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.
Focus on What Matters!
I often tell audiences when I’m speaking about “focus on what matters” that early in my supply chain career I delegated ALL of my price related activities to my buyers while I focused my savings efforts almost exclusively on value analysis. Why did I make this decision?
Well, I found early on in my career that it was easy to get the best pricing on everything that I bought if I contracted through my GPO or bid a commodity that wasn’t under a GPO contract. I didn’t need to lose sleep over this important, but very manageable activity any longer.
That’s when I realized that value analysis was where the action, opportunities, and recognition were in any healthcare organization. From that point forward, at every hospital, system and IDN I worked I immediately formed value analysis teams to root out the waste and inefficiency in my healthcare organization’s supply chain.
By doing so, I immediately saved my hospital, system or IDN millions of dollars (beyond price) annually, and gained a reputation as a superb material manager. This reputation wouldn’t have come to pass if I decided to use my skills to shave two or three cents off the pencils I was buying.
More importantly, because of the high visibility my value analysis teams attained in these healthcare organizations everyone in the organization knew us by our achievements (better quality, service and reduced cost). When it came time for my annual pay raise or bonus negotiations my senior management never quibbled about giving me a raise or promotion because they had seen my work first hand in a very observable way.
So if you are looking for more money, more recognition and more promotions in your healthcare organization, I would recommend that you “focus on what matters” – value analysis. And let your price savings become an automatic and systematic task that shouldn’t take much of your valuable time at all.
No Magic Bullet
Savings Beyond Price -Weekly eNewsletter – June 3, 2009
President & Chief Value Strategist
No Magic Bullet
Greetings,
I think that there is a tendency in healthcare for supply chain professionals to seek out a “magic bullet” that will be a quick fix to ALL of our supply chain expense management challenges. But is this really the best path for you to take to improve your supply chain performance?
For years we all thought that the big quick fix was to have high compliance with our GPOs. Then every one thought the road to success was to purchase a new MMIS system to give them high visibility in their supply spend. This was followed by a massive movement by hospitals, systems and IDNs to cleanse their data. Now we all seem to be jumping on the data analytics train as if this is ultimate quick fix to all our supply expense management issues.
This is the road often traveled by supply chain professionals in their search for better performance, but these quick fixes will never sustain long-lasting bottom-line results. If you want to be better than good in your supply chain performance you will need to choose systemic solutions, not quick fixes.
We have worked with numerous healthcare organizations that have employed all of the quick fixes I just talked about, but they still haven’t optimized, institutionalized or operationalized their supply chains’ savings efforts. This is because these organizations haven’t systematized these efforts into a cohesive operating plan, but instead jump from one quick fix to another hoping that this new “magic bullet” will be the definitive answer to all of their supply expense management problems.
It is now high time for healthcare organizations, with limited time, money and resources, to ditch these quick fixes in favor of a strategic, systematic and programmatic performance improvement effort that seamlessly fits into a carefully thought out supply chain expense management short and long-range plan.
This way when a new saving idea, suggestion or scheme comes across your desk you won’t get caught up in quick fixes, band-aids or costly fads that don’t meet your exact strategic or tactical goals and objectives for any given year.
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). 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.
Turn Tough Times into a Great Opportunity
A little-known fact is that the Chinese symbol for “crisis” (wei1 ji1) equates to opportunity in the Chinese lexicon. Strange as this may seem, the Chinese civilization has been around for thousands of years, so I guess they know an opportunity when they see one — even in a crisis.
It’s the same with the effects of our recession today. We have a great opportunity in these tough times to use this crisis to our advantage. Management at most healthcare organizations will be open to new and better savings ideas. Our department heads and managers will be more malleable when it comes to saving money. Even our doctors will be more open to discuss how they can help us in this predicament.
Case in Point! One hospital client of ours told us just last week that their surgeons asked them to establish a committee that would sit down on a regular basis to help their operating room director to identify and then implement new savings ideas. This hospital is being very proactive with their Value Analysis and Lean savings programs and the surgeons want to make a positive impact as well.
