September 27

The 4 Levels of Value Analysis Maturity

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Most supply chain/value analysis practitioners are looking for benchmarks to measure and then improve their value analysis programs, but finding this important data is almost impossible in our healthcare industry. With this said, SVAH Solutions would like to share with our readers our research in the four levels of value analysis maturity that we have observed at hospitals, systems, and IDNs nationally to help you with this important yardstick:

Level 1: GPO Contracts and New Product, Service, or Technology Evaluations

This is where 80% of hospitals, systems, and IDNs are now with their value analysis programs. Unfortunately, this value analysis model is probably costing your healthcare organization more in approvals annually than it is saving you money. If you don’t believe me, just add up your annual VA savings and then add up your new product, service, or technology approvals in dollars for the same year. At some hospitals this ratio computes as high as 1:5 (ouch)! So as you can easily see, this value analysis model isn’t sustainable over the long-term!

Level II: GPO Contracts and New Product, Service, or Technology Evaluations, Plus Clinical Supply Utilization Management Organization-Wide

Under this value analysis model, GPO contracts and new product, service, and technology evaluations continue to be assessed by your VA teams, but 80% of the VA team’s new mission is to eliminate wasteful and inefficient consumption, misuse, misapplication, and value mismatches (called utilization misalignments) in their healthcare organization’s supply stream. This VA model brings about substantial savings and quality improvements in the range of 7% to 15% of a healthcare organization’s total supply chain budget.

Level III: GPO Contracts and New Product, Service, or Technology Evaluation, Plus Clinical Supply Utilization Management at Point-of-Service

In actuality, your clinical department leaders manage their own utilization misalignments which represent a potential 11% to 23% reduction in a clinical department’s supply budget, while the value analysis coordinator assists them with this objective. Naturally, GPO contracts and new product, service, or technology evaluations continue to be evaluated by your hospital, system, or IDN’s value analysis teams. This is a very mature model that shares the responsibility for clinical supply utilization management with your healthcare organization’s clinical leaders. Why do all the heavy lifting? VA is everyone’s job in your organization!

Level IV: GPO Contracts and New Product, Service, or Technology’s Evaluations, Plus Clinical Supply Utilization Management – On Demand

Under this optimal value analysis model, all product, service, and technology lifecycle costs (beginning, middle, and end) are on your value analysis radar screen.  This means that your GP0 contracts, along with new product, service, and technology requests will be measured by their in-use cost, not their unit price. For instance, the cost under this VA model for an I.V. set wouldn’t be calculated at $5.00 per set, but $1.29 per patient day. This is the only meaningful measure that correlated to the new value-based purchasing payment plans that your healthcare organization is preparing for. 

I hope you can see by the descriptions of these four value analysis maturity levels that your value analysis growth isn’t a process, but a journey over many years. It all starts with the realization that value analysis is more than a new product or contract evaluation methodology. It is a process to reduce your healthcare organization’s product, service, and technology lifecycle costs, not just your upfront price or price at the pump. Once this value analysis definition is understood and internalized with your value analysis leadership, your new savings and quality improvements will flow organically.


Tags

benchmarks, GPO, hospitals, IDNs, savings, supply chain, supply utilization, SVAH, SVAH Solutions, utilization, utilization management, value analysis, value analysis programs


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