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GE Healthcare Camden Group Insights Blog

5 Keys To Getting Value From Your Value Analysis Process

Posted by Matthew Smith on Sep 1, 2017 4:33:51 PM

By Tom Fox, Vice President, GE Healthcare Camden Group

One of the first questions I ask my new clients is about their value analysis review process. Why? Because that’s the rigorous process every hospital and system needs in order to ensure they’re effectively managing supply expenses.

You, like almost every CFO and Supply Chain VP I speak with, are probably nodding your head right now, saying that you have a methodology in place. But I would like to challenge you on that.

  • What is your value analysis (VA) process, really?
  • Who is involved?
  • Do you include reimbursement analysis as part of the evaluation?
  • What tools do you use to track progress and monitor results?
  • How do you tie these results back to the overall impact on your organization’s total supply cost and net operating income?
  • Does the process include reaching identified cost reduction targets?

The ultimate effectiveness of your VA program depends on your answers.

Many VA programs I encounter focus primarily on the introduction of new products and technology. Others are the opposite – primarily centered on cost savings of existing supplies but ineffective at controlling new product entries into the organization. In order to truly exert some level of control over your supply costs, you have to focus not only on the new products and technologies coming into your organization, but also on how well you are managing existing supplies. In other words, it’s great to excel at minimizing the added costs of new technologies – it’s even better to control those costs while also reducing existing costs.

5 Best Practices For A Successful Value Analysis Process

Best practice #1: C-suite engagement
A C-suite level leader needs to chair and oversee your Value Analysis Review Team. Visibility at the highest level of the organization will ensure the team members feel accountable – and accountability is the crux of success. As the organization’s financial steward, your CFO is typically going to be the best person to chair this team. If that’s not possible due to bandwidth or competing priorities, then ask your COO or CNO to lead this team. And by “lead”, I mean truly lead the process and hold others accountable to targets and results while serving as the go-to person for dealing with barriers and resistance to change.

Best practice #2: Appropriate representation
Value analysis is not just a supply chain responsibility. Supply chain alone cannot dictate that clinicians change their practice, judge the impact on clinical effectiveness and quality, or calculate the expected reimbursement for a new supply. The appropriate engagement of other key stakeholders is of vital importance to the VA team’s effectiveness, and those stakeholders include physicians, nursing leaders, finance personnel, and other support departments like infection control, biomed, food and environmental services, and information technology.

Best practice #3: Clarity of purpose and aligned incentives
In the first meeting, the team needs to develop a team charter which will include the team’s mission, goals, and list of participants. Ideally, these goals will tie back to the participants’ annual incentive plans to ensure alignment with the organization’s goals. Ultimately, the purpose of this team is to ensure your clinicians have the products and technology they need while delivering appropriate cost savings and financial stewardship to the organization.

In subsequent meetings, the team needs to:

  1. Review all new products and technology requests: Hardwire a new product and technology assessment process that includes a review of the cost, reimbursement and clinical impact (outcomes); develop item master controls to ensure compliance; and review new spend versus historical spend to identify new products that may have slipped through the cracks
  2. Review strategic sourcing (contracting) opportunities to include contractual compliance monitoring
  3. Review product utilization by commodity to identify standardization and consolidation opportunities

Best practice #4: 100% process adherence
Make it clear that you expect 100% process adherence. Ensure each and every new medical supply, non-medical supply, drug or purchased service entering your organization goes through the same rigorous value analysis review process. No exceptions. And the only way to be successful at doing this is to continuously monitor your item master, Rx formularies, purchasing reports, distributor reports and invoices. This will likely be the most challenging part of revitalizing your VA program as it will require some difficult conversations with department directors and clinicians who have historically found ways to circumvent the process.

Best practice #5: Culture of accountability
Like I mentioned, accountability is the crux of success. Every team member needs to understand the important role they play in your VA review process. Your physician champions need to understand they are there to represent their colleagues and bring forth their expert opinions. They also need to understand they are expected to champion the team’s decisions among their physician peers and ensure their colleagues adhere to the team’s decisions regarding vendors, supplies and preference card items. Your department heads need to understand that they, too, are expected to respect the team’s decisions and not stray from the approved process when procuring new products or services.

This brings us back to the first best practice I mentioned: C-suite engagement. This will help you instill a culture of accountability into the team itself – and across your entire organization.

