Strategic Value Analysis Planning: A Three-Phase Process

The SVAP starts with evaluating the strengths and weaknesses, or gaps, in your current supply value analysis program strategies and tactics and ends with the development of your Strategic Value Analysis Planning Document that will be used as the blueprint to ensure that your new or refined Supply Value Analysis Program is successful—the first time. This entails a three-phase process as follows:

Phase I: Evaluating Your Current Supply Value Analysis Program: The first step in your SVAP is to understand quantitatively and qualitatively the strengths, weaknesses or gaps in your current strategies, tactics, methods and practices. This can be an audit of your current program. The most critical part of this audit, beyond understanding what your current program elements are today, is to determine where your hospital or system’s savings gaps are in relation to best-in-class hospitals and systems. This can be determined by benchmarking your supply and purchase cost as a ratio of operating revenues with a peer hospital or system. The normal ranges for these ratios are 13% to 15% for supplies and 24% to 28% for supplies and purchase services. If your hospital or system has a higher ratio than those shown above, the difference between your ratio and the normal range can be considered your savings opportunity gap.

Phase II: Development of Your Strategic Value Analysis Planning Document: Your next step in the development of your Strategic Value Analysis Planning Document is to define your mission, vision, organizational and administrative structure, goals and objectives, policies and procedures, reward and recognition program, value analysis candidates, etc., for your new or refined program. This exercise will give you a blueprint that you will require to weather the problems and hurdles you will face over the next few years.

Phase III: Planning and Execution of Your New or Refined Supply Value Analysis Program: Finally, you have reached the point in your SVAP at which you are required to develop strategies, tactics, milestone metrics and an evaluation system to ensure that your goals and objectives for your new or refined program are met or exceeded on a timely basis. The Planning and Execution Phase of your SVAP is based on the philosophy that, “what is measured happens”. We strongly recommend that a Balanced Scorecard be utilized monthly to measure the success of your new or refined program, since it will enable you to measure a number of critical success factors instead of just one  factor — savings. 

If your SVAP is developed carefully and properly, it will increase your probability of success 10-fold!