This is an unprecedented turn of events for this hospital, which I believe can be replicated nationwide, if only you decide to turn these tough times into a great opportunity to get your savings ideas heard, accepted and then implemented.
This isn’t a time to be frozen in your tracks. To the contrary, it’s the best time that I have seen in decades for you to maximize your savings efforts by engaging your executive management and hospital staff in meaningful discussions that result in even more productive and efficient methods and practices than ever before.
Have You Planted Your Seeds?
Savings Beyond Price -Weekly eNewsletter – April 8, 2009
President & Chief Value Strategist
Have You Planted Your Seeds?
Greetings,
What do perennial flowers and recurring supply expense savings have in common? The simple answer is that both can grow and bloom for many years if you use the right tools, provide adequate nourishment, and the proper care and placement.
Why? We have found that healthcare organization must plant seeds today in order to generate new savings tomorrow, next quarter or even next year. Otherwise, your supply expense savings will be short-lived or worst yet, die on the vine before being harvested.
Think about it this way. Your price savings are getting harder and harder to achieve since you and your GPOs have squeezed your suppliers’ margins to the bone. But that doesn’t mean that there isn’t BIG robust savings to be obtained by more effectively managing and controlling your healthcare organization’s products, services and technologies’ in-use cost or as we like to call them utilization misalignments.
In fact, our studies show that there is as much as 7% to 15% in NEW supply expense savings available to you right now. You can do this by attacking your wasteful and inefficient consumption, misuse and misapplication within the millions of dollars of products, services and technologies that you buy annually.
Case Study: One of our 223-bed community hospital clients was getting an excellent price and rebates on their contrast media, but then they found using our UTILIZER™ Dashboard that their contrast media in-use cost was $42,666 higher than their peers. When this utilization misalignment was investigated by one of their hospital’s value analysis project managers, they found that their radiology department had standardized on 155cc prefilled syringes to administer their contrast media. Their community standard was 100cc doses! After several negotiation sessions with their radiology director, he finally agreed to only use 155cc doses on his liver function patients; thereby immediately reducing his hospital’s contrast media cost by $41,298 annually. This was a win-win for all involved parties!
Question! “How would you know where your utilization misalignments are hidden at your healthcare organization without having a power tool to plant the seeds to grow and bloom your savings every month, every quarter, and every year?”
The typical healthcare organization has 7,000, 14,000 or even 30,000 SKUs (stockeeping units) they must track, manage and control continuously to ensure that their pricing and utilization is truly within acceptable limits. This is an almost impossible feat for super busy supply chain professionals to accomplish without leveraging technology to do this hard work for you.
A new era of supply chain expense management has arrived: Utilization Management. In fact, a new survey by Novation reported that 44% of healthcare organizations have decided to focus on utilization as their new path to savings for their hospital, systems and IDNs. This is the reality of the supply chain of the future, since price savings are slowly, but surely disappearing!
Isn’t it time that you jump on this fast moving utilization train so that you can reap the full benefits of new and better supply expense savings that are not only sustainable, but inflation proof?
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 what utilization management is all about may I suggest that you download our Utilization Management Special Report. This is the future of supply chain expense management.
Hunkering Down Isn’t A Viable Solution
I’m hearing from supply chain professionals throughout the country that their hospitals, systems or IDNs are “hunkering down” in this new economy with the hope of weathering this financial storm we all are facing.
Just the other day a supply chain manager clearly stated this paranoia when he said “I know this doesn’t make sense not to spend a little money with your Utilizer™ Dashboard when we could save millions by doing so, but that’s the reality at my hospital today.”
This frugality doesn’t make any sense to me, since when you are in a hole you need to dig yourself out, not wait for someone to rescue you. Simply refusing to spend money to save money or to generate new revenues isn’t a viable solution in these tough times. It will only make your situation worse!
