Metrics Matter: Choosing the Right Ones
If you want to see beyond the clutter, fog and noise that saturates our day-to-day business decisions the best way I know to do so is with metrics. Specifically, a metric is a set of measurements that quantify results thereby telling us more about our supply chain operations. This insightful information will then enable you to make your big and little decisions with confidence, congruity and speed.
One caveat! The difficulty in using metrics is that you need to choose the RIGHT ones to get the RIGHT results. I find the ideal methodology to do so is Activity-Based Costing: Linking a product or service to an activity or cost driver to uncover significant actionable information.
For instance, if you wanted to have a meaningful metric to analyze your office supply total in-use cost you would use full-time equivalents (FTEs) divided by your office supply spend to arrive at this measurement. You can then benchmark this metric against your peers to determine whether your total in-use cost for office supplies is within acceptable limits. This is a much more scientific method than guessing!
Why FTEs? Because people drive the cost up or down on office supplies, consequently there is a direct relationship between your office supplies spend and the number of people your healthcare organization employs on a full or part time basis.
Get the idea? Anytime you want to measure something you need to first indentify your COST DRIVER for the product or service you are measuring. You then divide your cost driver by your supply spend or labor cost to arrive at your metric. This methodology can become much more complicated than my example of office supplies when a number of variables are involved, but this is the basics on how you would choose the RIGHT metric to keep you from going off track.
I know that this topic boarders on being academic, but it really has real world applications in supply chain management. If you master the basics of this concept, it can make your job easier, more productive and will allow you to become a saving machine. That’s why metrics matter!
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Stretch Goals Can Lead to Breakthrough Thinking!
A goal by definition is an objective we want to reach, but a “stretch goal” is quite different as defined by Jack welsh, the former CEO of General Electric. He says that stretch goals “are essentially stimulating the staff to create goals that, given the current situation and what is known today, appear beyond their reach or otherwise unattainable. This is getting the employees and or managers to conceive of things that are at a magnitude beyond their wildest expectations or beliefs”
As Jack Welsh suggests in his quote, it’s in our human nature to select safe, comfortable and reachable goals. Why should you or your team stick their necks out when management is only asking the bare minimum goals from you? I see this “small thinking” attitude all the time.
I recently asked a material manager at a 238-bed community hospital what his savings goal was for next year and he told me that his senior management had set a goal for him of $50,000. By my estimate this material manager should meet this goal in less than three months — not one year. That’s not a “stretch goal”; it’s a puny, undersized, and no brainer. If I was this material manager I would at least triple my senior management’s goal to $150,000, just to keep me from falling asleep at the wheel.
If you want to have BREAKTHROUGH savings, then you need to bring about breakthrough THINKING for yourself, your staff and your value analysis teams. The best way I know to do so is for you to set “stretch goals” for every level of your supply chain operations vs. letting your senior management set them for you. Then brainstorm with your supply chain team to discover how you will meet your oversized goals.
As an illustration, one of our supply chain clients established a “stretch goal” for their department of $11 million for this fiscal year, although they didn’t know how they would make these savings happen when they committed to this goal. That’s when their supply chain team honed in on their utilization misalignments with our assistance and found $15 million dollars in new potential savings. If they would have settled for a so-so savings goal instead of establishing a stretch goal, they wouldn’t have found these big savings opportunities! With breakthrough THINKING, they are now on target to achieve breakthrough SAVINGS – not meager results!
So remember, when you are setting your supply chain savings and operational goals for 2010, don’t take the road most travel by establishing safe, easy and undersized goals. Stretch yourself, your staff and value analysis team(s) by instituting oversized goals that will lead to breakthrough thinking and gigantic results.
Why are Hospitals Buying So Many Different Products?
We would all like to think we know all the answers to the supply chain puzzle, but I can tell you from experience that until we developed our Value Analytics™ methodology 10 years ago, I found that I didn’t know what I thought I knew… I was just guessing.
For instance, did you know that healthcare organizations hardly ever buy the same products even if they belong to the same GPO or are divisions of the same healthcare system? In fact, our Value Analytics™ studies have revealed that the highest product match we have ever found between comparable hospitals with like operating characteristics is 18%. To bring this point home, one of our clients who owns five hospitals is buying five different surgical clippers. Isn’t that any eye opener?
This “Aha” made me realize that hospitals aren’t buying their products mainly to provide a primary function (what it is supposed to do) for their customers, but most buying decisions are based on a product’s aesthetic functions or features. There is no other reason, in my opinions, for this phenomenon to be happening.
