When high-profile healthcare expense management consultant Bill McFaul re-emerged from retirement in 2003 after a five-year absence, little did he foresee that the value analysis concept he helped to shape decades earlier would continue to simmer and start to boil again in popularity in 2004. That led him to found the International Society for Healthcare Value Analysis Inc. (ISHVA), one of two professional associations (the other is the Association of Healthcare Value Analysis Professionals or AHVAP) formally launched within the last year geared toward this expense management tool.

McFaul, who serves as the founding president of ISHVA until a practitioner is elected, sat down with Healthcare Purchasing News Senior Editor Rick Dana Barlow to share his reasoning behind the need for ISHVA and how it will fit into the healthcare operations landscape.

MCFAUL: It’s not just for materials managers’ time. It’s really for all the people that utilize the tool of value analysis. And that encompasses a pretty broad base of professionals. I’d like to try to avoid the designation that it’s only for materials managers. You have supply chain professionals, value analysis coordinators and a whole host of people. It comes down to anybody who’s involved as an expense management professional. The titles are changing so much that it’s difficult to differentiate what is a manager of materiels vs. materials manager nowadays. Participation would be demanding on study, travel time and so forth but we’re only looking for a small segment of the industry that needs healthcare-specific skills training.

In a large organization, system or network you may have a person who becomes the OR materials manager and they can have a huge responsibility in managing expenses for that area. If it’s under materials management, great. If it’s not, you shouldn’t exclude those people from having some skills training. They can currently sign up with AHRMM or other organizations for basic logistics and management of materiels training, including online courses and the like. They can go to the AHRMM meetings and become a member of AHRMM very easily. The Board has decided to focus on skills training more than on the logistics piece.

ISHVA is doing its best, and the Board has discussed it numerous times, to keep the costs to a minimum. It’s not going to be a big expenditure for the members to participate in these programs. As the founding board gives way to an elected board of practitioners that new board and the organization may decide to have bicoastal meetings or have one meeting in the spring and another in the fall, or alternate the meetings at different times to try to keep the travel expenses to a minimum. That’s a key thing. Unfortunately, providers have cut back so much on the budgets for training and education it’s a Catch-22. They expect people to perform and do more but at the same time they won’t allow them to spend the money to get that kind of training. The founding Board is very cognizant of these problems and hopefully as the practitioners, who will be involved in running the organization, come in they will remain as sensitive to it as the founding board has been.

Well, [sigh] the Board felt that it was important to try and provide unbiased skill-set training. When you bring in management philosophies and business philosophies in training sessions, such as win-win negotiations, psychology of change and the like you can often bring in other influences, other supplier-based opinions. Rather than do that the Board has been committed to have it be unbiased in any way. I’m not saying that other organizations have a bias but we’re really talking about not having it be swayed and having people come to a meeting and be pigeon-holed to talk about their products and services and supplies. They’re really focused on what we’re calling ‘boot camp’ kind of training. This is not for the people who want to come and sit and make their notes and go home. It will be very intense, high-level training that will span pre-meetings, during-the-meeting intense work and post-meetings. It’s got to be independent as we see it. The people and practitioners we talked to prior to starting the organization thought it would be an excellent way to approach it. Hopefully, the incoming Board of practitioners will retain that.

No, there will not be a trade show. The Board of Directors has discussed that numerous times. We’re not in any way trying to compete with any other organization or undermine or diminish their effectiveness. The other organizations are doing an excellent job but it’s very difficult for the structure and processes they have to provide the level of skill-set training that ISHVA is talking about. We’ve juggled the schedule around to be at opposite times in the year so as not to compete with AHRMM or AORN or any of the other national meetings solely for that purpose. We recognize that providers are restricting the amount of money that’s spent and that people only have a certain amount of time available to attend these things. We’re sensitive to that.