So when you hear that there is a freeze on ALL new spending at your hospital, system or IDN, I would question the validity, sanity and wisdom of this management fiat. Inspired leadership doesn’t retrench, hunker-down or hide from reality. They take prudent steps to dig out of the hole that they find themselves in until they can see the daylight. Then they dust themselves off and move one step at a time to higher ground where they can clearly see the light at the end of the tunnel.
In fact, inspired leaders are spending money to make and save money, even in these perilous times. These leaders understand the importance of moving forward, not backward in this sea of change. And they have the courage to make the hard decisions that are necessary to keep their healthcare organization on course in these turbulent times. To their credit they aren’t waiting for someone to rescue them from the challenges they face because they know help isn’t on the way.
When the Going Gets Tough
Savings Beyond Price -Weekly eNewsletter – March 3, 2009
President & Chief Value Strategist
Greetings,
When the Going Gets Tough
Mikel Harry of the Six Sigma Management Institute tells us that when the going gets tough “Get back to basics. Re-examine everything you do and aim for breakthrough, not incremental, improvement. Have the courage to lead. You lead people to breakthrough, not manage them to breakthrough.” This is a winning formula in this recession!
Your healthcare organizations need your ideas, your expertise and your leadership to pull them through these uncertain times. If support from the top is lacking, then it’s even more important for you to lead the way in producing significant supply chain savings to right your boat.
I know that you are a regular reader of this e-newsletter and I’m preaching to the choir here. However, sometimes I think it’s important to remind you that almost nothing happens in your hospital, system or IDN without the leadership, involvement and know-how of supply chain management — making it happen.
You are an essential cog in the wheel that is required to keep your healthcare organization financially fit. So when the going gets tough I know that supply chain management will be part of the solution to these hard, tough problems we face today.
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 are really looking to “get unstuck” by traveling on new paths you will want to sign up for our latest webinar “Game Changer: 2009 Recession” where we will discuss this topic in detail.
P.P.S. I want to remind you to take a look at our latest version of our Utilizer Dashboard Software today. You have to see how this software tool will give you fast, efficient and easy to use low cost tool to help you drive out all of your savings beyond price then you need to take a look at the Utilizer today! You have to see the Utilizer to Believe it!
***Just Released***
Free Special Report
Supply Chain Utilization
Targeting your next big savings opportunities
“Could a misalignment that comes with a simple (and less costly) fix be eating away at your savings?”
“Beware of Standardization”
“Managing utilization costs can save six to 10 percent on total supply expenditures”
Getting Unstuck
Savings Beyond Price -Weekly eNewsletter – February 24, 2009
President & Chief Value Strategist
Greeting,
Getting Unstuck
Failure to “get unstuck” can put your career as well as the health of your healthcare organization – at risk. By this I mean in times of peril, like we are experiencing now, the old ways of doing things (price, standardization and capitation) aren’t going to lead you to NEW paths of success.
You must develop a new vision and a new fervor for your supply chain operations in order to move past what you have been doing so that you can create a new roadmap to lasting success. A good way to start on this new path for “getting unstuck” is to imagine what savings strategies you would pursue if price, standardization and capitation savings opportunities completely disappeared from your radar screen.
This scenario actually happened to my firm 10 years ago when GPOs took away all or most of the price saving opportunities that we were identifying for our clients. We then had to “get unstuck” and move on to new and better savings strategies, tactics and techniques (utilization, value analysis, and contract management) so that we could continue to bring value to our clients. In doing so, we found new paths to longer-lasting savings for our clients – beyond price — then we ever thought possible.
The vivid picture that I just described to you isn’t fiction, but a fact! Price, standardization and capitation savings are rapidly fading from your radar screen. If you don’t decide to “get unstuck” and move on to new paths you will be at an impasse that will put you and your healthcare organization – at risk.
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 are really looking to “get unstuck” by traveling on new paths you will want to sign up for our latest webinar “Game Changer: 2009 Recession” where we will discuss this topic in detail.
