In point of fact, from our empirical experience it requires a systematic approach to reducing your healthcare organization’s supply chain expenses to get it right. This concept is analogous to what the insurance industry calls BLANKET COVERAGE, a single unifying policy that covers any and all of your risk or exposure to unforeseen calamities. This BLANKET COVERAGE idea holds true with “Healthcare Expense Reduction”; To get it right you need to cover all of your supply expense categories of purchase – all at one time. 

To get you started on this journey, we have listed seven core elements of a successful “Healthcare Expense Reduction” unifying system. We advocate these core elements for you to obtain the highest return-on-your-investment of time, effort and resources in order to attack ALL of your supply expense savings simultaneously.

You will notice that these seven core elements described herein are actually interconnecting programs which you should have in place which cover the total spectrum of your “Healthcare Expense Reduction” efforts as follows:

1.   Utilization Management Program

2.   Value Analysis Program

3.   Contracts Administration Program 

4.   PriceCheck™ Program

5.   Inventory Management Program

6.   Linen Management Program

7.   Forms Management Program

As this list suggests for your “Healthcare Expense Reduction” to be effective you need to have complementary and synergistic expense reduction programs in each of your supply chain disciplines, not one-time events. This way you can be assured that you have “Plugged all of the leaks” in your supply expenses before they become mile-high gushers or raging rivers.  

This isn’t just a theory, but the actual system that we have employed ourselves over the last 23 years to assist hundreds of healthcare organizations in reducing their supply expenses to absolute minimums, and then to keep their expenses under control — going foreword.

It took me some time to fully realize that a good project charter is one of the key success factors for any and all savings and quality projects (Six Sigma, LEAN Management, Value Analysis, etc.).  The reason I now feel this way is that you need a beginning, middle and end to all projects.  Therefore, if you don’t have a good project charter you don’t have a rock-solid foundation for the beginning of your projects, thus, risking going off track even before your project gets started!

At minimum you will need the following 13 essential elements to be included in your project charter: Project Title, Project Type, Focus Area, Department, Facility, Project Start Date, Project Number, Champion, Project Leader, Product or Process Owner, Statement of Problem or Opportunity, Project Completion Date, and Financial and Quality Goals & Objectives (e.g., savings, improved revenues, reduced defects, etc.).

Now that you have these essential elements listed in your project charters you can refer back to them to insure that your projects stays on track, on budget and on time. We have found that the timely on going (monthly) review of this data to be critical to the success of any project.  In fact, to manage and control all of their projects, we encourage our clients to establish Balanced Scorecards based on the information in their project charters.

A recent survey by ISixSigma Magazine found that 81% of the most successful Master Black Belts ALWAYS utilize a project charter to get a fast running start on their projects.  The survey stated further that project charters were the second most commonly used tool by Black Belts, next to process mapping as part of their improvement work.  

How can you dispute these statistics? If you want to save even more money and improve your quality the answer is to start to employ PROJECT CHARTERS on all of your supply chain initiatives. You will then have a beginning, middle and end to all of your projects.

Specifically, the article states that “Hit by financial crisis, (Toyota) last year launched a “Value Analysis” program to cut the cost of producing existing models.  I believe this is the same financial crisis that healthcare organizations are facing today: reduced reimbursement, lower census and increased bad debts?  There is no doubt in my mind that Toyota has “got it right” when they decided to utilize the time-tested value analysis methodology as their tactic of choice to push to return to profit after a very bad year.

Do you see the similarity with healthcare? Our industry faces the same challenges as Toyota: slow growth, reduced profits and an uncertain future.  That’s why value analysis is more important than ever before. 

Our industries’ price savings are slowly disappearing, but there are still billions of dollars in value analysis savings still available in the healthcare industry.  This could be uncovered if we as an industry focus on the wasteful and inefficient consumption, misuse, misapplication and value mismatches in our supply streams.

Bottom Line: If you aren’t vigorously applying the techniques of value analysis to discover your next big savings opportunities, then you are losing out on this gold mine of new and better savings for your healthcare organization. As I see it, if healthcare organizations are to be profitable, viable and thriving in 2010, they need to take a lesson from the Toyota playbook and accelerate cost-cutting efforts with value analysis.

Steering Committee

If you don’t have a value analysis steering committee, chaired by the highest level of management you can recruit for this position, who will guide, monitor and arbitrate disputes in your VA program, then you are missing a key ingredient to your VA program’s success.

Balanced Scorecard

What is visualized and measured happens should be the mantra for your VA program.  This is best achieved with a balanced scorecard that measures in real-time your savings vs. goals, milestones, meeting attendance, team and project status, etc.

Executive Champion

No real progress can be made with your VA Team(s) without an executive champion being assigned as an administrative representative to your VA team(s). This individual’s job is to represent senior management, guide VA process, arbitrate disputes, remove road blocks and smooth the road when political impasses arise.

Extensive Training

Team leaders and team members need extensive training in value analysis (it is a real discipline like LEAN Six Sigma that has a defined process, practices, tactics and techniques), or your VA team leaders and members will just WING IT, resulting in poor or unrealized savings and quality improvements. 

