Value analysis is very important to our industry right now, and as I see it, will be even more important moving forward. Why? Because value analysis from its definition is a problem-solving methodology in which with the systematic functional approach can address all product, service, and even process challenges that we are facing. This is a bold statement to make. Some might think that I am trying to build value analysis up into something more than it really is. Or, perhaps you think that value analysis is just nurses validating products and are therefore selling the concept of value analysis short at your healthcare organization.
Value analysis has many important aspects that you need to understand and further utilize in your own health system’s programs in order to take advantage of all that this valuable systematic methodology has to offer. Below are what I deem to be the top five, in no particular order, that you need to pay attention to right now.
1. If You Want VA to Save Big, Then You Must Fuel Your Value Analysis Engine – Value analysis teams have no way to know where costs are rising in a health system, nor is there any reporting that can be deemed value analysis reporting in the true sense of a methodology like value analysis. Many call the VA workflow for new products (we have that too) value analysis software but the methodology nor the teams at health systems can just pull any savings out of their hat. Value analysis is the engine (method/strategy) to optimize costs and quality, but you need to fuel that engine other ways by benchmarking with cohorts, running clinical supply utilization systems, etc. In a perfect world, you will look at every major category in your health system and find all your savings, but the reality is that there is not enough time to roll through every category of your purchases. Plus, that would be an incredible amount of time wasted reviewing categories that were a dry hole to begin with. We need to be smarter with how we feed our VA teams. Teams with the right opportunities will optimize the costs.
2. Value Analysis Begins and Ends with the Customer – There is always talk of more clinical integration and collaboration that needs to happen in the healthcare supply chain when it relates to products, services, and technologies. Value analysis truly begins with the customers’ functional specifications, or what they absolutely require to take care of patients. This applies to all customers who are clinicians and non-clinicians depending upon what product you are performing value analysis on. No VA study gets performed without the customers’ functional requirements to ensure that the products they are requesting, or supply chain is providing, will in fact meet their functional requirements exactly.
3. The Functional Approach Works Every Time – Value analysis started as value engineering back in the late 1940s at General Electric where they were having issues with cost and quality of products after World War II. A Value Engineer named Larry Miles developed an approach that will disseminate the true requirements of a product, service, or technology and will cut right through to the root cause of issues with cost and quality. This was the functional approach as every product has a primary function and secondary function as well as features which can be functionally identified. You must first look at a product’s functions, not their costs or features. Match these functions to your customers’ exact requirements reliably, then cost and quality will fall into place.
4. Value Analysis is a Numbers Game – If your goal is to reduce costs for your organization yet you are only looking at 2-3 categories to reduce costs on, then you are not going to have much of an impact on savings. Yes, it is good you are looking at those areas but to truly make major strides towards big savings you must have more projects going forward that will give you the big numbers that your CFO and Senior Leadership are looking for.
Historically, about 8 out of 10 or 80% of the validated value analysis savings opportunity studies will net major savings, but most studies run 60, 90, or even 120 days before the final solutions are implemented. You need to have many studies going at all times to make sure that at the end of the fiscal year you are meeting or exceeding your savings goals.
5. It’s 2023, Stop with the Committee Approach Already – Value analysis committees, in which one to three people do all the work and the members who are department heads and managers just show up and vote on decisions, are very unproductive. Remember, these same department heads and managers are the budget owners of their respective areas and have a definite stake in reducing those budgets. They just don’t want anyone like VA telling them what to do. It’s time to move on from the outdated committee approach.
Our VA team model which we have been training our clients in for 30 years now is the Team Based Project Management Approach, whereby every team member will be assigned as the leader of a project to reduce costs. If you have 12 team members on your team, then you can have 12 projects going at any given point in time. If you have two or three teams in various clinical or non-clinical areas, you now have 24 to 36 projects going.
I am sure I could have listed many more significant aspects that are next level thinking for value analysis and supply chain professionals to incorporate into their VA programs, but these are key things that are most significant and can dramatically improve your program in the short and long-term. The thought of Value Analysis Led Savings Programs is very real today, but we must better organize, strategize, and enhance our programs to expect next level results. It may be tough taking a hard look in the mirror, but it will be well worth it, I guarantee you.
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