P.P.S. I want to remind you to take a look at our latest version of our Utilizer Dashboard Software today. You have to see how this software tool will give you fast, efficient and easy to use low cost tool to help you drive out all of your savings beyond price then you need to take a look at the Utilizer today! You have to see the Utilizer to Believe it!
***Just Released***
Free Special Report
Supply Chain Utilization
Targeting your next big savings opportunities
“Could a misalignment that comes with a simple (and less costly) fix be eating away at your savings?”
“Beware of Standardization”
“Managing utilization costs can save six to 10 percent on total supply expenditures”
Is Standardization Now Holding Us Back?
Savings Beyond Price -Weekly eNewsletter – February 18, 2009
President & Chief Value Strategist
Challenging Conventional Wisdom in Supply Chain Management
We all get trapped into believing what we have been taught over the years about what works in supply chain management, or what we call the CONVENTIONAL WISDOM (ideas or concepts that are accepted without question as being true). I call this “getting stuck” in the old ways of doing things. This can be dangerous to your healthcare organizations financial fitness.
In fact, most ideas and concepts that are considered CONVENTIONAL WISDOM today do change over time, and therefore need to be challenged and reevaluated if you are to stay relevant, progressive and forward thinking in our supply chain practices.
One such CONVENTIONAL WISDOM that has outlived its useful life is that standardization is the one key to supply chain success. This fact is standardization is actually holding back new and better savings for your healthcare organization.
Here’s why. No one size, shape, color, formulation or mix of products, will not universally meet ALL of your customer’s exact requirements. You will either over-shoot or under-shoot your mark if you believe every customer has the same functional requirements thereby one size fits all situations. That’s why you have found it impossible to standardize on pacemakers, ICDs, orthopedics, spinal implants, etc. It just won’t work because every patient has different medical requirements that can’t be standardized. Your goal should be customization (built to the exact specification of each customer group), not standardization which is now becoming the new CONVENTIONAL WISDOM in this new healthcare economy.
I would also ask you to challenge and reevaluate the CONVENTIONAL WISDOM that everything you buy must be disposable. The healthcare organizations that we have worked with who have the lowest total cost are the ones who recycle, launder or reprocess more reusable kits, trays, gowns, towels and custom packs than their peers.
Summing up, everything that you have learned over the years that was thought to be true, isn’t always based on fact. You must constantly be challenging and reevaluating what you are doing so that you don’t fall into the trap of believing that what you are doing is the most cost effective or efficient way to do business. There could be a better way
Never…ever stop questioning the CONVENTIONAL WISDOM that once was thought to be infallible because very few things last forever!
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 would like more information on how to reorganize, reinvent and reinvigorate your value analysis teams to be better than good you might want to download my White Paper” Strategic Value Analysis®: Savings Beyond Price™” that will give you an insiders’ view on how to do it.
Unintended Consequences
Savings Beyond Price -Weekly eNewsletter – February 11, 2009
President & Chief Value Strategist
Unintended Consequences
I won’t argue with the conventional wisdom that standardization is one key to success in supply chain management. However, did you know that standardization can have unintended consequences that can greatly affect your healthcare organization’s financial fitness?
How could this happen? What we are seeing over the last few years is that healthcare organizations are over-standardizing on their product lines (I.V. sets, PICCS, electrodes, pacemakers, etc.) thus causing them to have higher total costs that are unnecessary, wasteful and unconscionable.
For example, we frequently see hospitals standardizing on one I.V. set throughout their healthcare organization at a cost of $7.86 or higher. These feature rich IV sets should only be employed in the operating room and emergency room, and not in every department in your hospital. By doing so, these hospitals are BLOATING their expense budgets by hundreds of thousands of dollars (maybe millions) each and every year.
The point I’m trying to bring across here is that standardization is a powerful cost management tactic when used artfully, but you need to have a set of rules to prevent over-standardization since this is uneconomical.
