Why Price Thinking is Holding Back Big Value Analysis Savings at Your Healthcare Organization!

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In each issue of HVAM we will provide our readers with the one basic proven and time tested tenet of value analysis to assist you to refine, enhance and advance your value analysis processes. If you have any question on this lesson, please contact us at bobpres@StrategicVA.com.

One thing that is totally misunderstood by value analysis practitioners is that value analysis isn’t about price – at all! So, if you are evaluating a GPO contract for price and suitability, you aren’t practicing value analysis. What you are doing is price shopping!

Yes, you might shave a small percent off your commodities with price shopping, but you won’t experience double-digit savings, which is the promise of value analysis. In fact, you will usually stop your value analysis study at the point of getting a better price. This is what is holding back big value analysis savings at your hospital, system or IDN; not moving beyond price and standardization when you should instead be moving to performing functional analysis.

By definition, value analysis is the study of FUNCTION and the search for lower cost alternatives. Did you see price mentioned in this statement? No, because price isn’t even a consideration in the value equation. Although, as value analysis practitioners we do factor in “life cycle cost” as one of the critical success elements in determining “best value” when recommending a product, service or technology for purchase to our customers and stakeholders.

Case in Point! One of our clients, instead of signing off on a new wound care group purchasing contract being offered which would have saved them a few thousand dollars, decided to pursue, with their value analysis team, an investigation of their wound care program with the goal of reducing their pressure ulcer rate. During this initiative, their VA team reviewed its use of patient transfer devices, skin care and incontinent care products, ultra-absorbent pads, and its bed making process. In doing so, this organization uncovered inefficiencies in the use of patient transfer devices, the efficacy of the skin care products, value mismatches with absorbent pads, and lack of consistent process in bed making. Once these inefficiencies were corrected, our client reduced its ulcer rate by 10 percent while reducing its total wound care supply spend by $262,000 annually.  

The lesson to be learned here is to never stop at your first best savings idea (e.g., GPO contract savings of a few thousand dollars), but instead move on to investigate the family of products and services that surround the product or service under investigation. This way, you won’t leave hundreds of thousands or maybe even millions of dollars on the table – untouched.

On-Site, Fully Customized 1, 2 or 3 Day Advanced  Value Analysis Training Program Can Help Your VA Team(s) Increase Savings by 300% or More

“This (training) program offers a different perspective on value analysis than the GPO based programs. It can offer a recipe – complete with tools for the development or revitalization of a (VA) program.” Betsy Miller, Value Analysis Manager, Shands Healthcare

www.StrategicVA.com/TrainingOnSite.htm  or E-mail BobPres@StrategicVA.com for On-Site fees

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