Strategic Value Analysis In Healthcare – Supply Chain Hospital Consulting and Healthcare Consulting – Savings Beyond Price – Lean Value Analysis

Opening Up a Whole New World of Supply Chain Savings

Taking Your Value Management Performance to the Next Level

EVOLUTION$$$$$$$$$$$$

TAKING YOUR VALUE MANAGEMENT PERFORMANCE TO THE NEXT LEVEL OF MATURITY!

The dynamics of value management (value analysis and value engineering) in the healthcare industry has radically changed over the last ten years. We have watched as healthcare organizations moved from Sole Practitioner to Value Teams (Value Management Continuum) to determine the relative worth of the products, services and technology purchases. Yet, with few exceptions, hospitals and healthcare systems have not reached the superior performance stage of maturity in this discipline. As value management (VM) matures in the healthcare industry, the basics need to evolve, thus taking your value management performance to the next level of maturity. This leap forward is crucial if your healthcare organizations are going to thrive and survive in the 21^st century.

SVAH’s surveys show that 80% of healthcare organizations today are employing Products Evaluation Committees or Value Analysis Committees to manage and control their non-salary expenses, which is a great leap forward from the days when sole practitioners tried to manage and control their hospital’s supply/value chain expenses. Nonetheless, this improvement in value management hasn’t set the stage for superior performance, which requires a committed culture, new organizational architecture, new skills, technology and reshaping the way you evaluate and select your products, services and technology purchases.

What’s Holding Back Superior Performance?

8 key reasons or factors that we have identified that are holding back superior performance in value management at our nation’s hospitals and healthcare systems today:

1. No Road Map

Most value management programs are started without much thought about strategy development and deployment, thereby getting off on the wrong foot before they get started.

2. Time-Knowledge-Manpower

There is never enough time, knowledge or manpower for value management programs, because material management believes this is their area of responsibility alone.

3. Winging It

The lack of a defined scientific process for evaluating products, services, technologies, systems or process. It is much easier to just WING IT!

4. The Puzzle

No central database — just multiple spreadsheets being continuously pieced together without capturing vital documents, studies and projects.

5. Who Did What, When and Why

No follow up, follow through or accountability for studies or projects.

6. Round Peg In A Square Hole

The conventional wisdom that standardization of products, services, technologies, systems and processes is the goal of value management, when in fact the goal should be customization.

7. Trial and Error

Consuming clinicians’ time trying this product or that product in their particular department to see if they “Like it” without first defining their exact functional requirements.

8. Clinician Push Back

The practice of pushing and pulling the clinicians in the direction of change as opposed to partnering with them is a usual occurrence in healthcare organization’s today.

As these eight reasons suggest, moving from the Awareness Stage to the Superior Performance Stage of value management is an evolutionary process, which usually requires higher-level skills and new processes (identified as GAPS) than a healthcare organization has at the current time. To move to the next level of performance you must evaluate your current state and envision your future state, then develop and prioritize your plans to get there.

At What Level Of VM Maturity Is Your Healthcare Organization?

There are four levels of value management maturity: Awareness, Understanding, Competency and Superior Performance. At which level of maturity is your healthcare organization? How effective and efficient is your value management system?

The concept of the Value Management Maturity Model (VMM²) shows that there are varying levels at which a healthcare organization can perform value management. This means as an organization grows and matures, its capabilities should progress along a continuum that should become more proficient and effective over time. The purpose of the VMM² is to determine where your internal practices have large variations or GAPs in VM maturity. It is our vision that a healthcare organization will use the VMM² to measure its value management maturity against VM best practices to determine their GAPs, then put in place the mid-course corrections needed to move to the next level of VM maturity

Taking Your VM Performance To The Next Level

Over the last 20 years, we have observed healthcare organization’s value management performance maturing from an AWARENESS STAGE in the 80’s to an UNDERSTANDING STAGE in the 90s. Yet, few hospitals or healthcare systems have reached the COMPENTENCY or SUPERIOR PERFORMANCE STAGES in the 21^st century due to performance GAPs in their VM programs. As VM skills and methodologies mature the basics of the VM discipline must evolve to the next level of maturity to enable your health care organization to survive and thrive in this century.

For the purpose of having a common language to measure VM maturity at any healthcare organization, HCP has developed a rating system for healthcare executives and MMs to make a clear judgment on current level of maturity: their healthcare organization’s.

