March 9

Healthcare Value Analysis Isn’t About Lowest Price


We believe it is easy for value analysis practitioners to fall into the trap of believing that healthcare value analysis is about the search for the lowest priced product, service, or technology. In practice, however, value analysis is all about the search for a product, service, or technology with the lowest lifecycle cost that can reliably meet our customers’ exact functional requirements. There is a big difference!

Start with a Blank Piece of Paper

Rather than comparing the prices of so-called comparable products, a value analysis practitioner should start with a blank piece of paper to determine the functional requirements of her customers. For instance, if you receive a requisition from one of your nursing floors for a new Urometer, you would not start your value analysis process by comparison shopping.

Instead, you would interview your customer to determine what primary function (hold urine), secondary function (monitor output), and aesthetic function (easy emptying, anti-reflux, safe and secure) requirements she was trying to meet. Then you would search for a Urometer with those exact attributes that offered the lowest lifecycle cost. This approach could save your healthcare organization tens-of-thousands of dollars more annually by doing so.

Why Writing Functional Specification Works

The #1 secret to mastering the art and science of value analysis is to write functional specifications for the products, services, or technologies you are researching vs. accepting the brand name (e.g., Bard, Davol, Johnson and Johnson, etc.) identification that your customers have provided you as their specification on their requisitions.

The reason for the success of this functional specification technique is that it hones in on your customers’ exact specifications as opposed to expressing them in broad, proprietary, and illusive terms. This way you can quickly understand where your customer is coming from without the confusion of brand name advertising.

Take the Time, Save Even More

It’s easy to accept a brand name spec as your functional specification; who has the time to interview, observe, and shadow customers? However, this is why millions of dollars of non-compliant (i.e., higher or lower spec. product, service, or technology than required) products, services, and technologies have creeped into your healthcare organization’s formulary.

Consequently, it is a value analysis practitioner’s job to interview, observe, and shadow their customers to define their exact functional requirements. Otherwise, you will be accepting your customers’ brand name specs as precise, correct, and exacting, which we know not to be true by any means.

Special Note: For those of you who may think that value analysis is different in healthcare or created specifically for healthcare I caution you to think again. The classic VA model that we outlined above is the actual VA model that was created by Lawrence Miles of General Electric, the Founder of Value Analysis/Engineering. Remember, it does not matter what product, service, or technology you are looking at; they all have functional specifications that need to be analyzed!


functional requirements, healthcare, healthcare organization, Healthcare Value Analysis, lifecycle cost, price, value analysis

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