Clinically integrated strategies enhance outcomes, drive cost efficiencies

1. Hospitals will never be paid as well as they are now. Medicare reimbursement will decline by at least 7.2 percent. For Medicaid, healthcare providers can expect to be paid 14 percent less. These reimbursement rates continue to decline although populations utilizing Medicare and Medicaid are increasing.

2. The way hospitals are paid will fundamentally change. Fee for service will evolve to fee for quality. Pay will soon be about the outcomes, not the service provided. Medicare no longer pays for hospital-acquired conditions and readmissions, and more quality-based reimbursement studies, such as those for bundled payments, are underway to develop a nation-wide model.

3. Care can no longer be delivered in silos. The era of alignment is upon us. Incentives (specifically financial) for years have not been aligned between providers, thus creating competing interests and poor coordination. Bundled payments and accountable care organizations are currently being studied as mechanisms to create the alignment and protocols to remove silos and enhance multidisciplinary approaches between physicians, hospitals and non-acute care providers who will share the rewards, better outcomes and financial performance that coordinated care should deliver.

4. More focus will be centered on treating chronic diseases to lower costs. Currently, 133 million Americans have some form of a chronic disease such as diabetes or COPD. Five percent of these patients equate to 55 percent of hospital admissions and care provided at Medicare rates.

Facing these new realities, margins will be under more pressure than ever. Materials managers will also have more accountability for helping to control costs without compromising quality of care. How can materials mangers contribute to helping their organizations in this new frontier?

For years, many materials mangers have focused on implementing quality-focused cost containment programs, such as value-based purchasing. What is the next step for materials managers wanting to drive more costs from their sourcing processes without impacting quality of care?

Clinical Value Analysis is the next logical step for materials managers. It allows you to lead with a clinical approach by utilizing outcome data, ancillary utilization and supply costs.

Clinical Value Analysis takes product and service evaluation from subjective to objective through a formal, customized and collaborative approach that helps you reduce and manage expenses. It helps you gain buy-in from across your organization since it involves interdisciplinary teams, integrating the clinical staff into the decision-making process. In this process, you are evaluating both the clinical efficacy and the overall financial impact in your decisions.

Clinical Value Analysis should include all supplies and services for a thorough analysis. It is always supported by clinical documentation which maintains and improves quality and customer satisfaction.

To start a Clinical Value Analysis program, the first step is to establish your structure. The standard structure is to put a steering committee in place that includes representatives from across the organization, including clinical and materials management members. Rather than create a series of service line-specific committees, it is sometimes more beneficial to create a series of ad-hoc committees based upon the supply categories or systems being addressed.

A basic Clinical Value Analysis program works on new product introduction and commodity standardization opportunities across all categories. For the most thorough program, leave no stone unturned. Look for opportunities everywhere from physician preference items (PPI) to office supplies. The steering committee should establish upfront that there are no sacred cows while reviewing the sourcing process to uncover savings opportunities.

To start the sourcing review process, nine steps should be used:

1. Assess and quantify the opportunity by aggregating combined spend on whatever product category you are evaluating (PPI, med/surg, etc.)

2. Hold a stakeholder kick-off meeting and explain the rationale behind the Clinical Value Analysis exercise

3. Gather clinical and business requirements and factor them into your approach to ensure a thorough review

4. Evaluate RFPs from vendors

5. Hold stakeholder review of RFP summaries and financials

6. Consider stakeholder recommendations for awards

7. Hold final negotiations on the contract (this stage involves Legal)

8. Implement new sourcing agreements. Communicating the benefits of using Clinical Value Analysis across the organization is important to ensure buy-in, which allows you to capture the associated savings by moving volume to new vendors.

9. Repeat process in other categories

To make these steps successfully, your organization must first insert a consistent and data-driven clinical change management process that drives product standardization in order to maximize group purchasing organization (GPO) tiers and custom contracts. You should also consider cost containment team strategies, policies, procedures and new product introduction analysis tools. To empower the team, provide awareness and visibility to senior management on your team’s ability to make big changes and decline business with some vendors as part of your cost containment strategy. Finally, facilitate product review meetings regularly to keep Value Analysis top of mind.

A large bucket to focus on within the Clinical Value Analysis program is PPI. The top 10 supply expenses by MSDRG make up 33 percent of all supply costs, although they only constitute 10 percent of the total volume. With an efficient Clinical Value Analysis program, big results can be achieved in this area in a small amount of time, including reducing PPI costs by 8 percent in 18 to 24 months time.

When looking specifically at medical devices, collaboration between physicians and non-clinical staff is most important. Savings can be achieved in physician and clinical preference items by employing clinical criteria for device selection, reducing utilization of products and reducing waste, employing evidence-based standardization of clinical practices and reducing average unit costs. To reduce costs, steps can include negotiating a lower acquisition cost, negotiating discounts or rebates, substituting a less-costly product, evaluating new products and vendors and standardizing them to achieve premium pricing based on market share.