Project Management

All team members need to be accountable for their results.  This can only be accomplished by assigning VA studies to individual project managers who then are responsible for defining, planning, investigating and implementing VA savings opportunities. 

As you can see by this checklist, value analysis isn’t a group of individuals meeting monthly to discuss new product introductions, GPO contracts, or product failures.  It’s a formal and disciplined process that requires executive management leadership, continuous measurement, monitoring and control, extensive training and stringent project management to be successful. 

If you are missing any of these ingredients, you are forfeiting the opportunity to be the “best” of the best in value analysis.  Don’t leave these success elements to chance, but instead incorporate them into your current VA program so you can be assured of success – not failure!

This chore can best be accomplished with surveys, interviews and focus groups.  However, I have found that the most efficient and least time consuming way to gather your customers’ critical-to-quality requirements is with FOCUS GROUPS.  Louise Lee of SmallBiz Magazine tells us that there are 5 vital steps you need to know about when you are conducting focus groups. I have listed these steps below: 

1.     Do Your Homework

You need to develop a list of questions beforehand as conversation starters, but your questions should be broad enough to encourage discussion. A good way to start off is to ask your customers how they use the product, service or technology that you are studying.  This will break the ice and get the dialog going!

2.     Find the Right People

When you’re conducting a focus group not only invite customers, stakeholders and experts to participate in this exercise, but also ask a few non-customers to your session, this can help to give   your focus group members some perspective and keep them grounded.

3.     Choose a Location

If possible, have the location for your focus group as far away from their work centers as possible. In doing so, you will eliminate most distractions, interruptions which will shorten the length of your session. 

4.     Pick a Moderator

Most focus groups can last as long as two hours, and participants can be combative, blunt and critical of your efforts. Consequently, if you don’t feel comfortable in this environment have one of your hospital’s facilitator’s moderate your focus groups. 

5.     Discuss Results
Once you have completed your focus group, analyze your findings.  Look for themes and ideas that stood out in the discussion, and see how you can use them to guide your value analysis study. And be prepared for negative feedback about your focus group, since most people in your hospital don’t like change.  

As you can see, conducting a focus group takes time, planning, and analysis to truly comprehend the VOICE OF YOUR CUSTOMERS in any VA study that you conduct.  From my experience, conducting focus groups as an integral step in your VA studies will improve the quality of your studies 10-fold. As an added benefit, it will clearly demonstrate to your customers that you really are interested in their opinions, comments and advice by your actions and subsequent results.   

It has been proven beyond any doubt with our own clients that if you incentivize your value analysis teams to save MORE by giving them rewards and recognition you will increase your savings yield by as much 300+ percent. However, in the 22 years we have been working with healthcare organizations in the value analysis arena only one in eight of our clients has opted to do so.

The question is why? After thinking about this question for some time now, it seems to me that there is a “cultural Bias” in healthcare organizations against incentivizing any of their teams (LEAN, Six Sigma, value analysis, quality improvement, etc.). They believe that team members are already getting paid a salary to do this work so why should we give these individuals any extra incentive to do what they are already being paid for?

What is missing from this decision “not to incentivize teams” for their new, harder, different and time sensitive work (that they are assigned to do beyond their normally assigned duties) is that this work is a HUGE distraction from what these hospital employees think they are getting paid for. The result: Most staff members only give 40% of their time, energy and effort when assigned to teamwork – not 100%!

Change the paradigm! If you want to change this pattern of behavior in teamwork, you will need to change the perception of this work as burdensome by emphasizing that it is important, mission critical and essential to the financial health of your hospital. This is accomplished by incentivizing all of your hospital’s teams, including your value analysis teams, with rewards and recognition when they reach predetermined goals and milestones.

Believe it or not, by doing so you will quickly discover that your staff members will line up to become members of your value analysis teams (and all other teams), not avoid them. Better yet, it won’t cost your hospital a whole lot of money (about 3% to 5% of the savings) or time to establish and manage a team rewards and recognition program.

You will be repaid for your efforts with new and better savings that will generate as much at a 35:1 ROI on your investment. Doesn’t this sound like something your hospital and thousands of healthcare organizations around the country should have been doing for years? If not, why not…

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.

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.

Not Quite! We still haven’t attacked the waste and inefficiency of these same products, services and technologies in our value streams. This can represent 7% to 15% in new and better savings for your healthcare organization if you add LEAN Management techniques to your value analysis model.

The LEAN Management techniques were introduced by Toyota into their manufacturing process in 1934 to eliminate waste from their production process. LEAN’s core concept is to “eliminate anything that doesn’t add value to your products or services”.  LEAN techniques have been so successful that they are now being applied in every industry (including healthcare) in every country around the world as a waste eliminator.

It’s no longer good enough to just obtain the best price for what you buy because price is just the tip of the iceberg. You must now “LEAN” the products, services, technologies and the processes that support them if you are going to wring the towel dry on your savings.

