My first reaction to this eye-opener was that this must be a typo, but then I realized that this number was consistent with AHRMM’s 2007 (30.7%) and 2008 (36.5%) survey results, so it must be right. I also know that many hospitals, systems and IDNs don’t have active value analysis teams, so that’s one reason why this number is so low. Another reason it’s low is that not all supply value analysis programs report to material management. I have often seen this vital function reporting to nursing service, not materials management.

My thinking is that even if this number is a little off, it still shows a dangerous trend in healthcare: Material management isn’t 100% in charge of their healthcare organization’s supply value analysis programs or there is no VA program is place to do so! 

As I see it, VA is a mission-critical function of materials management.  Every hospital, system and IDN should have a supply value analysis program and it absolutely should report to materials management.  This is because price is the smallest factor in the total cost equations (about 21%), while 79% of your product, service and technology cost is attributed to the in-use cost of the commodities you are buying. Based on our empirical experience, only VA teams can drive out these unnecessary and unwanted utilization costs…period!

In brief, if your hospital, system or IDN is to get ahead of the wave in the new healthcare economy that is upon us, you will need to embrace the value of value analysis in controlling your total supply expenses. This means, in practice that you will need to take charge of your VA program if it reports to another department or establish VA teams to get this hard work done. 

The alternative is to either ignore this proven cost-cutting methodology or leave it to someone else in your hospital, system or IDN to get this important work done. This doesn’t seem like a plan to ensure your job security to me, so I would suggest that you take charge of your VA program today or get your VA program started to protect your turf and to keep your paychecks rolling in for the foreseeable future.  It doesn’t take a whiz kid to see this as the road you should travel.

Let’s face it value analysis is not as easy as it looks. If you were to tell me that you could establish a Six Sigma Teams without training black, yellow and green belts and then expect these teams to achieve Six Sigma outcomes you would be just kidding yourself.  Your team members would need extensive training in Six Sigma to accomplish superior results. Value analysis is a discipline very much like Six Sigma or Lean Management. To be proficient at value analysis you need to have extensive, continuous and up-to-date training for peak performance!

That’s why this client not only began their VA program with extensive training for all their team leaders and team members, but they also realize that this education is never ending and that in order to continually improve their VA program they must refresh their VA training each and every year.

For example, this client told me that they contracted with a trainer last year who focused on evidenced based management. This year they hired our firm for advanced value analysis training as well.  This is not a one-time event for this client, but an ongoing stratagem to continue to hire the best value analysis trainers and on an annual basis give their VA teams new and even better strategies, tactics and techniques that they can employ to boost their VA team’s performance.  

It was also important to note that this client had their Chief Operating Officer attend this training session and then spoke to the group during a break. He reaffirmed how important all of their VA work is to their hospital, especially since their reimbursement is not going to go up any time soon even though higher technology expenses are still pushing their costs up each and every year.  I can’t tell you how significant it is to have an executive management sponsor, like this COO, fully engaged and very active in hospital’s VA program!  From my perspective, it will certainly make these team leaders’ and team members’ job easier and their teams much more successful.

One of the reasons this client’s VA program has been so successful over the last few years is that they keep the momentum going with VA training each and every year so that their VA teams never lose focus of how important they are to the financial success of their healthcare organization.

It’s easy for any hospital, system or IDN to put a VA team(s) together and say “Go Save Money”. It’s usually followed by capturing some low hanging ripe fruit that’s ready to be harvested. Nevertheless, we have found that the true test of a VA program’s sustainability, profitability and productivity is for them to achieve measurable and meaningful savings after their low hanging fruit has been picked clean! 

An annual VA refresher course on the most up to date techniques in value analysis would be a good starting point for you too to keep your VA team(s) focused and motivate each and every year.  
Last but not least, it doesn’t take a lot of time, effort or money to do so.

We were delighted to hear that this team leader was moving in this direction since VA isn’t just about product, service or technology evaluation/selection. It’s all about reducing your total cost from acquisition to disposition of your products, services and technologies. We therefore have encouraged all of our value analysis clients not to isolate their product, service and technology investigations to the commodities themselves, but to instead dig deeper and broader into their value streams to eliminate any and all waste and efficiency that might reside there hidden from their view.

