Supply chain and value analysis seem like an endless world of projects, initiatives, conversions, problems, recalls, and new product request evaluations that just go on and on. Once you think you have everything taken care of, other problems or initiatives show up. One thing is for sure, there also comes a lot of uncertainty with all these initiatives, projects, and new product requests. You need to know with confidence how you are going to handle these situations strategically to meet your goals and objectives.
Should You Trust Your Gut or Rely on a Proven Benchmarking System?
One of the best tools that I have used over the past 25 years and continue to use is benchmarking. Benchmarking can answer all of your questions as well as show you the right direction you need to be taking your organization. Gut feeling is great, but at the end of the day you will need to know that your gut feeling is in fact correct and that you are not leaving money, performance, or life cycle results on the table needlessly. Plus, you don’t need your Senior Leadership to hire some consultant who comes out of left field and makes you look bad when you should be the one reporting all aspects of benchmarking of your department back to your leaders.
Below are a few reasons that might make you think further about planning to implement a benchmarking system or enhance your existing system.
#1 – Leave Nothing to Chance – Cover All Your Bases
The time has come for all Supply Chain and Value Analysis Leaders to employ their own strategic patient volume centric benchmarking system to cover all the bases and then some. What if in everything you did you had multiple angles (reports) to view strategically before you even lifted a finger one way or another? No whims, no guesses, just real facts based on real data – your data!
I sit in VA meetings all the time and when I see a new product request for any given category, I pull up that hospital/health system’s category benchmarks to see where they stand. If they are high in the cohort benchmark range and a surgeon is again asking for additional instrument spend, I let them know this as that is important information for a VA team to know.
Another organization was about to perform a system-wide value analysis review of endomechanical products because their lack of standardization was costing them as they could not attain the best tier pricing. Instead, by using their benchmarks we were able to figure out that it was only one of their facilities that was causing the issue and the rest were close to best practice levels. We even helped them using product level benchmarking on cost per surgery case to show which products were causing the problems (endo-reloads). This saved so much time and effort as nobody had to do any major value analysis review but instead were able to jump right to the root cause at the problem hospital in their health system. It could have taken a VA team months to figure out what their benchmarking system told them in just a few days.
#2 – You Need to Know Where You Stand
As mentioned earlier, your gut feelings are great, but at the end of the day Supply Chain is a multi-million-dollar business and we need to be more certain about our GPO telling us what tier we are at and that we feel good about our costs in any given category. We need to know where we stand in the over 750 major categories of products we purchase and over 500 of the purchased service categories. Remember, you may have the best pricing in most of your purchase categories, which is great, but there is more to keeping costs in check than the almighty price. We call this savings beyond price which includes managing things like waste, inefficient use, feature-rich products, life cycle cost issues, and value mismatches that can keep your costs high even with the best pricing. Why not uncover the hidden gems right in your backyard?
#3 – When You are Contemplating Taking Any Initiative Action, You Need to Know Which Way the Wind Is Blowing
When you start a new initiative, there is what we call the “Before, During, and After Effect” of what you are about to undertake. As the example above on the endomechanicals highlighted, you will want to check your benchmarks before you take any action to spare yourself unforeseen issues or to validate your next steps. Time is too valuable when it comes to making sure you are engaging in the right areas and have the right stakeholders for your initiative.
Don’t disregard the “During Effect” while you are working on an initiative. Things don’t stop happening in the weeks or even months that you are performing a review. Make sure things aren’t getting worse or better during a review. For example, a large health system was working on a $650K savings opportunity but took over eight months in their value analysis process and were taking their time being deliberate, all the while the category’s cost was continuing to increase rapidly during those eight months of analysis. They were not aware that the costs had gone up another $280K during that time frame. If they had been tracking the “During Effect,” they would have been able to prevent that huge increase from occurring. It’s always better to know than to not know.
Lastly, you want to know what the results are after the fact on any change or implementation. There is no better way than to use your benchmark/key performance indicator measures before your initiative starts and then continue to measure against that moving forward, well after the implementation has taken place.
#4 – Benchmarking Allows You to Be Proactive
Other than working on contracts before they expire or bidding out categories to gain better pricing, you might think there is not much more proactive you can be versus the normal reactive world we live in in the healthcare supply chain. But if you had measures and benchmarks, you could trend and track your major and minor spend categories and quickly have them tell you where you are trending too high or even trending too low. Using too much product could be a sign of waste, inefficient use, value mismatches, or even product failures that will affect costs and quality. In turn, trending too low in a particular product category could uncover other issues like quality and life cycle optimization. The advantage of being proactive with your benchmark trending and tracking is that it allows you to solve small issues before they become major issues months or even years down the line.
#5 – You Need Flawless Proof for Department Heads & Managers
Supply Chain or Value Analysis does not buy anything – it is the department heads and managers whose departments specify the products, services, and technologies that are procured. With any supply chain or value analysis initiative, you are going to need proof that any savings, quality improvement, or conversion’s juice is worth the squeeze. Yes, these department heads and managers sit on your VA teams and are all for saving money or improving quality, but at the end of the day, everyone is for change until it comes to their department. Benchmarking gives you proof that will gain the buy-in of your department heads and managers and not allow them to “talk away savings” which they are very good at.