We’re trying to keep expenses extremely low. It’s starting off as a very low-budget operation, and hopefully it will continue that way. We’re also trying to seek some grants from organizations that recognize that we’re going to be unbiased. We’re not trying to impact suppliers in any way. This is not about beat-’em-up or negotiate win-lose. This is win-win-type training for people. Whether the foundations will fund us remains to be seen. Lawton Burns, who’s on the Board, is helping us on trying to pursue those kinds of donations.

My research showed a need, as I understood it, from professionals who are practicing expense management, to focus on interpersonal communication – the collaboration-cohesion organization line. That requires a whole different skill set. Not everybody is going to want to go through that. Not everybody is going to want to spend the amount of time and hard work to get into the level of detail and study that’s required in many of the topics that the education committee is looking at. So I don’t see this as being a huge number of members. If it gets to be large, that’s good. And then I would urge the organization to have more regional meetings to keep the travel expenses to a minimum. For the most part you could have concurrent meetings over several weeks around four parts of the country. The focus is on meeting the needs of whatever percentage of the industry that’s out there. But we’re not talking about large numbers. We’re talking about quality of training.

Actually, both. I’ll paraphrase a quote from Wayne Gretzky. Someone asked him why he was so successful. He said because he skated to where the puck was going to be. There are a lot of people who are still skating to where the puck is today. Unfortunately, the industry’s pressures are mounting so rapidly that by the time people reach that spot it will already be past them. The pressures are mounting that rapidly. In the past, manufacturing protocols would mean you might replace a technology every four, five or six years. Strategies are changing that quickly, too. Now with the technology we have a lot of the strategies that were only a year, year-and-a-half or two years old have changed so dramatically and so rapidly that providers just can’t keep pace with so many changes. There’s a need for these expense management professionals or whatever they might be called to start thinking in terms of meeting the needs of the industry in the future. That comes down to scenario planning. It doesn’t take much to think just for a few moments with the pressures where they are today what the future of healthcare may be. I’m not talking about what the buildings are going to look like or the footprint of healthcare but what their needs are going to be. As we do that, from our 15,000 hours of research that we’ve put into this, three things come out: Cost, quality and change are going to be consistent. So for the people who are involved in expense management their skill set – both intra and interpersonal skills will be critical and this is what we’re striving to help them with.

Besides ISHVA, another value analysis association debuted at roughly the same time. However, AHVAP [the Association of Healthcare Value Analysis Professionals] is seeking out only registered nurses to be members but reaching out to materials managers as non-voting associate members. What makes ISHVA’s strategy so sound when nurses seemingly dominate the value analysis coordinator’s position?

You’re absolutely right. The value analysis coordinator’s position is predominantly made up of registered nurses. However, as you know, I was instrumental in the creation of the concept of value analysis coordinators. And some of the best people that we had at McFaul & Lyons Inc. were not registered nurses. That doesn’t mean that registered nurses aren’t doing an excellent job. It’s really about the person. If you say a registered nurse is that person going to have a background in the operating room? ER? Infection control? Intensive care? Would that person have been on a general nursing unit? The knowledge set is not as important as the characteristics and skill sets of the individuals. We also have spent thousands of hours looking at the model of value analysis and what it has evolved to be as far as a tool. We found that it’s really an old model. I think the other organization – AHVA – has very good intentions but they’re busy skating to where the puck is rather than to where it’s going to be.

Unfortunately, I don’t think ISHVA’s going to stem the tide. The profession of what we historically have thought materials management and supply chain could or should have been in a complex environment moving forward has to an extent been neutralized. It’s actually losing the battle against getting the executive team to recognize it as a true internal consultant and resource in a leadership role. There are a lot of factors contributing to that. I guess there’s not anyone who’s out waving the flag for the profession to say what it could or should be. There are a lot of companies that are establishing services that they’re calling materials management, which are really managing materiels. They’re heavily involved in the logistics side and that’s a critical part of what materials management is all about. However, that’s not where the leadership role or being where the puck is going to be in the collaboration and cohesion organization-wide of getting everyone together to work on managing the big picture of non-labor expenses – not just that 15 percent to 20 percent that is currently available to the process of traditional materials management. The big picture includes the other 20 percent to 25 percent of things that don’t come through the purchasing department in non-labor expenses for purchased services, outsourcing contracts and the like.

