One of the biggest challenges that me, you, and anyone who works in the savings beyond price sphere face is the non-belief in savings opportunities brought about from proven benchmarking and utilization management reporting. It can be hard to trust that big savings are that easy to identify, but even harder to believe that they are real. For example, when we show you that five of your ten facilities are running over in a particular clinical category by hundreds of thousands of dollars respectively, the first reaction is one of doubt. That is okay!
Every Department Uses Products, Very Few Use Them Optimally
In Healthcare Value Analysis and Supply Chain, everyone is for savings in any way, shape, or form, until the savings are in their area or affect their particular categories of product. You have to understand that they are not cost managers or Value Analysis experts; they run clinical departments that have a fine balance of products that are mission-critical for their success and optimal patient outcomes. Protecting their turf is part of the game, but it is not the end game. You must become an expert in savings beyond price to assist them in going to the next level of cost optimization, all while maintaining and/or improving the quality of their products/outcomes.
Below are best practice mindsets that me and my team use every day, and you should master these and use them too!
- You Have Full Control, but Make Sure You Read the Room First – You are always in control. You select the savings opportunities to present to a Value Analysis Team or Department Head/Manager. You work in your Value Analysis and Supply Chain world every day, so you should have a feel for when to present savings opportunities and when not to. Read the room. If they are going through a tough conversion or something major, then perhaps you need to move to other departments or categories and come back to this opportunity. There is a time and a place for everything, and that includes the Value Analysis project that is trying to wring the towel dry on savings. Be strategic and mindful, while also staying on the tail of the savings over the short and long term.
- Welcome the Doubt! – When we show anything negative about a product, service, or technology, the normal human reaction is to doubt that what we are showing them is real. The good thing about benchmarking, though, is the fact that we have their patient days, their cath lab cases, their Da Vinci cases, etc. We are comparing to the operating metrics that they use to push back with, “We were busier last month!” This is normal feedback, which to me is as good as gold because we have their attention and can let them know that we are using their exact patient volume metrics and thus the savings opportunities are real.
- Show Them the Good Benchmarks & Utilization First – This is a little trick that we use all the time. Before you show your major savings opportunities, show them where they are doing good in a category or two. Start every meeting with good benchmarks and/or utilization report categories because they will begin to buy into the benchmarking and utilization reporting that they will be challenging once you show them the areas for savings opportunities. Many Department Heads and Managers tend to poo-poo new types of benchmarking and utilization reports just because they are new. They use terms like, “We can’t be benchmarked because we are so unique here.” Granted, no one hospital is exactly the same, but there are many like-sized hospitals and health systems that do similar work, and you can draw benchmark comparisons if done right. Either way, show them the good, and they are subliminally buying into the benchmarking and utilization reporting already. It’s tough to challenge something that makes you look good!
- Never Forget that Savings is the Gift that Keeps Giving – One thing that we found out about benchmarking and utilization management is that savings keep rising to the top of the reporting. Remember, healthcare tends to look at cost optimization in an episodic manner, meaning they have a run of optimizing costs on major categories for, say, a year to hit a budget number for the CFO, then they take their foot off the pedal. With benchmarking and utilization reporting, savings opportunities that you had no idea were happening are always popping to the top of your reports. This is very nice to have, and it keeps your savings beyond price humming right along year after year. Get it out of your head that you can fully wring the towel dry on all of your over 750 major savings categories. It’s just not going to happen. Products change, processes change, contracts change, and people change. All that spells more savings beyond price year after year.
- Lots of Reasons for Increased Costs – Keep in mind that when 50% of the hospitals in a health system have increased costs and 50% do not, there may be multiple reasons why each facility is running high and there may be multiple reasons for each, respectively. In healthcare, we like to cost-optimize by the rule of one, meaning that we are running high because we are not standardized in the contract. That may be so, but there are many more reasons why your costs are high in 50% of your hospitals and not in the other 50%. The good news is that you know the state of the category and have best-practice hospitals to compare to with products, processes, etc. Remember, savings beyond price can entail rich products selected, waste/inefficient use, not meeting life cycle value requirements, and value mismatches. Each facility is the same but also unique in savings beyond price. Plus, you can use savings beyond price to meet your standardization goals as well!
You would imagine that the client Supply Chain and VA Leaders would be ecstatic that they just had a savings opportunity handed to them on a silver platter in all their different categories, but they know that is only part of the challenge. Identifying savings is one thing, but getting to the finish line with solutions that truly optimize the costs while maintaining patient outcomes and quality is the bigger challenge. But this is not impossible, and with the mastery of these mindset lessons, you will be an unstoppable force in your Savings Beyond Price journey.
The Bottom Line
The bottom line is that your organization is looking for savings beyond price because your price is going up due to market conditions and inflation by over 3.3% in the coming year. You need to have a savings beyond price program in place and rolling in order to not only offset the increases but to make positive gains in an area that is traditionally not even touched in a systematic way. It’s time to get after savings beyond price once and for all!
Below are some similar articles that you may find interesting.
The Advantages of Having an Ongoing Value Analysis Strategic Plan (VASP)
Podcast 99 – Out of Isolation – Winning Strategies for Forgotten Healthcare Supply Chain Leaders
What’s the Missing Piece to Health Systems’ Supply Savings Programs?