Over the years we have conducted numerous value analysis process engineering studies by employing a FAST Diagram*.  In my opinion, it is the best value stream mapping “made simple” tool available today.  I can make this declarative statement since I have used numerous value stream mapping tools in my 27 year consulting career and hands-down the FAST Diagram is the easiest one I have found to learn, understand and then quickly generate results in the shortest time.

If you’re not familiar with FAST Diagramming let me explain. FAST Diagramming will enable a value analysis practitioner to identify each function, in a logical sequence, prioritize them and then test their dependency, efficacy and relative worth to your customers in any value stream process under investigation. In this way, you can more skillfully understand the complexity of your value stream processes as opposed to becoming preoccupied and paralyzed with methods and practices of flow-charting or traditional process mapping.  

We have documented, by utilizing FAST Diagrams, up to 23% in process improvements (time, labor and resources) in any business process that we have studied over the years. More importantly, we have never found a dry hole in any study to date, which is proof positive that FAST Diagrams work.

So if you want to mine even more savings for your value analysis program, don’t have your VA team(s) stop your VA studies at your product, service or technology evaluation/selection phase. Have them move on to the next phase of your VA study — process improvement.  

If you do, you will find that there are both big and small savings to be achieved in this process improvement phase of your VA study that will be well worth your time and effort in doing so.  Up to 23% to be exact! 

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*Learn more about how to perform a FAST Diagram in “The Ultimate Value Analysis Program” pages 177 to 186.

Savings Beyond Price -Weekly eNewsletter – January 7, 2009

Robert T. Yokl

President & Chief Value Strategist

 

Your Secret Weapon for 2009

I had some time over the holidays to think about how the financial crisis we are now experiencing has affected almost all healthcare organizations’ census, investments and revenues, I came to this conclusion: Hospitals don’t need more patients, investment income or even revenues to be profitable.  All they need to do is to become more efficient to be profitable!

This is your hospital’s SECRET WEAPON for 2009 to ensure your healthcare organization’s viability.  I can’t think of any hospital that isn’t wasting their time, money and resources. But the good news is that you can cut 7% to 11% from your supply chain budget now if you waste less.

Here are six ways you can waste less in your supply chain in 2009 to survive in these hard economic times:

1.                      Lock Down Your GPO Contract Compliance

Most hospitals aren’t fully realizing their GPO contract cost benefits (i.e. food, service contracts, paper products, chemicals, physician preference items, etc.) because of their department heads’ resistance to change.  This is unacceptable behavior in this harsh economic climate. Now is the time to lock down the compliance on all of your GPO contracts to realize your full savings potential.

2.                      Attack Your Utilization Misalignments

I can’t think of a better time to attack the biggest waste in your supply chain: Wasteful and inefficient consumption, misuse and value mismatches in your value streams which are costing your hospital 8% to 14% in unnecessary cost. If not now, then when would there be a better time to do so?

3.                      Shrink Your Inventories to a Minimum

Your hospital needs more and better cash flow than ever before. What better way to do so then to take cash off your shelves in the form of unnecessary and unneeded inventory and put it in your hospital’s bank account?   

4.                      Re-energize Your Supply Value Analysis Program

I haven’t seen a supply value analysis program that couldn’t be renewed to be faster, better and to yield more savings beyond price. To do so you will need to refocus your savings on utilization of the products, services and technologies you are buying — not just on price.

5.                      Implement a Productivity Management System

If you don’t have productivity standards for all of your supply chain activities and a monitoring system to hold your staff accountable for their efficiency, then you are wasting a whole lot of time and money getting your work done. Remember: What is measured and monitored will improve!

6.                      Increase Your Use of Technology

There is no better way to cut waste and inefficiency in your supply chain than having technology lead the way.  Using faster, smarter and better technology than you have now gives you ultimate visibility into your supply chain, not just using it for your transactions. In 2009 you need search out better technologies that will make your job easier and more productive!

Yes, we all will have a rocky start in this New Year due to our weak economy, but it doesn’t need to be a catastrophe for those supply chain professionals who decide that there is too much waste and inefficiency in their supply chain that now needs to be removed for increased profitability for your healthcare organization.