Unfortunately, the executive team is trying to execute those strategies but there’s not a middle management process that’s cohesive across the whole organization. It’s the executive team that tries to do that and they have a lot of challenges ahead of them that doesn’t allow them the time to do the detailed analyses and then get people to cooperate. Within these silos every department as it’s evolved in healthcare is almost a separate company, so to speak, in their communication with each other. They’re fighting for limited resources. The hospitals have a limited amount of money available and everybody wants to maintain their staff to do their work and not be involved in anything else. One example would be the pooling for transportation personnel. There are probably six or seven departments that have their own people that do transportation of some sort. That’s ludicrous.

That’s really not true. We’re not trying to establish value analysis as a profession. Value analysis is a tool. The profession to me encompasses numerous potential titles of anyone who’s involved in managing expenses. It’s evolved in the last 15 years or so. People are viewing value analysis as the process. That’s really very troublesome. They are precluding the need to get very involved in all the tools that are necessary to get people to want to collaborate. You can do all the value analysis work you want and come up with a conclusion that something should be utilized or changed but then you can’t get the acceptance and the collaboration with the medical staff or the using departments. Value analysis is just that. It’s a tool to measure need and the appropriateness. You can’t go anywhere unless you make that change.

We’re not in any way suggesting that value analysis or value analysis coordinators should not be part of the infrastructure of the materials management or supply chain operations. To the contrary, we believe that, forgetting titles because they vary so darn much, that within a large organization, especially systems and networks, there needs to be a true expense management group that will involve a leadership role, the manager of materiels, people who are in charge of the logistics, the people who will coordinate the application of product and service evaluation, including value analysis, sterile processing. That whole group functions in a virtual, almost distributed, leadership role without worrying about the hierarchical structure. You’re delivering one outcome and that’s customer service and effective expense management. They need to work together as a close-knit team and deliver those outcomes for the whole organization and not just for the few departments that currently allow materials management to be involved in the process.

Not at all. There needs to be an individual who is coordinating centrally in a leadership role the management of all non-labor expenditures. That person’s title will vary from organization to organization. But that individual can be a critical component of executing the strategies for the whole organization. That individual has a very large number of employees under their direction. These individuals can be critical in executing any strategies that the organization may have. But you need that individual as a leader. In fact, that job may be bigger than any one individual so you can use a team of people to help deliver on that strategy. What the title of that leader will depend on what that organization wants it to be – whether it’s a vice president of something or a chief resource officer, it doesn’t matter.

The problem is that too many people associate materials management in the role of managing boxes and materiels or the same with supply chain. You carry with it the preconception that the title carries with it what the person’s doing. So I have a hang-up with and am not too comfortable with using current titles to describe what the position could or should become.

Something to do with resources. In the 1996-1997 period I spent a lot of time running around the country encouraging the creation of the title of resource manager. In fact, I worked with the two professional organizations at that time to change the name of the organization to reflect the need for that transition. When I retired I was somewhat disappointed that the momentum didn’t continue. In fact, it’s going the other way, if anything.

At the present time, not really. I’m so gun-shy because of the problem in the late 1990s of trying to call it chief resource officer. To me it has to do with the managing of all resources. If an organization chooses to make it a C-suite position that’s their choice. But it should connote more of a leadership role or a facilitation role and an internal consultant to everyone in the organization.

It would really depend on how the structure is changed in the organization. The structure in the organizations today as I see it will vary and change dramatically as the pressures intensify. The roles that people have today are based on the evolution of materials management, which was disjointed or discontinuous at best. If someone were to recreate a whole new operation and put someone in charge and gave them authority – and I hate to use that term because it’s not a matter of authority or control but a matter of coordination and facilitation – as an internal consultant, what position would someone else assign to that? It really would vary based on the culture of the organization and that’s the problem. There has not been a lot of cultural assessment with regard to the interpretation of what expense management could or should be.