The first rule I would recommend you adopt is to not standardize on one product, service or technology without first understanding your customers’ (we call them “value groups”) exact functional requirements. In the case of IV sets you could have 7 to 9 value groups (OR, ER, Nursing Floors, Clinics, etc.) that you need to observe and interview to uncover their specific functional requirements, before you make a decision on what IV sets you will stock for them.
REMEMBER: One size of anything doesn’t fit ALL of your customer requirements. If they did we could hire monkeys to manage our storerooms because it wouldn’t matter what the monkeys gave out since it would be all the same to our customers. We all know that this would be an unrealistic and even laughable situation.
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 would like more information on what rules you should be following to avoid over-standardization, I would suggest you listen to our “Value Analysis 2.0” podcast where you will learn new rules, systems and models to move you to the next level of savings performance.
4 Ways to Save Big with Both Arms Tied Behind Your Back!
The tough economy is hitting the healthcare supply chain in a big way. We are losing staff members, freezing spending and eliminating our capital budgets. That’s why our hospitals are counting on us to keep the big supply chain savings machine humming. This is all happening at the same time you are asked not to spend a dime on valuable resources that could offer huge returns to improve your healthcare organization’s bottom line. You might say, we are being asked to save big with both our arms tied behind our back. To assist you with this challenge, here are four ideas for you to consider in order to smooth the road to savings:
1. Get Organized to Save – Who do you think will save more with less, a supply chain manager who has an organized strategic written plan or a supply chain manager who is just going along with the flow or as we say “winging it?” Of course the answer is going to be the supply chain manager with the written plan who can look at the macro and micro picture of their supply chain performance. Don’t leave anything to chance, plan for success! Need a Savings Plan Template? Check out our Targeted Blueprint for Supply Chain Savings!
2. Stop Thinking Price – Let’s face it, the effort it takes to scrape up price savings is not worth the effort any longer. We have our GPO contracts in place and we are lucky to hold the line on increases as opposed to the big savings that we are accustomed to seeing. One answer is to start looking for “Savings Beyond Price™ which we have calculated could be as much as 79% of all new savings opportunities available to you! Look for waste, inefficient use, over-standardization, and value mismatches that could be easier to attack than price savings if you really look for them. Download our Free Supply Chain Utilization Report here!
3. Ask Your Colleagues Where They Are Saving Big – Start asking your colleagues where they are finding savings and see if their efforts translate into opportunities for you too. This could be achieved by using the AHRMM listserv. Another idea would be to create your own “Savings Tip Groups” with your colleagues that you can share your best practices and savings ideas. Why reinvent the wheel when you can learn from your colleagues and they can learn from you as well?
4. Get Your Vendors Working For You – You have valuable expert resources that could be put to work for you in order to save big money for your organization. As we see it, you are only utilizing a fraction of your vendor’s product lines. There are many cost-saving products to choose from that you may have overlooked. Tell your vendors that you would like to have them make recommendations that would reduce your costs inside their existing product lines. This will ensure their importance to your organization as not only a vendor that provides product, but as a valued partner that actually does more than just sell you products.
We know it’s tough out there and I hope that these ideas can assist you in taking your organization to the next level of savings. In addition to these savings ideas, I want to make you aware that we have a huge archive of articles and savings ideas available for FREE on our www.strategicva.com web site and blog. Go ahead and check them out at our expense. I can guarantee you, that you won’t be disappointed!
Is Value Analysis A Numbers Game? Let’s Do the Math!
The mindset is simple; Fast and Efficient Studies = Fast Savings to our hospital’s Bottom Line. Fast and Efficient Studies = more studies being completed which create the multiplier of savings hitting your hospital’s Bottom Line! Is Value Analysis a numbers game? The answer is yes, value analysis is a numbers game. The more studies you can get completed with equal or better results the more new studies you can work on and add to your hospital’s bottom line savings in these tough times. Here are two case studies to help understand this concept:
- Average 100 Bed Hospital “A” Performs 15 to 20 VA Studies in a year and Saves $320,000 – not bad right?
