The #1 Critical Success Factor to Saving Big in the Healthcare Supply Chain

By Robert W. Yokl, Sr. VP, Operations — SVAH Solutions

The most important first few hours you can spend on any value analysis, supply utilization, or even major organization-wide value initiative is to “plan it out.” Think of the old business mantra, “A business without a plan is a plan for no business,” which holds true for savings initiatives in healthcare. A savings initiative without a plan is a plan for little or no sustainable savings! Planning works and is key to successful and sustainable supply chain savings initiatives.

Be Careful of the Price Savings Easy Button Trap

I know it is easy to fall into the contracting mindset of immediately scanning for lower pricing. Price is only one element of the total cost of the product to your organization, so why only focus there? There are many reasons why costs are high and many areas that need to be focused on.

You Must Be Organized to Save Big

We have had a long running mantra at our organization which is, “You must be organized to save big.”  This not only is an internal mantra but an external battle cry when it comes to working with hospitals and health systems throughout the country over the years. Organizations typically have all the pieces of the operational/talent puzzle, but like a great team of talented athletes in any sport, you need a coach/manager to set a strategic direction for success. This is part of the being organized to save big mindset that should not be ignored as you are working on your next level of supply chain savings to curb the Covid-19 downturn and PPE cost overruns.

What to Plan for and How Much Time it Will Take

Recently, I was tasked to work on a Laundry Linen Value Analysis Project with a client. I have written many value analysis planning initiatives and best practice documents in this area over the past 29 years in working with clients. I had been down this road before, but I did not just do a copy/paste and use past boilerplate documentation for this client. I realized that they were unique and different. Using a simple six-step process for value analysis, I wrote a totally new project planning document for this initiative that was customized to them. The best practice document was there as a guide, but there were certain elements that would not have pertained to this client and others that did. By customizing the approach using a standardized but flexible six-step process, this client had their own unique plan for their Laundry Linen Initiative. Nothing was set in stone. This is a living document that can be adjusted, updated, and further developed until the initiative is completed. They will have this document for future use, as Laundry Linen will arise again; it always does.

The Plan is the Shortcut to Big Savings

I cannot tell you how many times I trained value analysis teams proper value analysis strategies and processes which included planning out value analysis and utilization management initiatives, only to have them forgo a simple plan for their initiative they are assigned. Inevitably, they try to shortcut any learned process and run with the first best idea they hear from a customer or vendor representative, which usually does not pan out to the savings they intended. How did they become lost? Because they failed to plan and ran down the value analysis rabbit hole too fast which resulted in no savings. Inevitably, they want to stop the analysis or don’t know what to do because they are stuck. Luckily, with a little coaching and mentoring, we assist these clients to see that they jumped from starting a value analysis study to step four in a six-step process. When we plan out their next steps and give them a path for savings that includes all areas of savings opportunities to uncover (price, standardization, utilization, etc.) they truly understand the power of what planning can do.

You Don’t Have the Time Not to Plan

It does not matter whether you are starting a single value analysis evaluation or creating a system-wide value analysis program. You need a set plan in place that works and takes into consideration all factors of savings, organization inertia, key customers, and stakeholders. Most of our plans at my firm are based on solid data that points the way to savings before you even begin to get into the value analysis process. Most department heads and managers require proof that there is a solid reason to change operations of their department’s products and services. If you have solid data points to prove your case for a value analysis review, it gives you and your senior leadership confidence that the initiative will be a success.

Do Not Overthink It

Be careful with your planning. I have seen organizations go the other way with planning and form 15 corporate teams and another 20 hospital-based value analysis teams, without really knowing if there are sufficient savings opportunities for these teams to work through their agendas. Do you really need to have a Respiratory Therapy Corporate Value Analysis Team? I have found little or no savings over the years in Respiratory Therapy and I do not recommend that a Respiratory Therapy Team be formed at organizations I work with. Finding a team to put the respiratory products into scope is a better strategy; less is more. Do not over-team the teaming process in your planning. It may sound great on paper, but forming additional teams chews up a lot of human capital that may be best served on other more effective and higher dollar initiatives.

The Name of the Game is Sustainable Short and Long-Term Savings – So Plan for It Ahead of Time!

Once upon a time, a hospital or health system could easily form an initiative team and give them a simple goal to “go save money” on a particular category of purchase. Yes, they would come up with some savings on obvious low-hanging fruit objectives, but then sputter out when the low-hanging fruit falls off the agenda. With an ongoing planning system in place, you can push past limiting bottlenecks and challenges and sustain your savings programs over the long term, while providing short-term results as well.

About Robert W. Yokl, Sr. VP of Value Analysis & Supply Chain Solutions
Robert is the Program Leader for SVAH Solutions that provides value analysis, clinical supply utilization, and savings validation tools to help organizations to gain the next level of savings beyond price and standardization.