There seems to be a tendency in hospital supply chain management to provide customers with feature-rich products, services, and technologies. When it becomes evident however that your customers don’t need everything they want and desire, it’s almost impossible to take these features away from them.
In fact, your customers will find every excuse to keep you from doing so. It’s human nature to hold on to what you have now vs. accepting the unknown. However, our nation’s hospitals’ meager reimbursement structures can no longer afford any product, service, or technology that isn’t grounded in proven, cost-effective, functionally acceptable outcomes.
This reminds me of when I worked as a consultant for a bankrupt Catholic hospital a few years back, where it was my job to reduce expenses (labor and non-labor) to the bone. When I brought to the attention of the vice president of operations (who was a nun) that we could save in excess of $100,000 dollars a year by outsourcing her laundry/linen function, she turned me down flat. Her reason was that the quality of HER linen (notice the possessive noun) wouldn’t be as good if her laundry/linen service was outsourced.
Hospital Value Analysis: Finding a Functional Equivalent
While the Sister had a point, I then asked her who was going to pay for the over-the-top quality laundry/linen service at her hospital, since her patients where almost exclusively Medicare and Medicaid, and she didn’t have an answer to this question. As you could imagine, it took me a few weeks to get Sister to agree to outsource her laundry/linen service. Guess what! Sister never complained about the quality of her outsourced laundry/linen service going forward since it met her functional requirements reliably and cost effectively. It wasn’t the highest level of quality service that she had before, but it was adequate, acceptable, and reimbursement justifiable.
As this story suggests, the secret that we have found to executing “takeaways” in hospital value analysis is to calculate the COST of NON-CONFORMANCE ($100,000 in my example above) of not doing something, and then estimate the reimbursement that your hospital is receiving for the procedure, test, or case to raise your customers’ conscience as to the sparseness of their hospital’s margins. This usually tilts the decision in your favor, but not always.
Show the Cost of Non-Conformance
When all else fails, the next tactic we recommend to our clients is to show the COST of NON-CONFORMANCE on their value analysis monthly savings report and then share it with your value analysis steering committee. With few exceptions, this protocol will solve 98% of your non-conformance challenges because your steering committee members will demand answers from your customers on why they can’t implement these savings. You will find that very few customers can justify the unjustifiable to your value analysis steering committee.
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