Non-Labor Expense Reduction


TomFox_headshot.jpgMr. Fox is a Vice President with GE Healthcare Camden Group with more than twenty years of experience developing strategic vision with C-Suite executives, physicians, and department leaders to transform how healthcare organizations utilize their non-labor dollars. Mr. Fox works closely with clients across the country reduce non-labor costs and sustain those savings over the long-term. He works closely with clients to identify savings opportunities, obtain stakeholder support, and educate staff on utilization to maximize and sustain the savings. He may be reached at [email protected].

 

Topics: Non-Labor Expense Reduction, Tom Fox, Value Analysis

Control and Maintain Costs Through Non-Labor Expense Reduction

Posted by Matthew Smith on Aug 30, 2017 9:11:08 AM

By Tom Fox, Vice President, GE Healthcare Camden Group

Healthcare organizations must constantly keep an eye on Non-Labor expenses, which typically represent approximately 40% of their total operating expenses. This is an ongoing battle with frequent periods of regression and sometimes a lack of focused oversight leading to missed budgets. Most organizations rely on their Group Purchasing Organizations (“GPO”s) to access competitive price points for supplies and services while using departmental leadership and processes, such as value analysis, to manage existing expenses as well as expenses associated with the various new technologies entering the organization daily.

Non-labor expenses are often not managed with the same rigor dedicated to managing labor expenses. Because of this, many “typical” strategies for managing Non-Labor expenses only address bits and pieces of the total Non-Labor cost equation, resulting in a huge opportunity cost associated with overlooking the full picture. The equation for total expense of a supply or service is PRICE x USAGE, and there are several items that should be investigated in each part of that calculation, such as:

  • Is the product or service truly needed in the first place?
  • Is there an equivalent product or service that could be evaluated that might provide efficiencies?
  • Are you using the supply or service in an appropriate manner, and is the way you are using it based on sound evidence, business case analysis, and/or clinical necessity?
  • Are you delivering the product or service in the most efficient way possible?
  • Are you engaging the right people in the decision-making process?
  • How does the price and utilization of the product or service support your reimbursement model, patient care needs and/or the needs or your internal/external customers?
  • Are you getting the best value out of the product or service you selected?

Simply relying on your GPO to manage these challenges is an incomplete solution. The GPO is focused on maximizing purchasing volume to drive better pricing, and they often encourage the use of contracts they have negotiated, when the contract or solution may not be the best available to you. The fact is, GPOs frequently do not manage a significant portion of Non-Labor spend as they are focused mostly on supplies and select contract services, with more of an emphasis on pricing than utilization.

Traditional non-labor expense reduction efforts end up being a temporary fix if sustainable governance models are not employed to create accountability. Any reset or launch of a sustainable Non-Labor expense management process must be supported by the appropriate structures and effective, repeatable methodology and tools, including:

  • A steering committee, led by a C-Suite sponsor, and focused on total Non-Labor expense management
  • Advisory councils for nursing and physician leadership to effectively engage the right stakeholders in the decision-making process
  • Effective project management workplans that highlight progress and barriers along with tracking documents to summarize overall status of efforts
  • Visibility to real-time impact to the bottom line

The GE Healthcare Camden Group Advantage

Our experience working alongside our clients proves we can generate a reduction of approximately 5-7% on total Non-Labor expenses, and sometimes as much as 8-10%--even with clients actively working with their GPO partners.

Non-Labor Expense Reduction from GE Healthcare Camden Group offers the advantages of:

  • Appropriate oversight of the full non-labor expense management process
  • Proven methodology supported by boots-on-the-ground subject matter experts who promote sustainable process changes that become embedded into your culture and daily work activities
  • Accelerated financial impact that delivers significantly more value than currently experienced with current GPO relationships and existing internal processes

Health System Case Study

The blue button, below, offers an immediate link to a 1-page case study that highlights our recent work with a Southeastern health system which resulted in the identification of more than 150 savings initiatives and $35 million in Non-Labor savings. Please take a moment to review the case study, visit the Non-Labor Expense Reduction area on our website, and contact us to determine the next steps we can take to start you on your expense-saving path.

Non-Labor Expense Reduction


TomFox_headshot.jpg

Mr. Fox is a Vice President with GE Healthcare Camden Group with more than twenty years of experience developing strategic vision with C-Suite executives, physicians, and department leaders to transform how healthcare organizations utilize their non-labor dollars. Mr. Fox works closely with clients across the country reduce non-labor costs and sustain those savings over the long-term. He works closely with clients to identify savings opportunities, obtain stakeholder support, and educate staff on utilization to maximize and sustain the savings. He may be reached at [email protected].