Here’s an illustration of what I’m talking about using a surgical clipper as an example: its primary function is to REMOVE HAIR and there are no secondary functions (meaning in addition to removing hair it does something else) that I can recognize.
All surgical clippers remove hair therefore what makes them different? The answer is aesthetic functions or features that are nice to have functions, but in many situations are not needed. The only aesthetic functions that I can identify with clippers are its size, shape, color, ease of use, closeness of shave, fixed head or pivotal head. So why isn’t everyone buying the same clipper that provides the ALL the right functions at the lowest total cost?
With few exceptions, EVERY hospital in the country can, in my estimation, can standardize on 80% of the lowest cost functionally reliable products in each category of purchase that they are buying today. The reason that hospitals aren’t doing so is that they are buying too many unnecessary, redundant and glitzy AESTHETIC functions that are holding back billions of dollars of savings for their healthcare organizations.
So the next time you are buying a new product make sure that the aesthetic functions or features that you are purchasing are absolutely, positively required, before you needlessly spend your limited dollars on nice to have characteristics, but attributes that are not needed in order to meet the primary function of the product. It’s just that simple!
Creating the Future of Supply Chain Management
The biggest risk today, as I see it for supply chain professionals, is running out of savings. Yes, I know that some hospitals, systems and IDNs are still finding some low hanging fruit to keep their savings rolling, but those days are numbered. It’s not a growth strategy!
A good way to look at this emerging trend is check out what other industries are doing when they HIT the wall on savings. Over the last 5 years or so manufacturing, energy, financial, airline industries, etc., have been attacking the in-use cost of their products, services and technologies. Why? Because their price savings have disappear!
The tactic industry uses to drive out all of their waste and inefficiency in their value streams is called demand management or as we like to call it in healthcare — utilization management. This approach has saved billions of dollars without hurting their customer’s quality.
In brief, the demand management (i.e. utilization) methodology focuses its efforts not primary on suppliers or price, but on how products, services and technologies are deployed in an organization. Are there wasteful and inefficient practices, are they being misused or misapplied and are there lower cost alternatives to meet these stated functions at a lower cost? Its not uncommon for companies to cut 7 to 15 percent off their expense budgets and the savings can begin in as little as three months.
Extensive Industry research confirms the future of supply chain management isn’t about suppliers or price, it’s about your CONSUMPTION, where 79% of all of your new savings reside. Since most healthcare supply chain best practices (e.g. spend managers, just-in-time, ERP systems, etc.) are adopted from other industries, this is one trend that you don’t want to overlook, ignore or disregard because … it’s the future of supply chain management! This isn’t a prediction, but a fact!
So if you want to start creating the future of supply chain management at your own healthcare organization you need to start today by focusing on your own products, services and technology consumption. That’s where other industries are finding a GOLD MINE of savings, not just by bidding, negotiation or joining a new GPO to obtain a better price.
DATA GAPS: The Data You Have Vs. Actual Use
Most supply chain organizations have at least three trillion bytes of data in storage but they only have the analytical capability to analyze two trillion bytes due to their data gaps (e.g. missing data, inaccurate data, unclassified data, vague descriptors or inadequate classification of data). In fact, most supply chain organizations have only the capability to execute Value Analytics™ to their completion on only one trillion bytes of data.
What does this technical lingo mean to you? Most supply chain organizations are only capable of analyzing one-third of their data, at best, to uncover hidden utilization savings opportunities. Just imagine what you could do if you had ALL your data analytics steps in place to uncover these new and better savings.
Just the other day a supply chain manager told us that his spend manager didn’t give him the visibility into his supply spend vs. our Utilizer Dashboard, since our Value Analytics™ went deeper and broader into his supply chain than his spend manager did. The bottom line was $7.7 million in utilization savings that were hidden from his view since he was looking at only one-third of his data
So if you want to move to the next level of savings performance beyond price I would encourage you to implement these seven steps:
- CLEANS your data so that it is usable and defect free.
- HARNESS the latest technology to make your job easier. If you tried to perform these analytic studies without software your job would never be done.
- DEVELOP or use a third parties’ Value Analytics™ methodology to hone in on your utilization misalignments.
- ANALYZE the data that your analytics system spews out.
- ESTABLISH and/or utilize your current value analysis teams to ferret out the savings you have identified.
- FIND an executive sponsor or sponsors to champion your initiative and to remove the roadblocks you will encounter along the way.
