“It is now time to take your healthcare value analysis program much further than just looking at new products, recalls, and contract conversions.”
Value analysis in healthcare has come a long way from its early days in our industry and still has high value for the future. With all the history of value analysis, there are some very key points that tend to get overlooked that every supply chain and value analysis professional should be aware of. This is a simple list of those important things that you will want to know.
1. Value Analysis Was Not Founded in Healthcare – Value analysis had its roots in the 1940s right after World War II when there were scarce raw resources and escalating costs were ramped up with the high demand of a booming after-war economy. Lawrence (Larry) Miles, a General Electric Value Engineer was the father of value analysis/engineering. Larry pioneered the search for lower cost alternatives using function as the basis for problem solving, cost optimization, and quality improvements. Value analysis entered healthcare in the mid to late 1970s through multiple pioneer practitioners as well as being espoused by the Purchasing Managers Association.
2. Value Analysis in Healthcare is Not Just for Clinical Products – Many think that value analysis is only for clinical products. This is not the case because it is based on functional analysis and every product, service, and technology has functions to be studied for problems, cost optimization, and maintaining/improving quality. You can perform value analysis on a surgical instrument, a nursing floor product, or a maintenance product using the same methodology based on functional analysis.
3. Value Analysis Methodology is at the Same Level as Six Sigma and Lean Management – Toyota has their own value analysis program that is part of their product creation. Toyota studies their products to optimize functions to reduce costs and optimize quality. Both Lean and Six Sigma integrate with value analysis when analyzing products.
4. You Don’t Need to Be a Subject Matter Expert in Everything to Run a Value Analysis Program/Teams – In healthcare it is impossible to become a subject matter expert and perhaps even a generalist in the over 5k to 27K line-item products and services that flow through a healthcare value analysis program/team. You don’t even need to have all the subject matter experts represented on your teams either. Why? Because if a question comes up or a dialogue is needed, you simply go and interview the key subject matter expert(s) and find your answers.
5. Just Sitting on VA Teams for Years Does Not Mean You Have Mastered Value Analysis – Every value analysis practitioner should be trained in the methods and practices of the value analysis functional approach. Larry Miles, the founder of value analysis who had a degree in education and engineering, believed that a VA practitioner should have a minimum of 20-40 hours of training in value analysis to be effective. This includes your AHVAP trained leaders and your team members.
Value Analysis Optimization (VAO) is All Around Us
Every product and service has been optimized with a value analysis functional approach to reduce costs while improving and/or maintaining quality. This can be in the form of reducing production steps after initial manufacturing runs to simplifying packaging while providing the required functions. By constantly optimizing costs, manufacturers can further drive down their costs while keeping quality standards.
In order to survive in the future, the healthcare industry will need to further wring the towel dry on all product, service, and technology costs while maintaining and/or improving quality outcomes. The best, already built-in methodology to do this is value analysis, which is recognized as a best practice in our industry. It is now time to take your value analysis program much further than just looking at new products, recalls, and contract conversions. Start identifying areas to perform value analysis optimization (VAO) studies on and I guarantee you will find a whole new level of savings beyond price that you never thought was possible before.
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