 

Topics: Non-Labor Expense Reduction, Tom Fox

5 Tips To Cut Supply Chain Costs

Posted by Matthew Smith on Aug 29, 2017 11:27:57 AM

By Tom Fox, Vice President, GE Healthcare Camden Group

Has your hospital or health system struggled to reduce your Non-Labor expenses to meet budget demands? Is your organization finding it difficult to sustain previous expense reduction and find new opportunities? Here are 5 tips to help get your Non-Labor expenses and your supply chain back on budget – and keep it there.

1. Preparation Is Key To Engaging Physicians

If your hospital requires a value-analysis of products and medications used by physicians and other clinicians, it is essential that you engage with them to gain support for supply chain change initiatives. Before meeting with physicians, it is important to be prepared and do your homework. This includes performing a thorough review of relevant literature, researching product information and examining evidence about the impact of new supplies and treatments on the patient. Furthermore, it is essential to engage physicians in discussion to determine the quality of the clinical evidence with a focus on the clinical outcomes. By preparing for your physician meetings and having a plan for an open dialogue, you can make the most of your time with them and in turn, they will be more likely to consider and support initiatives to reduce supply chain inefficiencies and costs.

2. Effectively Communicate Supply Chain Changes

When considering supply chain changes, remember to include all stakeholders in the process. Consider all departments impacted by the potential change and include representation in meetings where changes are proposed. All communication should include information that describes the proposed or effective changes in sufficient detail to ensure clarity. It is also advisable that you include:

1. “before” and “after” scenarios for either product or process changes;

2. a reason for the change;

3. the expected implementation date; and

4. the contact person to call if there is a question.

Taking these steps will support a smooth transition to new products or processes.

Furthermore, it is critical to communicate to users when a product is on “back order” or “out of stock” for any reason. This communication should provide information about the plans to provide an interim substitute as well as expected date for re-stocking of the regular item. By doing so, you can ensure users will be able to accommodate the interim products during the time of a “stock out.”

3. Don’t Assume Supply Chain Parity

With respect to large integrated delivery networks (IDNs), there is a general expectation that standardized supply contract prices are loaded into materials management information systems and followed properly for all locations within a multi-hospital healthcare system. However, a review of these prices across the enterprise will very often identify fairly significant differences in pricing that contractually should not occur. This is particularly prevalent in large IDNs that have gone through recent mergers and acquisitions that required the consolidation of multiple items masters. Identifying these opportunities requires a review of not only prices for each item number at each location across an enterprise, but also conducting a review of the item master to identify duplicate item numbers for the same product. By identifying and resolving these price discrepancies, health systems can gain considerable savings.

4. Battling Extreme Drug Pricing Increases

Hospitals and health systems are experiencing an unprecedented escalation in the cost of older, commonplace drugs with new price increases. In these instances, drug manufacturers are not recouping the research and development cost of bringing a drug to market, but rather capitalizing on drugs that have entrenched use with little or no competition. Therefore, it is important to not accept these price-gouging practices without first exploring every effort to limit the use of these agents only to cases with no viable alternatives and to compound, dispense and administer in dosage forms designed to minimize waste.

Limiting the utilization of these old drugs with the new costly price tags will require the assistance and cooperation of the affected clinical departments. Often the clinicians ordering these agents have no idea that these commonplace drugs are now today’s pharmacy budget busters and educating them on this new reality will likely align them with the goal to seek alternatives when appropriate.

5. Monitor Medication Dosage Guidelines

Hospitals can limit the financial impact of drug price increases by closely monitoring and, when needed, adjusting medication dosage guidelines. In addition to limiting the utilization of medications when possible, the pharmacy department should review the actual dose utilized per case and determine if there is an opportunity to dispense in an amount that will minimize waste. This can be accomplished through internal pharmacy department compounding or through partnerships with custom IV compounding companies or 503B manufacturers.

Non-Labor Expense Reduction


TomFox_headshot.jpgMr. Fox is a Vice President with GE Healthcare Camden Group with more than twenty years of experience developing strategic vision with C-Suite executives, physicians, and department leaders to transform how healthcare organizations utilize their non-labor dollars. Mr. Fox works closely with clients across the country reduce non-labor costs and sustain those savings over the long-term. He works closely with clients to identify savings opportunities, obtain stakeholder support, and educate staff on utilization to maximize and sustain the savings. He may be reached at [email protected].

Topics: Non-Labor Expense Reduction, Supply Chain Management, Tom Fox

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