Everyone knows that value analysis is a big money saver from the standpoint of cost avoidance with new product requests as well as picking the right products from contract conversions. Not to mention, managing the supply resilience and recall issues that occur oh so often which hospitals cannot afford to throw major dollars at anymore. Value analysis allows you to manage all these issues and keep costs in check, but is that all value analysis can do? The answer to that question is no, value analysis can do so much more.
Can Value Analysis Make a Bigger Impact on Savings?
You are only as good as what you feed the value analysis engine. If you only feed the engine with new product requests, contract conversions, and recall issues, then those are the only results you can expect on the cost management front. Cost avoidance is also important but is really classified as money not spent and not so much true savings. The savings you get from standardization and pricing tiers from conversions are good for the savings report but they are not the big savings they once were. So, how do you make a major dent in the savings report that gets submitted to your Chief Financial Officer?
Having implemented these strategies at many hospitals and health systems throughout the country and supporting them with this effort, there are some simple steps that you need to take that will get you saving big. Plus, your efforts will show up in a big way on the CFO’s savings report. Some of these will sound like a no-brainer but they are very important.
1. Decide How You are Going to Make Time for These New Projects – New projects, of course you can handle them, right? Well, not if your agendas are already running at 100% capacity in every meeting, or worse, your meetings are running for over an hour because of all the new products and conversions that need to be addressed. You will need to devise a way to make room on your agenda to handle 1-4 new projects every meeting.
2. Who is Going to Lead These New Projects to Save Money? – If the Supply Chain Team and Value Analysis Managers have their hands full with just new product requests, recalls, contracts, etc., who is going to step up and take the lead on these new projects? For starters, I think you have to give the department heads and managers first crack at this as it will be their areas that you have to look into, and this will be the first time they are hearing about this. You must always be aware that there may be some bias as you move forward. If this is the case, you can bring the savings project back later and assign a different non-bias lead to this project.
3. How to Gain Buy-In from Department Heads/Managers Instead of Roadblocks – This is major as you will now be dealing with your end customers and finding the root cause of cost increases that will no doubt be thought of as making a department head or manager look bad. I guarantee you, their first reaction when hearing about a savings area will be to make a lip service assessment as to why their costs are running high, basically to get you to go away. But we can no longer just take a lip service assessment any longer. My experience has told me that about 95% of the time the initial lip service assessment is not accurate. So, how do you gain their buy-in? Just let them know what you are looking for as far as scope and ask them to investigate it and report back. They will need to actually perform the study. Eight times out of ten, they will look into the increases and realize that there is something more there. The big buy-in moment happens when they recognize this and thus, they get credit for the savings!
4. Look for Advanced Cost Management Training for Your Team – Giving a big savings project to someone and telling them to just go ahead and do their best to find the biggest savings they can is not a good method. You are just setting up your Savings Project Leads to fail or come up extremely short thinking they will know exactly what to do for any particular project since, “We all know how to buy, right?” Wrong. For new results, you must provide new skill levels to your team members so that they can successfully achieve the savings objectives you set out for them. Remember, all department heads/managers also manage their own supply budgets. Thus, this added training will give them a leg up in their own career advancement, not just for your Value Analysis Team.
5. Where Are You Going to Find This Big Savings to Work On? – This may be the biggest challenge for many of you because if you knew about a big juicy savings, you more than likely would have tried to make something happen to achieve even just part of it. There are many ways to go about this. One simple way would be as large contract areas come due for renewal or even conversion to a new contract, you could do a Retrospective Value Analysis Review on this category to find waste, inefficient use, or feature-rich products. There is also my favorite method and that would be to implement a utilization/consumption management system using an activity-based costing reporting system (e.g., cost per metric compared to cohort benchmark, historical, or system best practice). With these two methods, you will have endless savings projects for quite some time.
Many professionals tend to take the savings game for granted because they have been attuned to working with their GPO, standardizing to get the best tier, and receiving rebates year over year. However, you will quickly see that we need to put even more money on the board in the savings department. The steps above are the easiest way to make this happen in as little as 45-90 days. We are here to assist you with this if you need help. ([email protected])
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