Large Dollar Expenditures - Products, Services or Technologies with an annual value of $25,000 or more.

Vendor Recommendations – Review brochures, catalogs, samples from vendors to cull new savings ideas.

Magazine Articles On Savings Opportunities - Call article authors to find out exactly how they did it.  They will be happy to help you out without a fee.

New or Changes in Regulations - Most new or proposed changes in regulations costs can be reduced through Value Analysis.

New Clinical and Administrative Employees – Interview new employees for savings ideas they have been exposed to at other healthcare organizations.

Benchmarking – What are other healthcare organizations doing to save money?

Any Disposable Product – Can you return to a reusable product?

Any Type of Custom Kit or Tray – Contents of kits and trays should be fully investigated for their value!

New Technology – In addition to the cost of the new technology there is always add-on cost of labor and supplies that must be value justified.

High Utilization – Any Product, Service or Technology that has a high utilization cost is a candidate for study.

Product Recalls – Value Analysis Team(s) should be empowered to investigate why the product was recalled and the corrective action required to bring into conformity.

Bundled Products – Products like IV Starter Kits, Admission Kits, etc., need to be value justified.

Old Technology – Old technologies tend to be wasteful and costly and should be evaluated for appropriateness.

If you have any additional savings pipeline ideas, I would love to hear from you (bobpres@strategicva.com), since there is still time for me to add them to my new book. Naturally, if your idea is used in the book I would give you attribution for your idea.  I’m looking forward to hearing from you.

___________

* “The Healthcare Value Analysis Bible: The Ultimate Savings Resource” will retail for $29.95, plus $5.98 for shipping and handling (pricing subject to change in the future).  If you would like to pre-order this A-Z blueprint for establishing, refining or re-energized your supply value analysis program we are now offering a 10% discount on the retail price of the book, if you pre-order by February 26, 2010.  You can e-mail your order (with your name, title, organization, phone number, e-mail address, and shipping and billing address) to bobpres@strategicva.com. You will then be the first to receive this important breakthrough must-read book no later than May 2010.

Let’s say this exercise shows that your hospital is on the high side of this metric. Does this information allow you to make decisions or take action to reduce your supply cost? The answer is no!  This metric is only directional. Meaning, it only shows if your hospital is going in the RIGHT or WRONG direction on your supply expenses. However, it doesn’t tell you why or how you can change the direction you are going if results are unfavorable.

That’s why you also need to have ACTIONABLE metrics that will help you make informed decisions and take immediate action to correct the defects in your supply chain.  For instance, we just had a quarterly review with one of our Supply Dashboard clients where we talked about how his lab reagent metric (total reagent cost/Billable Lab Tests –CMI adjusted) has been going up. He then told us that he picked up this fact on his supply chain radar screen too. After some research, he found that he had a few reagents that he was buying that weren’t under contract that was causing this anomaly, which he said has now been fixed.

That’s what ACTIONABLE metrics can do for you (enable you to make informed decisions and take immediate action) vs. generic metrics that ONLY tell you that you are going off course.  For this reason, if you want to make positive change happen at your healthcare organization you will need to establish ACTIONABLE metrics at the ground level to greatly enhance your supply chain decisions.  Otherwise, you will be nibbling around the edges of your supply chain expense savings when a windfall of savings is just waiting for you to take action.

Become a Savings Magnet

Read this book and in a few weeks save more
money than you have in years. Sounds unbelievable? Robert T. Yokl
and Robert W. Yokl, healthcare’s leading authorities in Supply
Utilization Management, have helped hundreds of hospitals,
healthcare systems and integrated delivery networks to saved close
to a half billion dollars by employing the same utilization
management strategies, tactics and techniques that they will teach
you in this book.     Click Here for the Special Report

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:

1. CLEANS your data so that it is usable and defect free.
2. 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.
3. DEVELOP or use a third parties’ Value Analytics™ methodology to hone in on your utilization misalignments.
4. ANALYZE the data that your analytics system spews out.
5. ESTABLISH and/or utilize your current value analysis teams to ferret out the savings you have identified.
6. FIND an executive sponsor or sponsors to champion your initiative and to remove the roadblocks you will encounter along the way.
7. 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.

