More and more, we are seeing healthcare organizations buying value analysis software with the goal of improving their new purchase request workflow. Usually, this is because managing their new purchase requests has overwhelmed their Excel spreadsheet folders. Yet, we believe there should be other considerations when selecting value analysis software, such as:
1. Savings Validation: We believe that a savings isn’t a savings until it is validated. This is because our studies have shown that up to 26% to 46% of reported savings are actually lost. So, you might report that a new purchase request will save your healthcare organization 25% annually, but in reality, it is only saving 6%. Don’t you owe it to your senior management team to report accurate savings? Or would you rather your CEO, CFO, or COO uncover the dirty little secret that much of your reported savings aren’t real?
2. Savings Analytics: In our 34 years of providing cost management software, training, and advisory service, we have never worked with a hospital, system, or IDN that didn’t need to save money. Therefore, why wouldn’t you want to know where your best price, utilization, and standardization opportunities reside? This can only become a reality with savings analytics. Thomas H. Davenport, author of Competing on Analytics, describes analytics as, “The extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions.”
3. Savings Benchmarking: The best way to become better than just good is to benchmark your healthcare organization against your peers’. This enables you to search for best practices that lead to improved performance. For instance, I was benchmarking the cost of forms (not price) for one of our clients, only to discover a savings gap of 80%. I thought this was an error until I uncovered that my benchmarking partner’s health system had digitized most of their forms. This then provided me with a new forms best practice that I could recommend to my clients.
Value analysis is more than just vetting new purchase requests; it is a cost management technique to dramatically reduce your healthcare organization’s supply chain expenses. If you believe, as we do, that savings validation, savings analytics, and savings benchmarking are must-have specs for your value analysis software requirements, you will be ahead of the game when your CFO unexpectedly asks you for your supply chain savings recommendations because of a budget shortfall.
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