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!
New No Cost Webinar – Value Analytics The New Science of Savings
Value Analytics
The New Science of Savings
Learn the advanced methods and strategies to analyze your utilization trends, patterns and variations in your supply spend categories so you can move to the next level of savings performance beyond price.
Webinar Overview
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Are You Flying Blind?
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Why Value Analytics?
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What is Value Analytics?
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A Road Map for Success
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5 Key Elements for Precision
Thursday,
November 12th – 1:00pm Eastern
All
Registered Attendee’s Will Receive a Copy of the Webinar Slides and
Audio Replay at No Cost to You!
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
Webinar May Be FREE But The Information is Priceless
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.
New Science for Bigger Savings
Savings Beyond Price -Weekly eNewsletter – January 28, 2009
Robert T. Yokl
President & Chief Value Strategist
New Science for Bigger Savings
There is a new science for saving and operational excellence called “value analytics” that can squeeze every LAST drop of savings out of your supply chain and make your operations even more efficient and effective than ever before.
At a time when every dollar saved is surely needed to hold back the red ink at your healthcare organization, if you aren’t employing this powerful technique to uncover new savings and leverage operational improvements you are missing out on a powerful transformational tool.
It comes down to this! Most hospitals, systems and IDNs are throwing darts at an elusive and moving target to find their best savings and operational improvements. And with meager results! This is because most healthcare organizations aren’t employing a scientific approach to identify their best opportunities.
That’s where “value analytics” comes into play. It’s the art and science of measuring trends, patterns, and variations in your supply chain spend and operations in order to quickly identify savings and operational opportunities.
As an example, we recently found that one of our clients was trending unfavorable, by as much a $172,339, in their defibullator expenses. In another study, we found that a client of ours was generating too many purchasing orders for their size organization and therefore needed to reinvent their purchasing operations to reduce their operating cost.
It’s not an accident that we uncovered these anomalies in our clients supply chain operations. It’s because we employed “value analytics” to do the difficult work for us that never would be uncovered by the naked eye or even intuition.
That’s why I call “value analytics” the science for bigger and better savings and operational excellence. This is where the future of supply chain management is going. Is this the direction you are going too?
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 a reprint of an article I wrote for Hospital Materials Management on “Value Analytics” that explains this new science in detail just e-mail your request (with your fax number) and I will promptly fax it to you.
P.P.S. Don’t forget to check out our new blog “Is Value Analysis a Numbers Game?!” that will help you understand how to turbo-charge your value analysis studies.
Your Low-Hanging Fruit Has Been Picked! NOW WHAT?
I guess you have figured out by now that “there aren’t any more easy savings to be achieved”, on price, standardization, or even on your distribution fees. And I’m sure you have been asking yourself lately – now what do I do?
Another way to state this reality is that the “fish have stopped jumping into your boat”. This is because we have all have focused our supply chain efforts on price for the last 20 years and have wrung the towel dry in price savings. I’m sure you get it; there is NO more low-hanging fruit to be picked!
Now What? The answer to the dilemma we all face is for you to progress beyond just price savings and move up to the next generation of savings productivity which is called utilization management. To put it another way, you need to attack your wasteful and inefficient consumption, misuse, misapplication and value mismatches in your supply chain where your greatest savings can be achieved.
For instance, just last week I was talking to a MM — who gets it – who told me he just completed a utilization project where he measured the variation in his orthopedic surgeon’s implants and found a $50.00 per case difference between his surgeon’s procedures. Since his hospital performs 1,700 orthopedic cases a year, this could mean a potential savings of $85,000 for him. This is where you too need to expend your time (analyzing your data), vs. trying to shave off another one percent off your orthopedic implant cost, which probably isn’t going to happen.
In brief, your low-hanging fruit has been picked – get over it! There is a whole new world of utilization savings just waiting to be harvested, if and when, you take the time to measure, manage and control them. We call this the new discipline “value analytics*” which is the future of supply chain expense management. Don’t miss the boat on this one!
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* If you would like to see how we perform value analytics with our Utilizer™ Dashboard that will make you job easier, more fun and more profitable you can sign up for a test drive at www.strategicva.com/utilizer.htm.