- INCENTIVIZE your team members to keep them at peak performance.
I know that you are thinking to yourself that “this seven step roadmap is a tall order when you consider I’m already swamped with work.” However, these seven steps only look overwhelming to you if you try to do everything I’m suggesting — at once.
It took Strategic Value Analysis in Healthcare almost 10 years to be able to have them fire on all eight cylinders. What we would recommend you do to get started with your own Value Analytics™ Program is test the waters, since Value Analytics™ in my opinion is the future of supply chain expense management.
Effectively Maximizing Your Saving Yields
We all have a tendency to forget about yesterday’s savings because they are history, but by doing so we are losing a big opportunity to effectively maximize your savings yields. Worse yet, we are not realizing that your savings have evaporated because they weren’t put into practice properly.
We see this taking place all the time with clients of ours who believe that they have saved big dollars on a product, service or technology only to find, with the use of our Supply Dashboard that they either underestimated or overestimated their savings yields.
This reminds me of a client who thought they would save $52,345 on a disposable glove value analysis project, only to find they were spending $51,298 more than before the project because their food service department was now using the highest priced gloves available at their hospital. This blunder was due to poor communications in introducing our client’s new glove protocol and a lack of controls when the project was implemented.
On the other hand, we have had clients that have estimated their savings yield on a project to be $12,888 only to find with our Supply Dashboard that they actually saved $29,298 because they underestimated their savings by a mile. This is good news and bad news!
If you are to effectively maximize your saving yields you need to measure, manage and control your implementation outcomes. This can ONLY be accomplished by continuously tracking and trending each and every savings initiative that is reported on your saving reports.
This way of doing business will pick up on your radar screen any and all variances from your initial savings estimates and then, if necessary, you can take the appropriate action to get your savings projects back on track.
New Activity-Based Costing Model Makes Huge Supply Utilization Savings Happen!
Activity-Based Utilization Costing is a new utilization savings model that assigns the cost to natural classifications in supply chain expenses to identify their actual consumption by each category of purchase. By doing so, a healthcare organization can establish the true cost of the utilization of all of their products, services and technologies so they can eliminate any and all wasteful, inefficient, unneeded or unnecessary supply chain practices.
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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!
Moving From Fuzzy Supply Chain Benchmarks to Actionable Results
There is a level of uncertainty in the healthcare supply chain circles regarding what benchmarks are the best for measuring your supply chain effectiveness and efficiency, now that you need to live by and be judged by those numbers. What’s the correct answer to this challenge?
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!
Value Analysis is all about SCAMPER
Savings Beyond Price -Weekly eNewsletter – June 24, 2009
Robert T. Yokl
President & Chief Value Strategist
Value Analysis is all about SCAMPER
Greetings,
If you aren’t using the techniques of SCAMPER to boost your value analysis savings and improve your quality, then I have a big savings idea to share with you today. Here’s what I’m talking about!
Value analysis is all about “the search for lower cost alternatives to meet your desired functions (primary, secondary and aesthetic) reliably”. Whereas, SCAMPER is a proven technique to help you reach this goal. That’s because every new idea is just an addition or modification to something that already existed which SCAMPER helps you flush out.
So if you can modify, adjust, or alter a product, service or technology you are buying you will dramatically increase your odds of coming up with new and better ideas that can save your money or improve your quality.
Here’s a mnemonic developed by Bob Eberle to help you remember the SCAMPER concept when you are applying it to your value analysis studies:
Substitute something: Replacing a disposable with a reusable.
Combine it with something: Adding it to a kit, tray or pack.
Adapt something to it: Add fax chips to PCs to eliminate fax machines.
Modify or Magnify it: Reduce the size, volume or bulk of a item.
Put it to some other use: Use gloves for ice packs (it’s been done).
Eliminate something: Removing items from kit, tray or pack.
Reverse or Rearrange it: Don’t use custom packs at all (it’s been done).
Simply put, the SCAMPER mnemonic is all about searching out new and better alternatives to what you are doing and what you are buying now and will force you and your VA teams to change your thought patterns. This in turn will change your thinking about how you can save money or improve your quality. It will open up whole new vistas and pathways that will give you and your VA teams surprising insights and ideas on how to save money in every corner of your healthcare organization.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. If your value analysis team(s) is in a slump you may want to invest in our two-day on-site advance value analysis training program to move your value analysis teams and committees to the next level of savings performance.
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
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!
