More than a dozen experts shared their positive and negative anecdotes, as well as useful tips, with Healthcare Purchasing News that are chronicled below in edited transcripts of their own words.

Spine implants – Supply Chain worked with the [operating room] director and physicians to review changing from two spine implant vendors to one. Supply Chain had several meetings with clinicians and also meetings with both vendors to review each proposal. The physicians and OR saw the value of each proposal and were willing to partner with Supply Chain to select the best clinically acceptable product and negotiate the best option for the institution. All parties involved made this initiative a success.

I often use literature-derived evidence-based projections to translate clinical parameters into financial calculations. Using the marginal cost of care in our institution for infected total knee arthroplasty patients and the literature-derived reduction in [surgical site infections] from the addition of antibiotic in cement, I was able to demonstrate that the total cost of conversion was higher than the variable cost saving from elimination of the antibiotic – as recommended by consultants.

We’re only restarting our value analysis process. We had a lot of fits and starts over the years with product standardization committees, but they died under their own weight. People cared only when a product or service they used was being discussed. Then they showed an interest. So we added value analysis training into their operational skills portfolio, focusing on processes and their interaction with customers. We also shifted our focus to ‘clinical quality’ value analysis, which shifts the orientation from being materials [management]-driven to clinician/surgeon-driven. Clinicians and surgeons take their product requests to the division chiefs and a group of their peers for discussion before they ever get to the hospital or organizational value analysis process. The division chiefs evaluate how the products promote safe patient care, patient-centeredness, effectiveness, efficiency and equity, among other criteria. We don’t address product pricing but do our due diligence in checking for [Food and Drug Administration] clearance and whether the product competes with something we have on contract or in the item master.

Lee Memorial Health System has been working [on this] over the past 24 months and that has resulted in over $1.6 million in delivered product cost savings for our health system.

In 2006, LMHS consisted of three acute care facilities (including a children’s hospital and a rehab hospital within these facilities, outpatient centers, multiple off-site physician practices and urgent care clinics. In August 2006 LMHS acquired two local HCA facilities (later closing one). Over the next year our Supply Chain focus was converting processes and systems over to LMHS. In November 2007, our system began to experience the impact of some of the economic issues as we began to see our supply expenses creeping up. One of the reasons identified was a lack of standardization within our facilities. During a senior leadership meeting our Supply Chain Executive made a comment that led us down a path that rapidly changed our standardization and value analysis processes. The comment [was], ‘if we could just standardize to one surgical clipper across the system, we would see an annual savings in the thousands of dollars. And this is just one item.’

With senior leadership support we began to revamp our existing products committee, which at that time consisted of a single group of over 30 clinicians, purchasing and supply chain leaders who met monthly. The ability of this committee to move standardization of items forward had become stagnant as each clinical member had differing clinical opinions as to which products were clinically acceptable despite the fact that they were all using them in the different facilities.

LMHS made a strategic decision to change from a traditional [value analysis team] or products committee to a more focused approach creating smaller teams to work through standardization and evaluation opportunities.

After consulting with my Chief Nursing Officer, Donna Giannuzzi, we began a process that would allow using existing clinical leadership meeting formats that were already in place for policy and process decisions. We developed Supply Management Action Team processes and educated these clinical leaders [who focused on] five specific clinical areas: Critical care, surgery services, emergency services, acute care and women’s and children’s. These leaders were then charged with working through the standardization opportunities that were presented to their team with expectations of rapid decisions for acceptability. From the beginning we focused these teams on commodity-type items, those volume items consumed on a nursing unit or in surgery, and specifically removed the high-dollar physician preference items, CRM, orthopedic and spine implants from this process, recognizing these products would need a significantly different approach. 

[At] The Health Alliance of Greater Cincinnati, there is executive sponsorship, there is discipline to the data underlying the procurement system, there is discipline applied to the way purchase orders are built so that compliance reports can be produced and there is discipline to producing a compliance report. If something is not on track, the leaders of those teams are engaged to discuss how to get it back on track.