Your Partner In Savings Beyond Price™,

Robert T Yokl

Chief Value Strategist

Strategic Value Analysis® In Healthcare

Bobpres@strategicva.com

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.

I can’t think of any another profession (yes, value analysis is a legitimate and growing occupation in healthcare) that doesn’t require any training or educational requirements in order to be a value analysis leader or practitioner. Even bus drivers must have training, education and a special license to drive a bus.

Yet, value analysis leaders and practitioners make million dollar decisions, year-in and year-out, for their healthcare organization without any training. Is their something wrong with this picture?  I would think so!

If you aren’t aware of it, value analysis is an acknowledged and respected discipline with a 60-year history that has a defined six-step process (called The Value Methodology*) that needs to be religiously employed by VA leaders and practitioners in order to save money and improve quality. If you aren’t applying this value methodology in your value studies then you aren’t practicing value analysis – you are doing something else instead.   

To be truly called a value analysis professional (i.e. conforming to the standards of skill, competence, or character normally expected of a properly qualified and experienced person in a recognized disciple) you will need to upgrade, improve, and advance your skill sets to the next level of proficiency in this growing art and science.  This can only be accomplished with formal classroom training and education in this discipline.  

Isn’t it time you search out specialized value analysis training for yourself, value team leaders and your value team(s) so that you can become qualified and experienced in order to drive your value analysis bus?

_________________

* If you are ready to upgrade, improve and advance your value analysis skill sets and learn the value methodology, may I suggest that you consider registering for our Certified Value Analysis Leadership™ Training Program to be held on November 4-6, 2008.

• Added Many More Value Analysis, Utilization and Supply Savings Case Studies
• More Focused Training on Utilization Management and Benchmarking for Value Analysis Professionals
• Focus the Training to Be More Hands on with Real Time Actionable Results
• Share with you the Latest Strategies, Tools and Methods to Save More in Less Time with Less Effort
• Further Enhanced our Value Analysis Leader Web Software (included in the workshop)
  • New Utilization Benchmarking Section
  • More Savings Ideas to the Savings Idea and Best Practice Database
  • More Members Only Webinars

What’s value analysis all about?  It’s about commitment, discipline and focus and finding lower cost alternatives to what you are doing now!  If you are missing even one of these success components you can’t and won’t have consistent, sustainable and substantial savings results.

VA is all about having your senior management commit to making savings happen for your supply value analysis program or it will slowly, but surely sputter, fizzle and die.

VA is all about having discipline (practices and methods to enforce acceptable behavior) from the top, right down to your value team level or you will be going every which way — but forward.

Value analysis is NOT about GPOs, capitation, standardization or custom contracts, but is all about utilization management: wasteful and inefficient consumption, misuse, misapplication and mismatches. If you are focusing all or most of your efforts on the price side of the supply equation, you are missing 79% of your hidden savings opportunities.

To bring these points home here’s is an example: we once were retained by a hospital CEO who intuitively understood that saving money was ALL about commitment, discipline and focusing on finding lower cost alternatives to what his hospital was doing.  With our help, he organized, and operationalized his hospital’s multi-phased savings initiative.  He then became the chief cheer leader for his management team and hospital staff, encouraging his staff at every opportunity to dig deeper and broader then ever before to search out and find those hidden savings. Well, as you could have guessed, within a year his hospital saved over $6.5 million.

There is no magic to this success formula; just the commitment, discipline and focus to make savings happen the old fashion way: Hard Work!   

Your Partner In Innovative Savings,

Bob Yokl

Robert T Yokl

Chief Value Strategist

Strategic Value Analysis® In Healthcare

P.S. If you are looking to establish, enhance, re-energize and dramatically improve your value analysis program (or you have hit the wall on savings) then our Certified Value Analysis Leader Program to be held on June 24-26 is the ticket for you. And, as a bonus, you will receive a one-year subscription to our new Value Analysis Resource Web at “no cost” to you. Note: Only 25 days left to save on our early bird rate of $1,192.00! click here to learn more

P.P.S. Hove you checked-out our new and improved Savings Beyond Price™ blog where I talk this week about the “Supply Chain Hall of Fame Honors Nine Superstars”.? Can you guess who the honorees are?  If not, I have listed them for your review. and I hope some comments.  Visit the Blog Here