A good example of LEAN thinking is when one of our clients eliminated all of their operating room custom packs, since they couldn’t VALUE JUSTIFY how they added value (time, labor cost or savings) to their surgical suites operations. This might seem like a radical change to you but I’m sure you will agree that it illustrates that “leaning” your operations means not accepting the “conventional wisdom” about anything that you are presently doing. It means thinking and doing differently!

We have proven over the last twenty-two years with our LEAN Value Analysis System that LEAN and value analysis work better together, since we have found that value analysis searches out lower cost alternatives to what you are doing now. While LEAN eliminates the wasteful and inefficient consumption, misuse, misapplication and value mismatches in your value streams. It is the perfect marriage of complementary tools!

So if you are looking for even deeper and broader savings with your value analysis program than ever before, may I suggest that you add LEAN Management techniques to your value analysis model to get the job done end-to-end.

Think about it!  VA meetings are where your customers, stakeholders and experts give their input, guidance and support for your hospital, system or IDN’s buying decisions that run into the millions, sometimes tens of million of dollars annually. Consequently, how can you eliminate, dispense with or skip these important VA meetings without risking the erosion of your credibility, saving yields and innovation?

No doubt about it everyone’s time is limited in our fast paced healthcare environment, but this doesn’t mean that you can’t carve out some quality time each month for your VA team meetings. One way to do so is with virtual value analysis team meetings that save time and money!

One of our multi-hospital facility clients has been conducting virtual value analysis team meetings for one of their VA teams for three years now, since some of their team members must drive an hour or more to attend their bi-monthly VA team meetings. They have one meeting a month face-to-face and one meeting a month that is virtual without missing a beat.  In doing so, they have save hundreds of thousands of dollars in one year that would never have been captured if they decided everyone was too busy and had to drive too far to have VA team meetings.

If this client of ours can have successful virtual VA team meetings whose members are statewide, then you surely can have virtual VA team meetings right in your own facility. All you need to do is leverage the technology to do so.  It’s a cheap, effective and efficient way to save time and money for everyone you need to attend your VA team meetings!

The most common advice a VA facilitator (I hope you have one) usually gives to his or her VA team members is “Call me if you need me”. The end result is that your VA facilitator never hears from your team members for various reasons (time constraints, embarrassment, or awkwardness in asking for help) and consequently your team members never become proficient in the art and science of value analysis. This then leaves hundreds of thousands of dollars in savings on the table at your healthcare organization — untouched. 

On the other hand, if you have a structured, proactive coaching approach, where a coaching schedule is followed by your VA facilitator, team leader and team members, you will improve your overall team performance by 90%.  Just as important, your savings performance will improve by 2, 4 or even 6-fold over your current savings performance.

There’s a lot more to effectively coaching your value analysis team members (qualities of an effective coach, duration and content of sessions, sponsor and team leader involvement, accessibility, documentation, etc.), but we will leave these topics for other blog articles.

What the lesson learned from this blog article should be for you is that telling your team members to “Call me if you need me” is the worst advice you can give your team members.  Only with a structured, proactive coaching approach can you dramatically improve your value analysis teams and team member’s performance.

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

Bobpres@strategicva.com

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. 

Savings Beyond Price -Weekly eNewsletter – June 10, 2009

Robert T. Yokl

President & Chief Value Strategist

 

Dollarize to Save Big

Greetings,

One of the techniques that we teach in our advance value analysis training programs is to “dollarize to save big” so that you can, for the first time, negotiate out unwanted and unneeded functions and features on your customer’s requested new (or existing) products, services and technologies.  This is a powerful tactic that you need to understand and then consistently employ in all of your commodity negotiations with your customers.

Here’s an example of what I’m talking about!  There was a recent study conducted by J.D Power asking potential car buyers what functions and features they desired in their cars. This was done without showing them the price of these options. Naturally, one of the highest rated features (second on this list) was a navigation system, but when these same buyers were shown the cost of the navigation system ($1,500) their ranking for this option dropped from second to 10^th on their wish list.  

Why did this happen?  Because when you dollarize the functions or features for any commodity purchase you give your customers a REALITY CHECK to make sure that they absolutely, positively need it.  In most cases, they won’t select a high price option if they can’t value justify it in their own mind. 

Here’s another example?  If you would dollarize how many ports you clinicians need in your IV sets ($1.00 each), you will find most clinicians won’t select more ports then they actually need to get their job done. On the other hand, if you ask these same clinicians how many ports they require in their IV set without dollarizing, every one of them will select the maximum amount available. It’s just human nature to ask for more then you really need to give yourself a safety zone to work in. 

So, if you want to dramatically reduce the total cost of everything you are buying don’t forget to “dollarize to save big” when you are negotiating with your customers on the things that they say are really important to them. You will be pleasantly surprised at the savings results!

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. Is it time to think about advanced training for your value analysis team/committee?  With many hospitals about to start a new Fiscal Year with more challenging savings goals than ever before, you may want to give your teams an added advantage with advanced value analysis training.

 

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.