#6 – Benchmarking is Not a One-Time Event
The healthcare supply chain is constantly changing, adapting, growing, and even shrinking in some respects, and it all comes down to the patient volumes that are coming through your doors every week, month, and year. It is important to be constantly measuring and benchmarking your supply chain today and on a continuing basis to in order to know exactly what is changing and how you will address or not address these changes.
#7 – Benchmarking Will Instantly Make You Look Like a Genius
It’s impossible to be a subject matter expert in every category of purchase in the healthcare world but benchmarking levels the playing field a bit for you in the sense that you will know a lot about your organization and your benchmarked trends for all of your categories. You can then talk intelligently about these trends and what is and what is not included in your data and even enhance the benchmarking even further with feedback from your true clinical subject matter experts. Everyone wins here and it quickly allows you to engage in a value analysis initiative without having to be that expert every time.
#8 – Insurance Policy for Anything and Everything Supply Chain/Value Analysis
There is nothing better than having full confidence in your supply chain and value analysis efforts as well as the sustained results that you have brought about. I cannot tell you how many times our clients have reached out to us or just went in and ran their latest benchmark report when they had questions about costs being too high or quality being off, etc. This happens often and just telling your leaders that your price is the best is a great thing but being able to tell them that your overall total cost and quality is also excellent is a relief. Some may wonder whether they want to go to this level of detail and perhaps scrutiny on their supply chain and value analysis initiatives. To this I say, wouldn’t you want to know all you can know and use this as a forever insurance policy moving forward? You should know all you can before anyone else even thinks of challenging you.
#9 – It is One of the Best Evidence Sources Because It’s Yours
Benchmarking your own health system at all levels is the best evidence you could ask for as it is your own data formatted in a way that your leaders, department heads, and managers will buy into. Yes, you can benchmark with organizations outside your health system as well, but you can do a whole heck of a lot of good benchmarking and analysis with just using your own data with historical and periodic benchmarking as well as cohorting within your system. As a provider of these solutions, you do also have the option to be benchmarked against cohorts that will give you a good idea of where you stand in the marketplace. This is great knowledge and evidence that cannot be disputed because it is yours.
#10 – Make the Invisible Visible
We often talk about seeing the invisible or opportunities beyond price that reside in your supply chain purchases, but how do you really see them? Remember, just because a spend is high in a particular area does not necessarily mean that it is not just a reflection of your patient volumes. When you marry patient volumes to your supply chain in the form of an automated benchmarking system you can then see where the invisible opportunities are hiding in many ways such as year over year analysis, 6- and 12-month trends, cohort benchmarks, system level benchmarks, etc.
These will show you where something different is happening in your 750 major supply categories that you should be aware of. Savings beyond price requires looking at the total cost divided into your patient volume metric, e.g., Balloon Catheter Cost Per Cath Lab Case. If your cost is up year over year but your case volume is flat, then you know you need to initiate a value analysis review.
#11 – It’s Not All Bad News
Believe it or not, supply chain benchmarking tells you about the good, the mediocre, and the bad of what is going on in your supply chain purchases. This is very helpful as you will know what products and services fall into each category so that awareness permeates through your supply chain organization. Granted, there will be major savings opportunities down to minimal savings opportunities, but there will also be areas where you are best in cohort, best in system, and/or are making major strides year over year. The good news far outweighs the bad, but you need to know about the challenges and where you need to do better. Plus, you don’t need to have a contract manager turning a vendor’s screws to weed out an extra 8% to 10% savings that may not be there because you are already 33% better than the next best hospital. On the other hand, if a contract manager knows that you are running 25% higher than your cohort average, they can use that information to really push for better price savings.
#12 – Don’t Underestimate the Hawthorne Effect that Benchmarks Provide
Last but not least, in my 32 plus years in the healthcare supply chain and benchmarking for over 25 years, I have seen what is called the Hawthorne Effect when you introduce a health system-wide benchmarking system. In a nutshell, the Hawthorne Effect is that when everyone knows that “big brother” is watching, they tend to pay more attention to things like eliminating waste and feature-rich products. They know that Supply Chain and Senior Leadership are now tracking these things and are paying closer attention to this and thus savings happen miraculously in many cases. I have seen this many times, and it can be a reality for you if you implement a benchmarking system.
In Today’s Supply Chain World, It Is Important to Track Everything and Benchmarking Allows for This
Tracking everything could be viewed as swatting the hornet’s nest that will in effect cause multitudes of new work that needs to be addressed immediately because a CFO wants savings like yesterday. This has not been the case for any of our clients and thus will not be the case for you when you start out with this benchmarking system. But it will give you a whole new level of strategic thinking that you have never had before, which is invaluable. You will then be able to pick and choose the best candidates to start a value analysis review on or decide that you will throw back the high benchmark issues on the department head and manager experts/stakeholders to address. It is that simple, you control the process moving forward. To me, the best part is that you have a benchmarking system with the process you will control on an ongoing basis!
| About Robert W. Yokl, President of SVAH Solutions |
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| Robert is the President of SVAH Solutions which provides value analysis, clinical supply utilization, and savings validation tools to help healthcare organizations gain the next level of savings beyond price and standardization. https://www.SVAH-Solutions.com https://www.SavingsValidation.com |
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