This process of sharing multiple data points with our client enables us to triangulate our benchmark with our client’s OWN known, reliable and defendable internal data to confirm our benchmark’s validity.  This procedure usually affirms to our client that our benchmark is consistent with his or her OWN internal data and therefore makes good business sense for our client to investigate this savings opportunity.  

The operative word in this benchmarking validation process is OWNERSHIP.  When your customers see with their OWN eyes that your benchmark is consistent with their OWN internal data you can then make a believer of them. Without their OWNERSHIP (or believability of your data) you will never ever get your customers to judge that your benchmark is reliable, dependable or trustworthy.  It’s just that simple!

—————————————–

I have just given you the definition (above) of a new and emerging best practice called Activity-Based Utilization Costing that can revolutionize the way you save money. I’ve done so because now that price savings are slowly disappearing this new methodology will help you dig even deeper and broader for new and even better savings.

Here’s what it is all about

Activity-Based Costing (ABC) was developed in manufacturing in the 1970s. It was introduced by cost accountants that were seeking to identify the cause-and-effect relationship of their organization’s products and services to more objectively and accurately assign cost to each of their operations. Prior to this point in time, most operating cost were assigned by accountants as broad percentage for direct and indirect cost. 

Where products, services and technology costs are shared, such as we do in healthcare organizations, the ABC methodology requires some sort a weight factor to allocate cost accurately.  This weight factor is based on what is called a COST DRIVER or activity that directly relates to your products, services or technologies actual cost.  For example, the number of custom packs that you use in any given year would be assigned based on the number of case mix adjusted procedures (cost driver) you utilize. In this way you now have identified a cause-and-effect relationship between your custom packs and case mix adjusted procedures that can be precisely calculated.

Here’s how it can help you

We have found by employing the ABC methodology to measure utilization performance for our clients, once we have assigned a weight factor (or cost driver) to all of our client’s natural classifications (IV sets, Oxisensors, elevator contracts, dressing, trays, pacemakers, orthopedic implants, etc.), we can then quickly and easily identify any and all of our client’s utilization misalignments.  This means in real terms a saving in the range of 7% to 15% based our client’s total supply chain spend annually.

There are no shortcuts

You might say after reading this blog article, “Bob you are giving me a headache with all these calculations, isn’t there a simpler way to get the same results?”  I’m sorry to disappoint you but there isn’t an easy way to make these huge utilization savings happen. Believe me when I tell you that I’m always looking for an easier way to save money, but sometimes there are no SHORTCUTS to making savings happen. 

Where are your next savings coming from?

I would like to restate the fact that your easy price savings are slowly disappearing therefore, new and better savings strategies, tactics and techniques must be employed for you to keep your savings machine humming. Activity-Based Utilization Costing is one of the proven best practices that can assist you in improving on any savings strategy that you are now pursuing to save money. 

Lastly, don’t be overwhelmed by the intricacies of ABC methods that I just talked about because if I can learn, master and then apply these ABC techniques of this new science of savings — YOU CAN TOO!    

As a supply chain leader it’s your job to have a clear vision, credibility and confidence throughout this downturn and to continue to achieve double-digit savings to help fill your organization’s revenue gaps.

Leading through a recession starts with having a plan to cope with the downturn, even with a slashed supply chain budget. I hear some hospitals’ CEOs are asking their MMs to summarily hack off 10% of their supply budget, but that’s not a plan.  That’s an act of desperation and extreme anxiety that will too often backfire when the dust settles and everyone has time to take a deep breath!

That’s why a PLAN by definition is a carefully and thoughtfully conceived process of setting goals, developing strategies and outlining tasks and then setting schedules to meet those stated goals to avoid any and all pitfalls.  I would recommend that your recession plan should have these three critical elements:

1. Benchmarking of all areas of your supply chain operations to determine how much money is still available to be saved at your healthcare organization. The results of this exercise will then become your actual, realistic and obtainable savings goal for your plan, not some arbitrary number picked out of the air by others.
2. Develop strategies and tactics to attack each of the areas where you have identified savings opportunities. For example, if your GPO compliance is only 82% and your benchmark indicates you should be at 93% compliance, then develop a tactic to greatly improve this metric.
3. Establish a list of tasks, timelines and a person who is responsible for making the identified savings you have uncovered a reality. We like to use a 90-day timeline for all of our projects, unless there is an extraordinary circumstance that prohibits a task from being achieved in this timeframe. In this case, we give an extension on the project for 30, 60 or 90 days.

