June 27

Healthcare Value Analysis Led Savings Programs


“There is no doubt that the time has come for value analysis to step back up and engage in the major savings that organizations are in dire need to achieve.”

When value analysis made its first impact on healthcare years back, it was used primarily for major savings initiatives at health systems around the country. Some organizations still maintain this savings priority but many only use value analysis for areas that have limited or no savings such as new product request management or recall management. Recalls/NPRs do have an element of cost avoidance and quality improvement but the goal here is to have a full-blown savings component that you can tap into that can show you major savings beyond contract price and standardization. The net result of NPRs and recalls is normally a cost increase.

What I am talking about is adding an element to your value analysis program that can be an ongoing major savings pillar for your organization and especially for your CFO. It is time to start using value analysis for what it is highly effective at and that is getting to the root cause and solving utilization and other issues that drive organizations’ costs up even though they have the best price. Really, what other way can you find and drive savings out in a healthcare organization today? Cost savings must be VA led as it has the engine to handle the task. Here are three major steps you should consider to position your value analysis program and your organization to lead the value analysis savings initiatives.

7% to 15% Savings Possible with Value Analysis Led Savings Programs

1. You Have to Have Goals and Objectives for VA Led Savings Programs. The good ole “let’s just save as much as we can” does not work with complex healthcare products, services, and technologies. You have to strategically analyze areas of your organization and your budget that will bear ripe fruit. Like a health system we worked with that planned and strategically set a goal of saving $24 million. They broke out all of the areas for the savings, e.g., $14 million in supplies, $16 million in purchased services, $3 million in capital equipment. They did not just pick these numbers out of a hat. Their VP worked with their CFO and Budget Director to find out areas of their organization that showed major budget increases that needed to be reeled in.

Keep in mind, the savings that was set as a goal in the example health system above totaled over $33 million overall, but their program goal was $24 million. You must always flush your pipeline much higher in savings opportunities because you are not always going to be able to achieve those savings all at once or at all. With a higher total opportunity, you will then enable your VA Led Savings Program to meet their goal for the initiative or annual goals after you get into a maintenance mode. Keep in mind, we believe you can still save up to 7% to 15% of total non-salary budget with VA Led Savings.

2. Your VA Savings Engine Needs to be Fueled for the Short and Long-Term. In order for value analysis teams to perform analysis on major categories of products, services, and technologies, you need to first ensure that you have a detailed pipeline of savings opportunities to work on. Goals are necessary as in the above example as a macro goal, but you need to get down to the micro level to actually save money. Plus, you must have high value savings results from categories that are workable and have true opportunities to net the big results you are looking for. There are many avenues to use in this respect. For instance, we are big proponents of using benchmarks and key performance indicators (KPIs) to identify and stratify big savings opportunities. This will give you the proof you and your team members need to know that the savings are real and then use the value analysis functional approach to find the root cause(s) and develop strategies and/or lower cost alternatives to achieve the big savings.

Other areas include spend management and category management as well as clinical supply utilization.

3. Strategic Plans are Made Just for Adding New Elements to Your VA Program. The perfect methodology for adding value analysis led savings to your healthcare system should be planned out in a strategic plan. This just makes sense to take a step back and plan out all of the elements that will be necessary to meet your goals. Everything from savings opportunities to your team dynamics (especially advanced training) to your workflow for savings as well as short and long-term follow up. This does not have to be complex, and I prefer to handle the strategic planning elements in a slide deck for simplicity and communication. You can’t go wrong with a strategic plan.

There is no doubt that the time has come for value analysis to step back up and engage in the major savings that organizations are in dire need to achieve. There is very little that needs to be changed on the teams themselves in order to start working on major savings opportunities. Most importantly, it may seem a bit difficult to add major savings into your value analysis program but once you get the first major savings under your belt your teams will grow to really like saving big. VA teams have the power to save big!

Below are some similar articles that you may find interesting.

One of the Most Powerful Tools in a Healthcare Value Analysis Professional’s Arsenal Doesn’t Cost a Dime

Benchmarking is the Easy Button to Finding the Next Level of Big Savings Beyond Price

3 Important Things Clinical Supply Utilization Management Can Do for You Besides Save Money

Request Demo of SVAH’s Value Analysis and Utilization Tools


clinical supply utilization, Healthcare Value Analysis, savings goals, savings opportunities, spend management, value analysis, value analysis program

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