As is often the case in the [operating room], there can be a particular surgeon – or two or three – who does not believe in the value analysis effort and has little interest in cooperating with an exercise that might require him or her to trial or ultimately use supplies that are not his current preferred items. Typically, this situation is left to stand and is chalked up to a case of clinical preference. In many of these cases, however, the cost of continuing to use these ‘outlier’ items can result in a significant increase in cost.

In one hospital, we helped them develop a value analysis initiative tracking tool that specifically identified these additional costs, including increased purchase cost (item no longer on contract at preferred rates), increased shipping costs (overnight shipments as items not in stock), and overall increased organizational costs due to potential loss of [group purchasing organization] rebates, GPO tier pricing or corporate contract pricing due to decrease in volume in one of the corporate vendor’s divisions. By specifically documenting and communicating these additional ‘costs of non-compliance,’ the value analysis effort has succeeded in highlighting these costs for management, ensuring this issue reaches the appropriate level of management in the organization, documenting why supply budgets in selected categories are going to increase and providing better – realistic – data for development of next year’s budgets.

We have been consulting with a 192-bed hospital for over five years now that retained [Strategic Value Analysis In Healthcare] to train, coach and facilitate their supply value analysis program. Prior to SVAH arriving on the scene this hospital was saving about $350,000 annually, or 2 percent, in price savings only. They told us that they hit the wall on savings, that’s why they hired SVAH.

More importantly, this hospital’s senior management team was totally committed to this [value analysis] process and gave us the time, attention and support to get their VA team off the ground and running. Best of all, we found an energetic and enthusiastic vice president who became the VA team’s champion to help guide, monitor and refine their new VA.

Going forward, this client has identified and then implemented double-digit savings in the millions of dollars – beyond price – through their VA process because ‘things change and people change,’ so there is always an opportunity for more savings every year.

Why was this assignment successful? A total commitment of time, resources and people power by this hospital’s senior management and staff to make savings happen.

Successful programs are focused and deliberate. Initiatives are identified and prioritized. Teams are formed only when needed, and communication is active and ongoing. Many of these processes are incorporated in the contracting process so there is no lag in realizing saving. One program was designed to insure that all initiatives had a significant [return on investment], both clinically and financially. In the standardization area product groupings were consolidated and grouped to create economies of scale where none existed prior. This way, line items were decreased, practice variance resulting for product variability was decreased and cost was reduced. A system was developed to communicate and implement. In this example, value analysis proved its worth.

Here are two examples. The purchasing manager for Genesis Health System was overseeing the value analysis process for four hospitals and dozens of other sites. Genesis was searching for a way to automate as much of the value analysis process as possible, so it selected Premier’s ValueAdvisor tool to track the value analysis process from identification through analysis and from decision-making through implementation, including return on investment on both a clinical and financial basis.

As a result, the value analysis process is automated, removing paper requests from the process just three months after program installation. There is more time for work instead of time-consuming documentation, enough that a clinical support committee was resurrected. New committees including a steering committee of top administrators were added. All employees and physicians can make applications and see what products have been requested. Physicians can enter a conflict of interest or make a potential disclosure if appropriate which is helpful for the legal team.

Cape Fear Valley Health System (CFVHS), Fayetteville, NC, generated $5.34 million in supply chain cost reductions in just 14 months through focused work with Premier Consulting Solutions (PCS).

Through the efforts of a value analysis team, which included PCS representatives, and its steering committee, CFVHS began to recognize savings on 60 percent of project-identified savings even before the engagement was completed. The team identified the primary areas of supply spend savings, including orthopedics, pharmacy, cardiology and surgical services, and implemented the savings without any sacrifice to quality.

Value analysis team members come from different disciplines and levels throughout CFVHS’s organizational structure and serve to generate initiative buy-in, foster communication enterprise-wide, and reduce unnecessary expenses. Physicians are included on teams as projects demand.

