We Don’t Need Everything We Are Buying Now!

Robert T. Yokl, President/CEO, SVAH Solutions

The fastest, easiest, and most effective way to save money in value analysis is to stop approving so many products for purchase, since your healthcare organization doesn’t need everything you are buying now. For example, we see healthcare organizations buying 25% more in a quarter than they bought in a previous quarter. Can you think of a reason why this should happen…I can’t!

Furthermore, this binge buying of new products, services, and technologies is unsustainable in our healthcare economy where hospitals are getting less reimbursement every year as opposed to more. So, what do we do about it?

Your value analysis teams must have rules of engagement to push back on unnecessary and wasteful buying at their hospital, system, or IDN. Here are three ironclad rules to get you started on this journey:

  1. 5% Rule: No new product, service, or technology should be purchased if it doesn’t save your healthcare organization at least 5% or improve your outcomes by 5%. This is because the cost of change is about 5%, so you need to save more than 5% just to break even on the change. This is also the cause of most new utilization misalignments due to confusion by your clinical staff over how to implement the new product, service, or technology that was just purchased.
  2. Budget Rule: No new product, service, or technology should be purchased unless it has been approved as a line item in your healthcare organization’s budget. This rule will immediately eliminate 80% of your requisitions for any given year, since most of your department heads won’t want to go through the vetting necessary by your organization’s budget department.
  3. Guarantee Rule: No new product, service, or technology should be purchased unless the proposed savings is guaranteed by your supplier. No longer can healthcare organizations accept savings claims by their suppliers that never happen! Hold them accountable in writing for every dollar that is proposed to be saved over a specific time. Then ensure that the savings has really happened!

As these rules suggest, saving money in value analysis is not just about evaluating new products, services, and technologies, but slowing the binge buying that most healthcare organizations are experiencing, plus making sure that your suppliers’ projected savings stick over the long-term. You will discover that these three new rules of engagement for your VA teams will go a long way to ensuring that these goals and objectives are realized. Isn’t this what cost containing is all about?