- Average 100 Bed Hospital “B” Performs 30 to 40 VA Studies a Year and Saves $1.25 Million – this is what we need in this trouble economy, bigger dollars and more savings. However, it can only be accomplished by performing more studies.
Hospital “B” was able to complete more studies in less time and therefore attain bigger and better bottom line results faster. How did they make this happen? By having more teams, more team members and more projects that they completed within 90-days. It all about the numbers that makes savings happen faster and more efficiently than you ever thought possible.
Remember, you can do this too if you have the right numbers!
P.S. I forgot to mention that the Bellwether League is looking for nominations for their Supply Chain Hall of Fame for 2009. If you have a supply chain professional (active or retired) you would like to nominate for this prestige’s award please log on to www.bellwetherleague.org to do so.
Getting to the Next Level of Savings
I’m hearing from our clients that they aren’t saving money with new GPO contracts that are coming across their desk. In fact, they say that they are actually losing money due to 1%, 2% or even 3% price increases on these GPO contracts.
This reversal of GPO contract savings momentum is because the LAW of DEMINISHING RETURNS is now affecting the GPO healthcare model. This immutable law says that continuing efforts toward a particular project, goal or objective (e.g. contract savings) will decline in effectiveness after a certain level of results has been achieved.
Specifically, there is a level of savings that you can achieve with your GPO contracts (national, regional or local), but then inevitably you will hit a wall on savings. I personally believe we have reached the point in healthcare where LITTLE or NO new savings will be achieved in the very near future by any GPO. This is because we in healthcare have reached the level of diminishing returns with our GPO contracts after more than 68 years that GPOs have been in existence.
Now What? Healthcare organizations can’t survive without saving time, money and resources in all their operations every year due to the pressures of unfunded mandates, reduced reimbursement, inflation and now a weak economy. That’s why I have been preaching for nine years that we all need to get to the next level of savings: utilization misalignments in the products, services and technologies you buy. You need to do this or will risk watching your supply expense savings evaporate before your eyes.
Reality Check! The empirical data now quite clearly shows that your GPO contracts aren’t going to provide you with the savings momentum that your hospital sorely needs to survive and thrive in the new economy we are experiencing today. Isn’t it time you reprioritize your savings efforts from contract management to utilization management to hold the line on your savings increases?
Does Price Equate to Total Cost?
Savings Beyond Price -Weekly eNewsletter – January 15, 2009
President & Chief Value Strategist
Does Price Equate to Total Cost?
“Many CEOs(and supply chain professionals) have been conditioned to believe that supply chain management is all about price, and they have not taken a total cost approach and looked at other factors, such as utilization, in their (supply chain) model.”
This quote from one of HPN Magazine’s SURE AWARD recipients, Ministry Health Care CEO Nick Desien of Milwaukee, Wisconsin, is a WAKE-UP call to all supply chain professionals in this weak economy. Why? Because price is no longer king in our strategic supply savings arsenal!
If you want to continue to achieve robust savings every year, you must now refocus your savings efforts on your total cost from acquisition to disposition. The best way to do so is to attack your utilization misalignments, or your wasteful and inefficient consumption, misuse and value mismatches in your products, services and technologies.
Just the other day, one of our clients took this advice and saved $42,988 on their PICC trays by customizing their PICC trays to each of their value group’s (OR, ER, ICU, nursing floors, etc.) exact requirements. This client found that one size PICC tray doesn’t fit all of their customer prerequisites, so why should they be buying them all the same tray? For this reason, customization vs. standardization should be your goal too.
One final thought! Desien believes healthcare organizations that approach their supply chain as a strategic imperative, as other industries do, will be on the path to improve their hospital, system or IDNs overall performance. But this goal can’t be realized with price alone!
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. If you are looking for faster, smarter and better technology in this New Year to give you ultimate visibility in your supply chain, why not “test drive” our Utilizer™ Dashboard for even greater savings yield this year.
P.P.S. Don’t forget to check out my new blog “Why Do You Need a Team Mission Statement?” that will show you how to give your teams a common purpose and a firm foundation for their savings work.
