Value analysis: No longer the buzz word in healthcare, but a way of life

Over the years, Healthcare has seen a steady decline in the reimbursement dollars stemming back to the Balanced Budget Act of 1997 and the more recent Affordable Care Act in 2010.

According to a Stand & Poors S&P ratings report issued in August, 2014 it stated, "We expect the trend in weaker operating margins to continue as providers are facing mounting challenges, including weaker volume trends, increased integration costs relating to physician employment, and substantial investments in technology amid an evolving reimbursement environment due to health care reform. We expect these trends will continue to pressure the sector over the next several years especially given the difficulty of finding the next level of expense cuts to offset the investments providers need to make to maintain their financial stability. We believe the sector is at a tipping point where negative forces have started to outweigh many providers' ability to implement sufficient countermeasures." S&P reports the average operating margin 2.1% for non-profit hospitals in 2013.

Hospitals continue to struggle with finding ways to cut cost, save money and improve their operating margin. This has come in the form of process improvement projects and Lean initiatives. Value Analysis programs have now developed into a foundational part of the hospitals performance improvement activities and have taken center stage to address the issue. Historically, nursing products committees provided an avenue for nursing to present new products or vet concerns. Today, however Value Analysis programs are multidisciplinary and forward thinking. Gone are the days when "if you ask, you will receive." Value Analysis programs are now more than ever data driven, analytical and outcome focused.

The structural foundation of a successful High Performing Value Analysis Program rest on three key pillars:

  1. Clinical
  2. Financial
  3. Operational

As healthcare reform moves to value-based care, the cornerstone of Value Analysis has as well. Do your product/service requests or offering have a clinical benefit? What is the research to support the expected outcomes? Clinical efficacy is essential. Independent, unbiased research to support the clinical benefit being claimed. There is often significant push back because "clinical studies are not completed yet." Further discussion is needed to vet out the clinical justification to approve a product. Short term trialing is often an alternative in this instance allowing for use of the product over a delegated period of time such as three to six months and tracking usage and outcomes with the expectation to report back to committee at the end of the trail for final disposition.

Determining the clinical efficacy of a product is now a collaborative event with physicians, nursing, infection prevention, employee health, wound care specialists working together to ask the critical questions to thoroughly vet a product. Each clinician comes to the table with a unique perspective on how a product will affect the patients it serves and the clinicians who will use it.

Merely obtaining pricing is no longer sufficient. Value Analysis has taken a broader assessment of the financial impact a product has on the organization. First, perform a comparable analysis to the existing product taking into consideration the unit of measure to assure "each for each" cost is compared. Identifying the total cost of ownership is now highly scrutinized to include additional equipment or supportive products to work in tandem with the new product proposed, service agreements, warranties and lastly, the effect on reimbursement.

Value Analysis has evolved beyond traditional data analytics and is now addressing the impact products have on reimbursement. Again, taking a collaborative approach, the Value Analysis elicits the expertise of the Department of Finance to validate reimbursement and coding information provided by the vendor and the impact it truly may have on the organizations existing managed care contracts and Medicare payments, especially if your hospital participates in the bundled payment programs—BPCI.

The holistic view does not stop here. How impactful is the product request to daily operations? Does its use increase clinicians' labor? Is the conversion doable house wide or will "product creep" exist because of a department's or specific clinician's refusal to convert? Product creep can be an unraveling, counterproductive logistical headache if these concerns are not address at the onset. In order for the Value Analysis to remain credible, successful and sustainable, operationalizing and implementing is crucial.

Best in class Value Analysis programs ask Who, What, Where and When.

  • Who will this impact? Are they aware? All too often key stakeholders are taking by surprise which will only negatively affect next Value Analysis initiative.
  • What is the objective? Are all the variables vetted and understood?
  • Where will this affect? What other departments besides the department submitting the request will be affected? Very few products live in a vacuum, so where else can this product be found within the organization?
  • When will the implementation take place? Has a "Go Live" date for all training and education, current inventory run-down, remaining inventory swapped out for credit or return been established for a hard start? Collaboration becomes essential again with educators working with staff and the vendor to assure majority readiness and Materials Management and Purchasing working to on board the product either through direct purchase or with a distributor. Best in class Value Analysis programs remain involved in order to "quarter-back" all the moving parts to assure no one is left out of the loop or that issues are not resolved fully.

The ever increasing need drive efficiencies and decrease cost is now the standard. Organizations with a fully functional, autonomous and empowered Value Analysis program find that their Value Analysis program is a self-funded model that yields a significant ROI.

Lynn Hansen has been serving patients, their families and hospitals for the last 20 years as a clinician.

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