AWARENESS STAGE

Healthcare organization is aware that changes in their VM program are needed since it isn’t working: rudderless, low cultural commitment, inadequate organizational architecture, low direction, low support, price oriented, no training, no decision support or knowledge management.

UNDERSTANDING STAGE

Healthcare organization understands some of the basics of value management, but doesn’t know how to get to the next level of performance; adaptive and innovative, medium cultural commitment, value analysis steering committee, high direction, low support, customer focused, TQM training, utilizes templates for decision support, and minutes for knowledge management.

COMPETENCY STAGE

Healthcare organization is competent in utilizing most VM best practices, but still is challenged by time constraints, accountability issues, and clinician resistance: Creating purpose, high cultural commitment, VM steering committee, value teams, low direction and high support, outcome-based results, 40 hrs of VM training, utilizing value management software and, spreadsheets for knowledge management purposes.

SUPERIOR PERFORMANCE STATE

Healthcare organization has obtained mastery over VM strategies, tactics and processes and is now performing at a superior level of performance: strategic planning driven, board approved as mission critical, employs team-based project management model, Situational Leadership®, function oriented, continuous training, utilizes value management software with data warehouse.

With these definitions in hand, you will now have an opportunity to objectively measure the maturity of your current VM program. To assist you further with this challenge we have listed below a sample Value Management Maturity Model™ template for your review.

Strategic Value Management Maturity Model™ (VMM²)

The VMM²is organized in eight key value management requisite areas that are required for your healthcare organization to reach the highest level of performance in VM. The chart below illustrates how specific VM requisites would fall within each VM maturity level of varying degrees of VM maturity. For each requisite, some fundamental characteristics are identified, as well as the necessary changes in VM architecture, commitment or skill levels required for maturation from the Awareness Stage to Superior Performance Stage of the VMM². Using the VMM²as a guide, a healthcare organization would assess its current state and envision its future state to progress from its current state of maturity to the next level of VM performance.

Strategic Value Management Maturity Model™

VALUE MANAGEMENT REQUISITES	*Awareness Stage*	*Understanding Stage*	*Competency Stage*	*Superior Performance Stage*
Planning	Rudderless	Adaptive and Innovative	Creating Purpose	Strategic Planning Driven
Cultural Commitment	Low	Medium	High	Board Approved as Mission Critical
Organizational Architecture	Product Evaluation Committee	Value Analysis Committee	(1) VM Steering Committee (2) Value Teams	Team-Based Project Management Teams
Leadership	(1) Low Direction (2) Low Support	(1) High Direction (2) Low Support	(1) Low Direction (2) High Support	Situational Leadership®
Defined Repeatable Process	Price Oriented	Customer Focused	Outcome-Based Results	Function Oriented
Training	No Training	TQM Training	40 Hrs of Value Management Training	Continuous Value Management Training
Decision Support	None	Templates	Project Management software	Value Management software
Knowledge Management	Memos	Minutes	Spreadsheets	Data Warehouse

Situational Leadership® is a Registered Trademark of the Blanchard Family Partnership

Value Management Maturation Process™

While the VMM² can be helpful in identifying the performance stage of your VM program today, a more in-depth VM Maturation Process™ is recommended to determine the areas that you need more focus and improvement in to enable your healthcare organization to progress to the next level of VM performance. The VM Maturation Process™ is a systematic and defined planning process leading to the reinventing of your VM program. The process itself will enable your healthcare organization to appraise the strengths and weaknesses or GAPS in your current VM program and envision its future state or next stage of maturity. This process could take 60 to 90 days to complete.

Evaluating Current State of Your VM Program

The VM Maturation Process™ begins with an evaluation of your current vision, mission, values, objectives, etc., of your current value management program to understand where you are today. Without this understanding you may make critical assumptions that are wrong and will hold back the maturity of your VM program. We have listed below a checklist of the valuations that are required to determine your current VM maturity stage:

CATEGORY	EVALUATE YOUR CURRENT STATE
MISSION	Describe your current VM program mission or basic role or purpose today.
VISION	Describe your current VM program vision or what you perceive your VM program will look like when you meet your mission.
VALUES	Define the values (principles, standards and ethics) of your current VM program.
OBJECTIVES	Describe your current objectives (savings and quality) for meeting your mission and vision.
CULTURAL COMMITMENT	How would you describe your organization’s cultural commitment to your VM program? ( ) low ( ) medium ( ) high or ( ) board approved
ORGANIZATION ARCHITECTURE	Describe how your current VM organizational architecture is structured (administratively and operationally).
LEADERSHIP	Describe the leadership of your VM Program at each operational level (from low support – low direction to Situational Leadership®).
POLICIES AND PROCEDURES	Describe the policies and procedures for your current VM program.
VM PROCESS	Describe the VM process you follow repeatedly to evaluate and select your products, services and technologies.
DECISION SUPPORT	How do you insure that a scientifically repeatable process is being utilized by your value team members?
KNOWLEGED MANAGEMENT	How are you capturing and sharing the best practices that are being identified by your value teams?
OUTCOMES	What have your outcomes been (saving and quality) over the last 12 months?
MEASURES	How are you measuring the success of your value management program?
BASELINE	What is your baseline or benchmarking to determine the savings and quality that are obtainable?
TARGETS	What areas have you targeted in the last 12 months for savings or quality gains?
STRATEGIES & TACTICS	What strategies and tactics are you employing to improve your value management program performance?
PRORIATIZATION	How have you prioritized your savings and quality initiatives (list them)?
REWARD AND RECOGNITION PROGRAM	Describe you current reward and recognition program (if any).
EVALUATION SYSTEM	How are you evaluating that you are meeting your stated goals and objectives?

Envisioning Future State of Your VM Program

The VM Maturation Process™ ends with your vision of the future state (vision, mission, values, objectives, etc.) of your VM program which would enable you to formulate a written plan to meet your stated future objectives, based on the gaps you have identified in your current VM program. Without this vision exercise to determine the future state of your VM program, it is impossible for you to formulate stretch goals or to reinvent your VM process, thereby, inhibiting you from reaching the next level of VM maturity. We have listed below a checklist to assist you in determining your future VM state:

CATEGORY	ENVISIONING YOUR FUTURE STATE
MISSION	Describe your future VM program mission or basic role or purpose today.
VISION	Describe your future VM program vision or what you perceive your VM program will look like when you meet your mission.
VALUES	Define the values (principles, standards and ethics) of your future VM program.
OBJECTIVES	Describe your future objectives (savings and quality) for meeting your mission and vision.
CULTURAL COMMITMENT	How will you gain your organizations increased cultural commitment for your VM program?
ORGANIZATIONAL ARCHITECTURE	Describe how your future VM organizational architecture is structured (administratively and operationally).
LEADERSHIP	Describe how you will increase the leadership potential of your VM Program at each operational level.
POLICIES AND PROCEDURES	Describe your new policies and procedures for your refined or reinvented VM program.
VM PROCESS	Describe the VM process you will follow to improve the evaluation and selection of your products, services and technologies.
DECISION SUPPORT	How will you insure that your value team members are utilizing a scientifically repeatable process and have the tools necessary to complete their projects?
KNOWLEGE MANAGEMENT	How will you capture, document and share the best practices that are being identified by your value teams?
OUTCOMES	What outcomes (saving and quality) will you have over the last 12 months?
MEASURES	How will you measure the success of your value management program?
BASELINE	What will be the baseline or benchmark you will be employing to determine your savings and quality potential?
TARGETS	What areas will you target in the next 12 months for savings or quality gains?
STRATEGIES & TACTICS	What strategies and tactics will you employ to improve your value management program’s performance?
PRIORITIZATION	How will you prioritize your savings and quality initiatives (list them?
REWARD AND RECOGNITION PROGRAM	Describe the reward and recognition program (if any) that you will employ to incentivize your value team leaders and members.
EVALUATION SYSTEM	How will you evaluate the meeting of your stated goals and objectives?

Taking Your VM Skills and VM Process to the Next Level

Raising your VM skills and VM maturity level is an evolving process that won’t happen overnight. From our experience, it will require two to three years of hard work to reach the level of Superior Performance. Then the challenge for you will be how to maintain your VM program at peak performance. This can only be accomplished through continuous: (i) strategic thinking, (ii) Gap analysis (iii) process analysis and redesign, (iv) education and, (v) maintenance and incentivizing of your value teams to perform at even greater levels of performance.

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