As consultants, we do this planning exercise that I have just outlined for you, dozens of times a year for our clients, just the way I explained it to you.  There is no magic in finding savings, except hard work that ultimately leads to big implemented savings for you.

In this time of stress, anxiety and upheaval don’t take any short cuts in your leadership. This might create even more problems for you down the road or worsen your situation through poor or non-existent planning. Keep on course, on budget and on time with all of your planning to ease your way out of this recession and ultimate recovery!

Let’s first start by looking at the history of supply chain benchmarking systems.  Predominantly, these are global supply chain benchmarking systems that have been utilized by supply chain professionals for 10 to 12 years.  These systems focus on the overall global performance of supply chain organizations, such as, supply expense as a percent of net operating revenue or supply cost per procedure/test for respective hospital departments.

These are the preponderance of benchmarking systems that are in the marketplace today. I’m not saying that these are not somewhat effective but from the prospective of the supply chain manager are they good enough to obtain actionable results?

With this said, I think the word that best describes these systems’ metrics would be “ambiguous” at best. Yes, I’m saying they are uncertain, hazy, unclear, and vague. For example, if your surgical service cost per procedure is $122 over your peer hospital’s benchmarks and you are running 4,233 procedures per year your opportunities in surgery supply savings will be calculated at $516,426 per year.  But this result still leaves any supply chain manager asking these big questions:

• Where’s the surgery services actual savings hidden?
• Is it Physician Preference?  Clinical Preference? Waste? Misuse?
• What specific products are causing this variance?
• Where do I get started attacking these identified savings?

The answers to these questions are just the beginning of what I call the “time trap” that could take months, maybe even years to actually uncover these globally identified savings opportunities. 

Yes, your intuition could point you to the “usual suspects”, such as, implants, sutures, custom packs, endomechanicals, etc. However, we have found that the surgery suite is much more complicated, difficult and denser in supplies than you might think.  Accordingly, you may expend ALL of your time and resources in this area of your supply chain operations and then not yield the maximum return-on-investment you are looking for.

The most certain way I know to uncover where your supply savings actually reside in any category of purchase, and to avoid the ‘time trap” I just talked about, is to develop deeper and broader supply expense metrics at the SKU (stockkeeping unit) to lead the way to your savings. For instance, a good metric that we have been employing for some years to determine the reasonableness of the cost of custom packs is: Total Custom Pack Cost/ Procedures CMI Adjusted. This metric has been a reliable benchmark for us when compared to a client’s peer group to determine if their custom pack cost is out of line. This is much better than guessing if this is the reason why our client’s total surgical services expenses have been “red flagged” as being extremely high.

In the final analysis, supply chain benchmarks can be useful, constructive and very definitive in your search for supply savings, but only if they give you the answers to just about all of the questions that you might think of in your benchmarking exercise. This can’t be done at the 30,000 feet level. This information only can be deciphered at the ground level which will require you to greatly ENLARGE your benchmarking range, choice and depth.  That’s the only correct answer to this challenge!

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.

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

Bobpres@strategicva.com

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 17^th (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.

]]> http://savingsbeyondprice.com/savingsblog/how-to-create-manage-and-maintain-high-performance-value-analysis-teams/feed/ 0 http://savingsbeyondprice.com/savingsblog/are-you-getting-serious-about-value-analysis/ http://savingsbeyondprice.com/savingsblog/are-you-getting-serious-about-value-analysis/#comments Wed, 03 Jun 2009 13:43:49 +0000 Robert Yokl http://savingsbeyondprice.com/savingsblog/?p=134 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. 

Savings Beyond Price -Weekly eNewsletter – May 27, 2009

Robert T. Yokl

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

Bobpres@strategicva.com

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!

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!