Value analysis is progressing in responsibilities and outcomes in health systems throughout the country and has become an integral part of supply chain operations at most health systems. This is great news for this field and for the results that can be brought to these health systems. But — and there is always a “but” — you must not only have a value analysis program in place, but also develop not just the VA managers and team members, but everyone in the organization in the principles of value analysis. Why do this?
First, we are still only scratching the surface as to the full ability of value analysis in our health systems as to the true potential that VA can bring with costs, quality, and even productivity and performance improvements. I know many feel like they are piling too many duties and responsibilities on their value analysis teams, which does happen, but that does not mean that value analysis is not up to the task.
Organization-Wide Cost Optimization is Cooked into VA’s DNA
VA has morphed from its original incarnation back in the 80s, 90s, and early 2000s which was primarily a vehicle for reducing costs from non-salary expense reduction programs (offered by consultants back in the day). Once the programs were completed, voila, the hospital or health system had a VA program and committees in place thereafter. Health systems in the early 2000s started to realize that they were not evaluating their new product requests with any type of systematic method nor were they looking for risks, reimbursement, or cost overrun avoidance and started to use VA for that. Not to mention, VA was pulled into the contract conversion process which has always been lacking in supply chain. Add in recall management that just naturally fell into VA’s lap as well as other problem-solving duties.
VA Needs More Time for True Cost Optimization
The challenge with all these responsibilities being added to value analysis is that it has gotten away from a core function which is being a cost optimization vehicle and modality for health systems. Yes, current duties do save money to a degree, mostly tied into contracting, standardization, and price related areas. All these added duties, being very time consuming, have limited the time available to tackle cost optimization projects beyond price. Operationally, VA is very important and is the only way to handle NPRs, recalls, and contract conversions, but we still need to make time for true cost optimization areas that can generate major savings. If you ask a Chief Financial Officer what is more important, new product requests or cost optimization VA projects, I think you would find that they see new products as increasing the supply budgets – not reducing them. There is room for both!
VA Cost Optimization Enables Better Quality of Care
There are many who think that clinical quality and outcomes should be the primary goal of value analysis and that the cost saving aspect is not as important. I am not all for one or the other, nor am I saying that cost optimization VA studies are more important than new product requests and/or contract conversions. The bottom line is that we need both and we cannot keep slanting ourselves to the new product and contract side and leaving the cost optimization opportunities for another day. You must spend time doing everything in value analysis, and you must have systems in place that will enhance the workflows of not only new product requests and contract conversions but also cost optimization opportunities beyond price. VA is too busy to be guessing and working on dry holes. They need the sure things to work on that will net substantial savings, otherwise the juice is not worth the squeeze.
The Good News
I am lucky to see all the different types of value analysis programs around the country and all the nuances of each health system’s program that are unique and work for them. Can those programs improve? Yes, absolutely. Our clients are implementing newer and more advanced value analysis activities and learning to fit in time and resources for savings beyond price/cost optimization reviews. Ultimately, CFOs are going to turn to value analysis for the next level of savings that the contracting and pricing strategies aren’t producing any longer. Start planning how you are going to make more time for your VA cost optimization projects today!
| 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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