I absolutely had no thought of that at all. When I formed The Center as a think tank to come up with some new and innovative ideas I put about 7,500 hours into that. During that process I realized that a lot of the models for executing strategies in healthcare were somewhat weak because the real team infrastructures only exists from the executive suite up. From the middle managers down there’s not a lot of truly interdepartmental collaboration. There’s a lot of leadership in healthcare in a functional department but across all of the disciplines and departments there’s not a lot. Healthcare just evolved that way. When you had patient-charge focused and service line management, for a whole bunch of reasons there’s not a lot of esprit de corps in most organizations. When I was working with The Center to put that together I realized that, my gosh, the skill set, the intra- and interpersonal skills training is a major need for providers. I decided to focus on creating an organization like ISHVA to help provide that basic set of skills training to people. The Center and Strategic Initiatives in Healthcare is going to be offering services to providers but I don’t want to seem like a hospital or a network or a system needs to use our services in order to help educate their people. For 30 years I’ve been committed to training and educating people who were involved in expense and materials management. I wanted to carry that forward. So it’s for all of the right reasons. It made a lot of sense for us to have those kinds of training things available, but not necessarily from us, but to the profession and by the profession.

ISHVA’s bylaws make it very clear that consultants – myself included and all of our staff – will not be eligible to be members or attend the meetings unless they’re invited to be a lecturer. This is an organization as we envision it for and by the people who are involved in the profession and not be influenced or swayed in any other way. We didn’t form it for any reasons that are going to enhance our profitability.

Just as I explained we’re helping to get it started. The Center is funding the legal costs and putting the manpower in to support it and get it started. John Reiss, the attorney, helped with the incorporation and selecting the Board of Directors to ensure that the people on the Board will make certain that everything is done and all decisions are made in an unbiased manner. Neither The Center nor Strategic Initiatives is going to be gaining in any manner, shape or form from ISHVA. The Board of Directors is hopefully going to make certain that that’s what happens. As soon as we can get nominations and people to fill out the Board, then we’re going to be moving toward getting myself and others who are on the Board replaced by practitioners. At present time Joe Colonna, the CEO of Strategic Initiatives, is also on the Board but he, like the other people who are doing it are mainly helping to oversee the formation and developing the first educational programs. SIH has a rather exhaustive platform of totally non-commercial healthcare-specific training materials that they’re offering to the education committee to help get it started.

[Laughter] Actually, the buzz is just starting. It’s just starting to become a buzzword. We’ve done a lot of research on the impact of disruption theory as put forth by Clayton Christiansen and his people in The Innovator’s Dilemma and then The Innovator’s Solution and his most recent book Seeing What’s Next. Disruption theory is really amazing. If your industry or your profession or your company has been disrupted it’s too late. It’s a matter of time before your business or profession is almost extinct. That’s why you see some major companies come and go. Huge companies. Ones on the Dow 30 disappear. It’s just the evolution of the way things transpire with companies.

My concern is in seeing the developments in healthcare. It’s a bad time for people who are involved in the profession of helping manage non-labor expenses in healthcare. There’s too much confusion, too much misunderstanding of what things really mean or what things could have or should have been. So in the meantime with all the pressure to control expenses on the industry you have these disruptive influences which are undermining the ability of the professionals out there to do a much better job. You can do that without contract management. You don’t need to go out and contract manage for a materials manager to get someone to take that leadership role. However, it’s sad when sometimes you bring somebody in from more than 30 miles away carrying a briefcase and suddenly that person gets the support and cooperation when internally a lot of people had the resources to do it. It just hasn’t come together. The influence the industry has been subjected to as I see it and proven by Christiansen’s theory have disrupted the profession. And now it’s a matter for some small percentage of people, using the 80-20 principle – where 20 percent of the people who are going to be the leaders have the right access to the right skills training to help them. HPN