can tell you from experience that it will give you unfiltered feedback, more big ideas and new ways of doing things. And peer support that you won’t find anywhere else. If you want to get better at what you do this is one proven way to do so!
Benchmarking Still Drives Savings
Savings Beyond Price -Weekly eNewsletter – April 1, 2009
President & Chief Value Strategist
Benchmarking Still Drives Savings
Greetings,
Industry embraced a simple idea in the 1980s. The idea was that it was possible to search for the best practices that will lead to superior performance by comparing cost, time or quality of one organization to another. This process is called benchmarking and it has been immensely successful in all industries — including healthcare — for almost three decades!
Here’s the rest of the story! One BIG gap that we have found in healthcare benchmarking practices is that this technique is not universally applied to the identification of supply expense savings opportunities. Yet, healthcare organizations that are benchmarking their supply expenses systematically have found that benchmarking is “what drives savings” for their hospital, system or IDN.
No longer do these progressive healthcare organizations need to guess where their supply savings are hidden, they now know precisely what to target for their next savings opportunity since their benchmarking has illuminated the way.
For instance, one of our clients, who is a subscriber to our Utilizer™ Dashboard, quickly discovered that their hospital wasn’t recycling their Oxisensors at the level that they should have been reprocessing, thereby losing $32,692 in savings annually.
How would this hospital have known this important fact if they weren’t continuously benchmarking to improve their performance? The answer is they wouldn’t have known unless they had stumbled over this anomaly in their supply chain by happenstance. Then it would be too late to recoup their big losses!
If you want to be on top of your supply chain game, benchmarking your supply expenses shouldn’t be ignored or be a “one time event”. It should be a regular (we recommend quarterly), systematic measuring of your healthcare organizations’ supply chain expenses against those who are recognized as best-in-class practitioners in healthcare or even in other industries. In this way you can make certain that you are the best of the best in ALL of your categories of purchase.
at a time.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. If you want to know more about benchmarking best practices I would recommend that you sign up for our Healthcare Supply Value Analysis webinar on April 16th.
Choosing Cost Reduction Strategies for 2009
Savings Beyond Price -Weekly eNewsletter – December 11 2008
President & Chief Value Strategist
Choosing Cost Reduction Strategies for 2009
An article in the Hospital Materials Management newsletter predicts that GPO pricing will be going up in 2009 by as much 3.6%, even with the decrease in oil prices. Therefore, if you are looking to reduce your supply expenses in 2009 with your GPO contracts this isn’t a strategy you can count on to accomplish this goal.
That’s why when choosing strategies for cost reduction for 2009; you should be looking for inflation proof stratagems to keep your cost down permanently, not episodically. Here are some recommendations:
1. Re-specify Everything you Buy and Save Big
Since things change and people change, the products, services and technology that you are buying today aren’t being employed the same way that they were where when you first specified them 5, 7 or even 13 years ago. That’s why you can dramatically reduce your cost on almost everything you buy by re-specifying your customer’s exact requirements today.
2. Benchmark your Purchase Service Contracts
We are finding there is an unclaimed gold mine in all hospitals purchase service contracts, if only hospitals would start to trend, track and benchmark these high ticket purchases. Just recently, we identified a $4 million plus (i.e., 26.4%) savings opportunities in a client’s total purchase service spend. This dramatic case study should alert your attention to focus on the supply chain operational area. Paying more mindful attention to this could equate to huge savings.
3. Attack your Utilization Misalignments
I can’t emphasis enough that your hospital’s supply utilization misalignments is another virgin area of your supply chain operations that has been overlooked, neglected, or ignored for years. This is where 79% of your new savings could be coming from in the future. Don’t wait any longer to tap into these huge unending steams of savings opportunities.
So when you are choosing your strategies for cost reduction in 2009 don’t overlook these three inflation proof Savings Beyond Price™ stratagems that will boost your savings yield by 3%, 7% or even 15% in less than 12 to 18 months.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P..S. If you want to know more about how to master your purchase service contracts why not check out my article “The Last Frontier in Supply Chain Management” in the December 2008 issue of HPN magazine.
