Robert T. Yokl, President/CEO, SVAH Solutions

I was just asked today by the editor of HPN Magazine to comment on the trend that most healthcare organizations consider value analysis to be a synonym of “product evaluation.” I can’t give you my exact response that will be published in a future HPN article on value analysis due to a copyright agreement that I signed. However, I can say that this misunderstanding about the meaning of value analysis is the biggest challenge that is holding back turbocharging your supply chain expense savings in 2021. This is especially true since it has been my observation that most value analysis teams generally add more costs to their healthcare organization with their new product evaluation (new product requests) processes than they save each year. Do the math if you don’t believe me.

For the record, here is the difference between the product evaluation and value analysis concepts. Product evaluation is a process to determine the appropriateness of the product, service, or technology being requested. Value analysis is a technique to  determine the exact functional requirements that are needed and then search for lower cost alternatives that meet the functions for the product, service, or technology reliably.

For example, instead of approving a request for a new cardiac catheter tray that appears to satisfy its customers’ requirements cost effectively, a value analysis project manager would work with the customers to define their cardiac catheter tray’s primary, secondary, and aesthetic functions that meet their exact requirements. In many cases, the VA project manager would then negotiate with the customers to eliminate some of the unnecessary functions that were requested. Once this functional analysis phase is completed, the VA project manager would look for lower cost alternatives to meet the agreed upon functions. Although there are more steps (e.g., our 6 step Value Analysis  Funneling™ Process) to the VA process, I’m sure you get the idea that product evaluation and value analysis are two different distinct processes. By confusing them, VA practitioners are leaving millions of dollars in new savings on the table, untouched.