Let’s face it, value analysis (VA) is focused primarily on products in the healthcare world, and it can have an added impact on other areas like purchased services, technology, capital purchases, and processes. The key is the functional analysis methodology that is the basis for value analysis to make it possible to evaluate and analyze just about anything with the functional approach. As Lawrence Miles, the Father of Value Analysis, stated, “The customer wants a function. People want functions, not things.” You can replace the word “value” with “function” which would better help those understand the true meaning of value analysis, or just functional analysis all the same. It is challenging for those who perform and are part of value analysis studies and projects to wrap their heads around the fact that VA is all about functional analysis.
Many have focused on the words “value” and “analysis” and have drawn some other meaning of what value analysis is, but the reality is that it is only about the functional analysis of products, services, technologies, and processes. I understand how this can happen as there has been little or no education in the healthcare world that follows the classic tenets of value analysis that were created back in the late 1940s by Lawrence Miles and his team at GE. Back then, they coined the term “value engineering” along with “value analysis” but always anchored it with the study of function.
If you study the functional specifications of anything, whether it be a product, service, technology, or process, you will find that you can pinpoint everything from lower cost alternatives with equal or better quality to eliminating waste and inefficiencies in features. When you focus on function, you cannot lose your way as it guides you through your analysis. In the healthcare world, you can then match that up with evidence-based research and materials that will match up to the product, service, technology, or process’s functional requirements.
Value Analysis is the Study of Function and the Search for Lower Cost Products with Equal or Better Quality/Reliability
Products – Value analysis is already widely used in evaluating products, particularly for new product requests and contract conversions, where functional equivalents are compared to meet customer requirements. This approach is well established in healthcare supply chain management and typically follows a practical, trial-and-error methodology.
Taking it a step further, organizations can conduct retrospective VA reviews to assess existing products. Using an 80/20 lens, these reviews can identify lower-cost alternatives, benchmark best practices, and reveal waste, inefficiencies, and lifecycle gaps. All these evaluations begin with a clear focus on functional requirements, ensuring that current products fully satisfy the needs of end users and stakeholders.
Ultimately, this is straightforward functional analysis and not some complex theory, but a disciplined way to ensure value and performance.
Purchased Services – It can be challenging to apply value or functional analysis to services, but every service has clear functional requirements. For example, endoscope reprocessing includes specific cleaning steps and regulatory compliance obligations. The real question is, what are you contracting for? At its core, you are paying to ensure those functional requirements are consistently and effectively met.
Consider waste management services, such as exchanging sharps containers or transporting red bag waste to an approved disposal facility. The goal is to achieve compliance and operational efficiency at the lowest reasonable cost. Similarly, clinical services like medical gas delivery are mission-critical to patient care and come with strict standards and multiple features that must be evaluated to meet clinical needs. However, many of these features may not be fully utilized, making them ideal candidates for a functional review.
Applying value analysis to services can uncover significant opportunities for both cost savings and quality improvement. You won’t be disappointed with the results!
Technology/Capital – Most people don’t think to apply value analysis to technology and capital purchases, but it raises an important question: Why not? Capital requests typically follow a formal approval path, often ending with a finance committee review in a health system. However, this is not always true value analysis. Frequently, there is limited effort to evaluate lower cost or more efficient alternatives. The department leader requesting the capital item usually selects what they believe is the best option, and whether a structured value analysis was performed is often unknown.
Regardless, capital spending should include a disciplined VA process to ensure organizations purchase only what is truly needed and avoid paying for unnecessary features. For example, when acquiring a new surgical system, associated disposable supplies can easily be overlooked. A robust capital value analysis process would surface these downstream costs and help prevent unexpected expenses and inefficiency.
Technology expenses, particularly IT systems and software, represent one of the fastest-growing non-salary expenses in health systems today. While IT is often treated as a special category, it should still be subject to the same rigorous VA standards. Too often, software is purchased with features that go unused, or worse, it is abandoned entirely while ongoing costs remain significant. The bottom line is clear: All major expenditures should be evaluated through a value analysis lens to ensure full utilization and maximum return on investment.
Processes – Products, services, and technologies each come with their own processes and usage patterns that are essential to achieving optimal performance. Too often, healthcare organizations insert new products or technologies into long-standing, outdated workflows and then are surprised when waste and inefficiency persist despite these additions. To drive real improvement, it is often necessary to step back and examine the process in detail, step by step and function by function. This helps uncover bottlenecks, issues, and inefficiencies, enabling you to identify and implement more effective solutions that streamline operations.
Value Analysis Begins and Ends with the Customer
We are not saying to apply value analysis to everything in your organization just to apply it, but that you must purposefully employ one of the best embedded practices that works effectively in your organization to gain better results. Yes, you can bring in other strategies, but why not use something that is universally utilized in your health system today, and more importantly, is understood by your department heads and managers? If you are looking to expand cost and quality optimization in your organization, there is no need to look further than to something that is already operating and apply it to those added areas beyond products. You will be surprised at how much value analysis and the functional approach can bring to the table for quality improvement and major savings to your bottom line.
Below are some similar articles that you may find interesting.
Now Is the Time to Build a Clinical Supply Utilization Management Program
Unexpected Impact That Clinical Supply Utilization Management Does for Health Systems
Healthcare Supply Chain Leaders: Stop Waiting for Your Cat to Bark