P.P.S. Don’t forget to check out my new blog article “New Thinking for Turbulent Times” which will show you how to work smarter, not harder in this economic downturn.
New Software Opens up a Whole New World of Supply Chain Savings Previously Thought Impossible
For Immediate Release – Contact: Robert T. Yokl @ 800-220-4274
New Software Opens up a Whole New World of Supply Chain Savings Previously Thought Impossible
Utilizer™ Dashboard version 3.2 just released! Finally, there is a user friendly software that will enable healthcare organizations to quickly identify their supply utilization misalignments from the 30,000 foot level, right down to the ground level. This simple, effective and affordable Utilizer™ Dashboard will open up a whole new world of supply chain savings most think is impossible.
Skippack, Pa (SVAH) November 14, 2008 – Healthcare managers won’t be at all surprised to hear that the healthcare industry is rife with utilization misspends and misalignments. The root of the problem, according to expert research, is that despite their best efforts, healthcare managers have yet to uncover where their true utilization savings are buried.
Robert T. Yokl, President of Strategic Value Analysis® in Healthcare (SVAH) and a recognized supply chain management expert, recalls talking recently to a healthcare supply chain manager, who told Yokl that he, employing a spend manager, an analytics manager and clinical manager tools, was unable to locate their organization’s utilization misalignments. The job was not impossible, though, as SVAH’s was able to find nearly $4.2 million dollars in utilization misalignments for this organization.
“This very skilled and highly qualified supply chain manager was unable to pinpoint his savings opportunities, but this failure was in no way related to the managers’ skills or qualifications,” Yokl says. “He simply did not have the right tool to accurately find the savings that consistently remain buried in his supply chain data.”
Yokl’s solution is simple: Use the right tools for the job. Over the last eight years, SVAH has conducted hundreds of utilization benchmarking studies for hospitals, systems and IDNs by employing a proprietary utilization dashboard, which has identified close to a half a billion dollars in utilization misalignments for SVAH clients. Yokl says his company’s Utilizer™ Dashboard is the precision tool that hospitals and healthcare institutions really need. “The bottom line is that healthcare organizations can’t do it alone; it’s an impossible task to ask supply chain managers to find thousands, and even millions in supply chain savings using old-school strategies, tools and techniques.”
With this said, SVAH has just recently upgraded its Utilizer™ Dashboard to version 3.2 which now includes an easy to use contract management module that takes the hassle out of managing and controlling the hundreds (maybe even thousands) of contracts healthcare organizations must manage, archive and bid/negotiate almost on a daily basis.
The Utilizer™ Dashboard is available as a subscription service on a fixed monthly fee basis. It identifies all potential utilization savings, and subscribers also receive unlimited phone and e-mail coaching to assist them in translating, strategizing and implementing the savings uncovered with their Utilizer™ Dashboard. Yokl says one of the best features of the dashboard is that “SVAH does all of the heavy lifting and our clients get all of the savings.”
About The Company: Strategic Value Analysis ® in Healthcare, (SVAH) Skippack, Pennsylvania, is a software, training and consulting firm specializing in supply utilization management. SVAH’s mission is to give clients greater control over their supply chain by providing them with better information, better focus, and better systems so that they can make better decisions on their second biggest expenditure.
Just How Good Is Your Supply Chain Radar?
Just How Good Is Your Supply Chain Radar?
A recent client I was working with on a Supply Chain Scorecard Program and then subsequently a Strategic Value Analysis® Program vehemently disagreed with many of the metrics and benchmarks that SVAH utilized to identify savings opportunities for their organization in all of their products and commodity areas. Now keep in mind, I was dealing with the VP of Operating Room Services who up to this point had run their product standardization and evaluation committee (for 7-years prior) before we were engaged by their system to perform our supply chain savings services. No matter what product and/or commodity group I showed on their savings opportunity scorecard he would disagree that I did not have my facts correct or that the benchmark metrics were outright wrong.
Is it conceivable to think that you can know where all of your savings opportunities are before they inflict damage to your bottom line?
Do you want be proactive instead of reactive?
