Heroes and villains – make that anti-heroes – may ebb and flow among value analysis programs, but projects accumulate.

Many agree that counting your wins and losses can inspire confidence, development and growth, which fuels the momentum of value analysis as a concept that dates back to the throes of World War II and can trace its emergence in healthcare back to at least the 1960s.

Eight experts shared some anecdotes, giving props to successful ventures and landing drops on failed initiatives. They also shared a variety of learned lessons and useful tips with Healthcare Purchasing News that are chronicled below in edited transcripts of their own words.

A large multi-system hospital was able to successfully standardize to one vendor for surgical mesh through its value analysis program. The key reason for success was involvement of the end users. Several physicians were appointed to the ad hoc team, and a survey tool was used to allow every surgeon who wanted to give feedback the opportunity to do so. This survey tool was developed by the physician champions for the project.

A product fair was also held so each physician could touch and feel the products from various manufacturers. The products did not contain identifying information regarding the manufacturer. Physicians who attended the product fair completed an evaluation of each set of products and rated them as "preferred," "acceptable" or "unacceptable." The results were tallied and shared with the physicians who agreed to convert product for cost savings.

On some level, everyone understands that the cheapest is not necessarily the best in terms of value. But we have had the most success demonstrating this by showing our customers the actual components and processes we use rather than telling them. We also use the hospital’s own historical data to show that repairs done right last longer. When it comes to value analysis, showing is better than telling.

What comes to mind is a 398-bed acute-care, not-for-profit community medical center whose CFO set the goal to reduce her escalating supply chain expenses by 3 percent to 5 percent within 12 to 18 months, since she was noticing an unfavorable supply trend over the prior 12 months. With this goal in mind, the CFO established a supply value analysis steering committee, which met monthly and that she chaired. Membership includes vice presidents, champions, value analysis team leaders and a new value analysis coordinator. This committee would launch and then oversee her hospital’s new value analysis program. She then retained a consulting, training and technology firm to assist her in planning, organizing, institutionalizing via software and training of team leaders and team members of her four new value analysis teams – surgical, clinical, support services and technology. In the first year of operation her new value analysis program carved out $4 million dollars or 4.2 percent from her supply chain budget through the efforts of her value analysis steering committee and value analysis teams.

The success of the value analysis program can be attributed to:

1. The hospital’s executive management team being actively engaged in the launch and ongoing activities of their value analysis program.

2. Setting specific financial goals, such as 3 percent-5 percent reduction in supply expenses within 12 to 18 months.

3. Training of team leaders and team members vs. just letting them figure it out for themselves.

4. Institutionalizing the value analysis process with software so the results of the value analysis program could be measured, monitored and reacted to by the steering committee.

One customer was able to realize a combined $350,000 in savings on exam and surgeon gloves. They did this by standardizing glove vendors, glove types and stock-keeping units.  

Key reasons for success include:

1. Physician and clinician engagement and support by having a physician and nursing champion leading the glove team. This team led the evaluation process and the decision for a multi-facility IDN. 

2. A well-executed project plan, including the strategy and approach, key stakeholders, timeframes and deadlines.

3. Strategy to include a pre-initiative assessment to determine the success factor for implementation. 

One health system has multiple physician groups who regularly meet to discuss their practice. The system uses a capitated strategy for implants and has been highly successful in maintaining a moderate number of suppliers, which offers physicians the benefit of choice. In turn, physicians understand that using products outside of the capitated program undermines the savings strategy for the hospital. 

To that end, data is regularly reviewed to ensure compliance, physicians have critical conversations around practice, regularly review statistics related to waste and discuss what truly fits criteria as new technology, as opposed to a new twist or new packaging on a current product. The groups are a true collaboration between the hospital and physicians where objective clinical evidence is regularly reviewed and discussed.

Here’s an anecdotal success story, illustrating how ‘easy money’ can be left lying around if leadership and a collective proactive passion to ‘spend my hospital’s money as if it was my own’ is lacking. A major hospital was able to immediately realize more than $80,000 in savings – savings that had been previously identified but never acted upon almost one year before – by converting from one market-leading electrode supplier to another.  Once all key stakeholders were involved in the discussion, each individual was held accountable for delivering defined, quantifiable savings. Once the discussion itself was framed properly by the newly appointed C-suite level executive, asking "why can’t we realize $80,000 in savings?" instead of "can we make this conversion?" the conversion occurred quickly and painlessly, and the savings were booked.

For a value analysis best practice model, I would hands down look to West Penn Allegheny Health System in western Pennsylvania. September 2010 marks the one-year anniversary of Nexera [Consulting] being brought in on a five-year supply chain management contract, and a key challenge for Nexera was to assist WPAHS in implementing a system-wide, evidence-based, sustainable value analysis process. The kick-off meeting occurred in February, where the vision of WPAHS’ president and CEO to have high physician involvement in the value analysis process was implemented. 

Value analysis at WPAHS starts at the top with its system-wide value analysis steering committee.  The system-wide steering committee is chaired by a physician, and its 15 members include the physician chairs from each of the clinical service line value analysis teams for which they have cost-saving responsibility, including perioperative services, cardiology, and medical/surgical, in addition to a business operations value analysis team. Additional value analysis teams for lab and radiology are planned for the near future. The steering committee also includes one or more COO, CFO, and Chief Nursing Officer members from across the system, in addition to supply chain management, compliance officer, professional development and quality assurance. In the past year alone, savings that have been identified, implemented and validated near $11.7 million. 

