“Many healthcare organizations throughout the country have very active Value Analysis Programs but they have provided little or no training in advanced cost optimization methods, best practices, and strategies.”
Everyone knows how to save money, right? Just find a lower cost product or service and away you go, right? It would be nice if it were that simple, but the truth is that health systems have been, and still are, finding better pricing through group purchasing and custom contracting. This is par for the course – everyone is already doing this at a high level of maturity. Although that well has not dried up yet, it is unfortunately not the big savings it once was. Add in elements like tariffs, increasing costs, and the Big Beautiful Bill cutting back reimbursements, and you have a growing challenge to find a new set of wells for savings over the short and long term.
7% to 10% Savings is Still Possible
Finding new sources of savings is a bit of a process of elimination. Your GPO and custom contracting have all the bases covered when it comes to standardization and gaining the best price. The big question is, where are the savings beyond price? Are there areas that we have little or no systems to tell us exactly whether there is a savings opportunity or not? Areas that I often call out are waste, inefficient use, overly feature-rich products, and overall lack of total life-cycle cost value achieved.
I highly recommend finding these savings using utilization management, benchmarking, and savings validation. These modalities are guaranteed to uncover hidden savings using a patient volume centric method. They will put the savings onto a silver platter for you – but then your VA teams need to perform studies on these areas of opportunity.
The Missing Component That Health Systems Still Don’t Acknowledge
The most difficult thing with savings beyond price is understanding and working in a way that is totally different from how we work with price and contracting methods. If you have a big savings opportunity, you may leave a lot or all the savings on the table, not because you or your teams don’t want to save, but instead because they have never been trained in the right methods to look beyond price.
Many healthcare organizations throughout the country have very active Value Analysis Programs but they have provided little or no training in advanced cost optimization methods, best practices, and strategies. If you just assume that everyone is going to be on the same page, think again.
What Your VA Team Doesn’t Know Can Hurt Your Bottom Line
With little or no training in how to handle waste, inefficiencies, feature-rich products, etc., your VA team members who are department heads and managers will naturally jump into cover-their-tail mode and try to talk away your viable savings opportunities. Why? Because first and foremost, they have never been trained to look beyond price or even understand savings beyond price, so why would you expect them to understand it now? It’s not uncommon for department leaders and managers to push back on even well-supported savings opportunities, often because they are unsure how to implement and fully realize those savings within their departments.
Keep It Simple but Cover All Your Bases
You will want to address the key areas that are missing from your team’s view and clarify that it is not Supply Chain’s job to report feature-rich products or departmental waste. In many ways, it is their supply budget that is taking the hit for the cost overruns so having your budget in the positive black versus in the red will be beneficial in the long run.
- Waste – Eliminate all waste in your department. Find out where things are being wasted due to any reason and work to eliminate this. It may just be that an adjustment in your policy and procedures or a quick notification in the daily huddles is needed.
- Inefficient Use Patterns – This is where better alignment between departments and figuring out what works best is always of value to the Value Analysis Practitioner. You can use your own internal best practices to make everyone else more product efficient. But you must understand the dynamics of this to make this work.
- Feature-Rich Products – Train your team to work with Supply Chain for lower cost alternatives while meeting their functional requirements reliably at a lower cost.
- Life Cycle Cost Value – Keep your eyes open and realize that you are not getting the full value of your dollars from the products you are purchasing. It could be as simple as nurses not leaving a wound care dressing on for its total life cycle or not placing time and date labels on IV set tubing and changing them too often. There are a multitude of reasons why your teams need to have this knowledge at hand.
The Bottom Line – A Better Understanding of Savings Beyond Price Will Save Big
Once you start to identify your savings opportunities you will then have your fully educated VA teams attack these areas and bring forth all the savings that are on the table. They will truly be cost optimization experts after a few studies, which is especially valuable for your team members who are also budget owners as department heads and managers. Give them the knowledge and empower them to save and they can make it happen.
If you need a few slides to create your own savings beyond price training for your teams, send me an email and I can help (ryokl@svahsolutions.com).
| 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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