For example, we were being challenged on their IV Set usage per case mix adjusted patient day, whereby the metrics showed a savings opportunity of $155,000 on an $850,000 annual spend, an 18% savings opportunity!Interestingly enough, this hospital just completed their own analysis by their product evaluation committee on their IV Sets and concluded that everything was in-line and that they were optimized on their costs and quality (I did not see any supporting data other than discussions from committee meeting minutes that could support their findings). I held firm, I knew my numbers were good and I had over 301 hospitals in my database to back me up that I was in the “Savings Zone,” whether my client wanted to believe me or not.
As it occurred we continued to work together and set up their supply value analysis program which of course IV sets was at the top of the list. Now the unique thing about our company is that we have seen IV Set studies at 50 different hospitals and health systems, so we get to bring all the best practices, questions and strategies to the table for our clients. Here is what we found out with this particular IV Set Study/Analysis.
- The Good News! They had the best price – they were part of a large IDN and had a direct manufacturer agreement, no price savings could be achieved. We compared them to our best price database and they ranked in the top 95th percentile.
- Not labeling was costing them thousands – All the departments were not date/time labeling their IV Sets correctly or at all to let other nurses know when an IV Set was set up on the patient, therefore they would automatically change the set (often too soon) on the patient to insure quality. The best practice is to change the set between 72-hours and 96-hours. Because they were not labeling correctly a good Nurse would change the set so not to endanger the patient by leaving the IV Set on too long. $25,000 to $35,000 in utilization savings!
- They had been sold a wrong bill of goods – 11-months prior to SVAH’s engagement, the hospital’s product evaluation committee had approved the implementation of an IV Set locking device that cost $5.00 (in addition to the IV Set cost) to be utilized solely on central intravenous lines for an annual added expenditure of $5,000. This made sense to all and would add to the quality of care for patients with the central lines. What happened was, the product was then misused on every IV Set throughout the entire hospital which added $120,000 in added cost as opposed to $5,000. $115,000 overrun! (They did not know this overrun situation was happening because they had no system to monitor their commodity costs) The hospital then re-evaluated and found that the product was not required at all, they returned to using sterile tape! $120,000 in savings.
- There is more! – the client opted not to pursue this product category until a later date because of the major changes that the two opportunities above would make to their nursing staff, but they will then revisit this product line to look at the value/function of the products being utilized. There could be thousands more here!
Up to this point, my client did not have the tools or knowledge base that SVAH brought to the table that would uncover these hidden/invisible savings opportunities in their hospital’s supply chain. My client did not believe that there was that much savings on this particular commodity grouping but was only working with what they knew from their product evaluation committee and existing supply intelligence told them. It was not on his radar screen!
Your Partner In Innovative Savings,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. If you are looking to establish, enhance, re-energize and dramatically improve your value analysis program (or you have hit the wall on savings) then our Certified Value Analysis Leader Program to be held on June 24-26 is the ticket for you. And, as a bonus, you will receive a one-year subscription to our new Value Analysis Resource Web at “no cost” to you. Note: Only 17 days left to save on our early bird rate of $1,192.00! click here to learn more
New Podcast: 80/20 Rule for Healthcare Supply Chain Savings
This podcast is geared towards helping you align your efforts and focus towards the supply chain savings opportunities that will give you the best bang for your buck as far as effort to return on investment. We will highlight the major functions of supply chain savings and detail out all the major supply chain savings areas and why and where you need to focus your efforts for the highest supply chain savings return possible.
Certified Value Analysis Leadership Workshop – Early Bird Special
- Added Many More Value Analysis, Utilization and Supply Savings Case Studies
- More Focused Training on Utilization Management and Benchmarking for Value Analysis Professionals
- Focus the Training to Be More Hands on with Real Time Actionable Results
- Share with you the Latest Strategies, Tools and Methods to Save More in Less Time with Less Effort
- Further Enhanced our Value Analysis Leader Web Software (included in the workshop)
- New Utilization Benchmarking Section
- More Savings Ideas to the Savings Idea and Best Practice Database
- More Members Only Webinars
It’s Only Money Right?
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