Central to WPAHS’s success is its strong physician and C-suite level executive involvement in fact as opposed to theory, coupled with its clear vision, sound structure, defined processes and its use of data to track, trend, quantify and validate results.  

An IDN client, with eight facilities, had historically not addressed physician preference items and consequently its PPI supply expense costs continued to escalate. The Preference Group implemented a value analysis program and partnered with the IDN for tremendous success. As a result of thorough data analysis, product evaluations and clinician-led utilization and standardization initiatives, the client achieved $3 million in savings in six months.

A small healthcare institution attempted to convert surgeon’s gloves. The value analysis team did their research, performed a great analysis and had a very well developed action plan. Various surgeons were asked to trial the new glove and the trial proved successful. A date was set for implementation and communication was sent to all physicians practicing at the facility.

When the old gloves were removed from the shelves and the new gloves were placed, one physician caused a tremendous uproar. This physician had not been asked to trial the new gloves. When she was forced to use the gloves because they were the only thing on the shelf, she did not feel they were adequate to meet her needs. She complained to the CEO and the Chief Medical Officer. To appease the physician, they asked that the old gloves be made available for her. Thus, the old gloves were placed on the shelves beside the new gloves. Within six months, all physicians were back to using the old gloves and the cost savings were lost.

Lessons learned:

An example that comes to mind of a failed effort involves endomechanicals. I’m sure everyone who works on value analysis has experienced something similar and learned valuable lessons from the experience early in their career where all that could go wrong did go wrong. In this instance a savings opportunity of $1.5 million was identified that required a conversion of vendors and products.

The key reasons for the failure included not having a clear understanding of the surgeon’s clinical justifications for their choices in these products as well as unaligned strategic goals between administration and physicians on the financial impact of the initiative. Another key contributing factor was not clearly assessing the preference of the surgeons, the vendor of choice, and their commitment to the vendor, which made up the majority of their expense, and trying to force a change on them to a totally different vendor without first gaining their buy-in. 

The lessons learned have made for very successful subsequent physician preference initiatives, including getting administration involved and understanding the politics and surgeon dynamics and relationships with vendors upfront relative to the financial impact and surgeon incentives and preferences. Secondly, have the Chief Medical Officer and a surgeon champion in place to drive the initiative is key to success. You must have surgeon engagement upfront to support the initiative, administration’s support to stand behind the initiative and understanding of the pros and cons relative to physician relationships and alignment to ensure success.

In one particular hospital system a variation in practice between facilities was noted in the use of IV start kits. This variation was costing the hospital, and the team noted that sound clinical practice in the other facilities was not followed. The team expressed apprehension, stating they had attempted to achieve savings with this initiative in prior years as well. While clinical stakeholders were included, the team struggled to arrange a forum for discussion with physicians. The initiative remains a viable option for savings but nine months had passed with no successful change. The organization is not ready to put the initiative behind them and a recent review brought forward some important lessons learned that they are working to rectify:

While the team cannot yet claim success, they are moving in more positive directions.

I can remember one such failure that vividly stands out as a big failure. It was a 198-bed community hospital whose CFO was looking to establish a value analysis program, but wasn’t able to get his executive management team fully engaged in these efforts. In fact, his CEO had a heart attack at the beginning of his hospital’s value analysis program launch, and I don’t think he ever gave a second thought to this value analysis program once he came back to work.

To compound this ambivalence, the team leader who was selected to lead the hospital’s value analysis team didn’t show up for most meetings thus leaving the team’s facilitator to run the meetings. The team leader, when she did attend her value analysis team’s meetings, rarely kept her promise to her team members or followed up on team assignments. Within a few months the team leader actually stopped scheduling value analysis team meetings, which brought this hospital’s value analysis program to an abrupt halt with very little to show for their efforts.

As you can clearly see, this hospital never got their value analysis program off the ground due to a lack of engagement, involvement and oversight by the hospital’s executive management team; poor and/or absentee leadership at the team level and; no accountability whatsoever of this value analysis team’s activities. It was obvious to me that this value analysis program failed because the CFO never set the stage for success of his value analysis program when he didn’t get his executive management team fully engaged with his new value analysis program. He then made this blunder worse by selecting the wrong team leader to manage his newly formed value analysis team. These two critical mistakes quickly sank this CFO’s value analysis program before it got off the ground.

The most common causes of failure are because the key stakeholders and end-users were not involved in the process. Hospitals must engage key end-users from the start of the project to achieve success. If decisions are driven strictly for cost savings from administration or materials management without clinician buy-in to the value analysis process, failure is more likely.

There are typically many factors involved in physicians’ preference that must be addressed at the early stages to navigate project barriers to achieve the utilization and savings goals. Everything must be taken into account, including reasons for physician preference, knowledge of the preferred items functional equivalents, vendor relationships, as well as other non-cost related variables. This is a main reason why The Preference Group does not recommend proceeding with a value analysis program without physician and clinician involvement.

We used to train our sales representatives to simply sell repair services – and for the customer, the decision often came down to price rather than value. Now we show our customers how the need for repair occurred in the first place and how to stop the instruments from being damaged … and we combine this with excellent repair service. This enables hospital personnel to see the value of the process improvement support that IMS provides.