Premier and CFVHS uncovered savings through additional contract opportunities and discrepancies between existing supply contract prices and higher invoice prices. Significant savings were achieved by shifting percentage distribution of clinically alternative medications, giving greater weight to lower-cost options while keeping flexibility to meet patient requirements and prescriber preferences.

PCS introduced CFVHS to orthopedic construct pricing, which breaks down the components required for a specific therapeutic model. A construct on cemented hips, for example, listed and described all the components necessary to make up the hip. The team determined what really goes into a given therapeutic model, with input garnered from orthopedic surgeons, senior leadership and Premier consultants.

Desired pricing for each construct was based on current reimbursement structures. Premier compared CFVHS’s data on 13 implant constructs with blinded data from hospitals within the region as found in its pricing database These actual supply expense benchmarks gave CFVHS an objective truth that could be used to leverage vendor discussions. Negotiations based on this data yielded significant savings without orthopedic vendor change.

Cochlear implants – Supply Chain worked with clinicians – key stakeholders – and executives to present a savings initiative by reducing our cochlear implant manufacturers from three to one. Although the stakeholders were impressed with annual expense savings presented by reducing the number of suppliers for cochlear implants, it ultimately came down to the cochelar implant team’s decision that this was a patient-preference item and not physician-driven, which was Supply Chain’s initial view. We are revisiting this initiative.

I have been unable to achieve standardization on surgical mesh in our institution despite a plethora of commoditized alternatives, apparently because I have not found a way to translate the absolute lack of any evidence of superiority into motivation to abandon personal preference.

Broadlane has witnessed a few situations where executives have evaporated from the process or people lose their focus, causing the entire initiative to fall apart. This is why it is imperative to have ongoing executive-level involvement. Even HMA studies suggest that to be successful, there must be executive sponsorship throughout the entire process. It’s a continuous effort.

An [integrated delivery network] determined at the corporate level that it wanted to implement as much supply standardization as possible throughout its six hospitals. To nobody’s surprise, there was a wide variety of supply choices across the IDN hospitals initially. A corporate value analysis program was implemented, and in most cases selected items were recommended as the standards across the IDN. For several of the physician-preference items, however, the selected supplies were opposed by one or two of the more influential hospitals’ clinicians. As such, the decision was made to standardize on those items that were acceptable to everybody as the ‘best compromise’ solution. This compromise, negating the effort to balance costs and benefits, resulted in standardizing on the most expensive items and raising supply costs for the IDN as a whole.

We consulted with a 240-bed hospital [where] their CFO brought us in to stop the bleeding in his supply chain expenses. But he seemed to be the only one who had a sense of urgency about the project. To top it off, their CEO was out on sick leave with a heart attack, so he never attended our kick-off meeting when we installed their supply value analysis program.

We then established, trained, coached and facilitated their new supply value analysis team – four team leaders and 10 members – whose team leader was their vice president of operations. This seemed like a good choice for a leader since this individual had previously been their material manager. Almost immediately, the team leader made promises to the team members that she didn’t keep, and then didn’t show up for most meetings and finally stopped holding VA meetings altogether. We naturally followed up with the team leader weekly until she stopped returning our phone calls or e-mail messages.

What when wrong with this assignment? Little or no commitment whatsoever from this hospital’s senior management to make this VA program a success.

We have all seen the programs that evaluate a specific product, and the big win is the standardization of that product. Value analysis is so much more than a new product committee. It is my feeling that value analysis fails when the process lets outside influences and factors drive the process and in the implementation of identified improvements. In the first area, value analysis seems to have a ‘habit’ of trying to analyze everything and anything that is requested of it. Secondarily, value analysis tries to employ ‘democratic processes’ to its decision making process in order to make sure all views are uncovered. This is a core problem because value analysis needs to be focused and disciplined with goals that align with the system it is to support. Value analysis’ purpose is to drive efficiencies and savings; anything that does not fit with this should not be attempted. Regarding the second ‘failure,’ value analysis programs need to become experts in implementation. Too many times, amazing opportunities are identified and quantified only to fizzle out due to the lack of ability to implement.