Are You Ready to Step Up to the Cost Challenge, Value Analysis Professionals?
These are challenging times when it comes to revenues and bottom line costs for health systems throughout the country. Even those that are still doing well with profitability have their eye on the ball. When you think about all the things in the works like revenue enhancement (which has been around for 20 years) and group purchasing (which has been around for 50+ years) to gain better pricing, what more is there to do? One area that is what I call “the grey area” is savings beyond price which could be referred to as consumption management, utilization management, waste and inefficiency optimization, enhancing life cycle costs, and optimizing feature-rich products within your contracts. That is one heck of a grey area that has virtually been sitting there forever within all health systems’ supply chain spending with little or no action taken on it.
For those that don’t think there are much savings beyond price, think again. There is as much as 5% to 10% of the total supply budget to be saved. You might bump into these savings opportunities from time to time but many just go untouched, forever depleting your bottom line costs. The good news is that there are also areas in which you are running optimally but if you cannot differentiate where you are running well or where you need a little or a lot of help, then you are flying blind. We as healthcare supply chain and value analysis professionals are better than this and need to step up and take the bull by the horns and attack all these savings opportunities that are flapping out in the wind waiting to be optimized.
My GPO Says Our Pricing is Good, So Why Bother Optimizing Further?
Remember, even though you have the best price that does not automatically mean that you are getting the most out of your dollars spent. That price has a life cycle cost attached to it which you must optimize further to get the reliable functional use at the lowest possible cost. Plus, there is always the patient volume driven aspect that affects the consumption of products that can cause cost overruns that price does not factor into.
You don’t need products that exceed clinical expectations or features that are not necessary. The name of the game today is to continue to optimize contract pricing while adding consumption/utilization management and product feature optimization while eliminating unnecessary waste and inefficiencies in your value stream.
What is Old Can Be New and Fruitful
When I entered the Value Analysis world back in 1992, our firm installed value analysis teams at hospitals and health systems with the sole purpose of attacking costs on new and existing contracted products that health systems purchased. We taught a solid VA process that worked, provided savings opportunities to the VA teams, and coached them through the savings project process. Those VA teams achieved major results because they had solid savings goals and a solid value analysis process that looked beyond price and actively wrung the towel dry on major and minor savings. Interestingly, we used this strategy for over 20 years until the maturity of VA teams was reached at health systems and these initiative-based teams fell by the wayside.
Time to Bring Back or Reinvigorate the Savings Beyond Price VA Team
A team totally focused on savings beyond contract price will be unchained from the price mindset because they will only be focused on the products within the existing contract portfolio of your health system. That is the playing field and there are millions of dollars that can be saved in this game. Each team member will take on projects and will be accountable for bringing results while the VA leaders coach and guide them along in their process. They will also need some training in VA and cost optimization to help them be successful.
Every member of a VA team is normally a department head/manager but in this case, you are looking for those that are good project leaders as well to be able to handle this very different challenge to optimize costs. In the past, this was handled very well by the team members and once again can be handled by them if the right environment is created.
They Will Stay in Their Lane
They won’t be disrupting the contract formulary either, they will be staying in the lines but instead will be using benchmarking, utilization reporting, and other advanced cost management techniques to identify major savings opportunities beyond price. The key to the success of this Savings Beyond Price Value Analysis Team will be to make sure that they are working on viable savings opportunities every time, not just working on large dollar purchases that spend management shows at the top of your list. That does not always equate to saving money, and the worst thing that could happen to your team would be to work on a project for a period only to find a dry hole. We are better than that today!
Why Can’t Our Existing VA Teams Take on Savings Beyond Price?
VA teams are highly effective components of healthcare systems’ supply chain organizations, but their plates are very full, as their agendas are packed with new product requests, recalls, resilience issues, and product issues. These take up the majority of VA teams’ time and resources which leaves little time to focus on areas like savings beyond price. Granted, if you give one of these teams a juicy savings opportunity to work as a project, they will come through with savings, but that may just be a one off. We need strategic, ongoing savings projects to move the needle on savings beyond price.
Value Analysis Savings is a Numbers Game
The more value analysis savings projects you perform, the more savings you will achieve, but the reality is that you need to take a different approach to this, such as adding a new Savings Beyond Price or Cost Optimization Value Analysis Team that will be completely focused on saving money and performing value analysis projects to do so. This will be a true team, not a committee, and every team member will have a hand in this initiative. This all may seem a bit simplistic in nature, but it is not being done and should be. It’s time to take the next level of cost optimization at hand and implement your version of a Savings Beyond Price/Cost Optimization Value Analysis Team today!
| About Robert W. Yokl, President of SVAH Solutions |
|---|
| 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 |
Articles you may like:
Clinical Supply Utilization Management: The Gift that Keeps Giving Big Savings
