What delivers the “Value” in Value Analysis?

March 23, 2023

Value analysis is not new; the concept has been around since World War II, when some General Electric engineers were forced to find alternatives for materials that they could no longer source. In the process, they discovered substitute products that were often of better quality and/or lowered total costs. The driver was necessity (not unlike what we faced during the pandemic), and the objectives have remained relatively the same through the years: sourcing and selecting products based on price and efficacy. But even that is starting to change.

In January, I had the opportunity to host an exploratory discussion on the broadening requirements for Value Analysis, as hospitals face increasing societal demands, such as the impact of products and purchasing decisions on health equity and the environment, among others. Joining me were three of the most forward-thinking professionals in our industry:

• Liz Eisenberg, RN, director of Clinical Value Analysis at Scripps Health and president of the Association of Value Analysis Professionals (AHVAP)

• Tom Lubotsky, Vice President, Supply Chain, Allina Health

• Mary Larsen, former Sustainability Director, Advocate Health and advisor, MindClick

The question I posed to all three of them (and to the audience) is whether Value Analysis professionals will need to expand the factors they consider, such as:

• The ability of a vendor to supply, including willingness to share information on potential disruptions and if products are produced domestically

• The environmental impact of products (including packaging, transportation, etc.)

• The availability of certified, diverse and local suppliers to support economic development in disadvantaged communities

• Whether a product has been produced by forced labor

See a larger list (although not exhaustive) of potential factors in the chart on this page.

Not surprisingly in the wake of the pandemic, nearly 90 percent of the audience said they already consider risk mitigation/ability to supply, while more than 56 percent want to know if a product is produced domestically. Mary Larsen was pleased to see that nearly half of the online audience was also including the environmental impact of products in their deliberations. Just as with transparency about supply continuity, Larsen said providers are dependent upon their vendors to share information on the embodied carbon resulting from the full product lifecycle of their products and what they are doing to reduce carbon emissions, chemicals of concern and other negative environmental impacts.

For Liz Eisenberg, it’s important to get clinicians involved in these broader discussions. With the American Medical Association and more than 200 medical journals calling climate change a public heath emergency, clinicians can be important partners in meeting sustainability objectives.

The challenge she and the other panelists noted was how best to include an increasing number of factors in their analysis, and how much weight to give each. From our discussions, that depends on the overall objectives of the healthcare organization and the role of the products or services under consideration. While cost and efficacy will always be paramount, the ability to support an institution’s journey to net zero carbon emissions or its efforts to support employment in locally distressed neighborhoods may shift a decision in favor of one product or vendor over another.

As Tom Lubotsky noted, what were once seemingly simple decisions, even about commodity products, are no longer, as you need to consider the role of a variety of factors at the system level. In his work to support Allina’s population health mission, Lubotsky says it comes down to a question of what contributes to value and the ability to produce a unit of care at a lower overall cost. For him, there are lots of levers that can be pulled, from finding a domestic supplier, a product with a lower carbon footprint, or even changing how often products are ordered, thereby reducing the number of shipments, not to mention supply chain labor costs.

Larsen added that addressing these larger societal issues can also address the biggest immediate challenge facing most healthcare organizations, labor shortages. While it is more complex, by considering these critical issues – from the economic well-being of communities served to reducing the carbon footprint of healthcare operations – healthcare systems can boost employee morale, while attracting and retaining staff committed to delivering that cannot only be measured but also experienced.

All three panelists will join me again on May 11 at the GHX Summit in Chicago for a repeat of this panel discussion. Join us if you can.

Karen Conway works to advance the role of the supply chain as a critical enabler in the pursuit of a value-based healthcare system. As Vice President, Healthcare Value for Global Healthcare Exchange (GHX), Conway explores how the supply chain and improved data quality and visibility can support understanding of what increases value for patients and to those organizations that develop and deliver healthcare products and services.

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