What’s the difference—and why value analysis is important
A clinician attends a conference and sees an innovative product they want at their hospital. Back home, a committee evaluates the product and agrees to buy it. Is this a decision for the New Products or the Value Analysis (VA) Committee? It depends on whom you ask.
VA programs can include new products, but New Product Committees don’t necessarily include value analysis, says Drew Preslar, AVP, Advisory Services at HealthTrust Performance Group. “To me it comes down to being proactive versus reactive,” he says. With a New Product Committee, the team reacts to requests, whether for a new device, product or service. The group determines whether to approve it, comparing it to similar contracted items.
Value analysis: A continual process
With a VA program, the team makes worklists and schedules categories to review. These teams proactively assess a facility’s existing portfolio of all products that are contracted, off-contract or used within that category, especially when contracts near renewal, and look for savings opportunities through utilization changes, product standardization or SKU reduction. They’ll examine the latest cost and outcomes data to support recommendations for hospital or systemwide usage guidelines.
The same team can also evaluate new products, in different parts of a VA committee’s meeting agenda. “However, less than 10% of the agenda should allow for new product introductions,” says Vicki Alberto, VP, Clinical Resource Management at HealthTrust. Any new products under consideration should be viewed through the lens of value analysis, to ensure that they are effective, have equal or superior clinical outcomes to products currently in use and that they are priced competitively.
Meet the mission
All health systems have missions to serve patients and their communities. They need financial stability to drive the best patient outcomes. The work of VA teams allows health systems to become better financial stewards while improving patient outcomes.
Cost is vital, though it doesn’t always mean the lowest price. A $100 operational item may have the same clinical outcomes as the competitor’s $120 item. But if the less expensive item needs a $50 companion product while the $120 item includes it, the latter is actually more cost effective. The same is true for purchased services.
These programs have a huge financial impact on a health system. A study from AHRMM (the Association for Healthcare Resource & Materials Management) found that effective VA programs can result in cost reductions that range from 7% to 15%. And research from HFMA (the Healthcare Financial Management Association) indicates that hospitals reduced on-hand inventory by up to 25% when implementing robust value analysis processes.
How to build a VA team
When HealthTrust experts work with members to improve their VA teams, they ask about committee make-up, especially looking for executive sponsorship to establish accountability. They also review the team’s workplan, past agendas and meeting minutes. “A leading practice agenda will have new contract updates, initiative updates, and newly identified opportunities for both savings and SKU reductions,” Alberto shares. Completed initiatives should show how the hospital saved money when improving utilization or standardizing products.
HealthTrust also reviews the team’s stated purpose and objectives, and whether or not they align with the organization’s mission and vision.
The structure of a VA team depends on the size of an organization. A single 150-bed hospital will have a smaller team than an 800-bed hospital or a multi-hospital system with shared services. Larger systems can also break out sub-teams to focus on service lines, while smaller systems may have one VA team to cover everything. Regardless of the size of your VA team, it’s critical to include the right people in the right discussions with the information that pertains to them.
Each VA team should have clinician involvement from the various service lines. A systemwide team should include facility representatives. Not only does this help with best practices and idea exchange, Alberto explains, but each area can see how product usage affects both outcomes and costs. If one hospital achieves the same outcomes with a less expensive product, clinicians from the other facilities will be more open to switching.
Physician representatives can be service line leaders, chief medical officers or medical directors. “You’ll want to select a recognized clinical leader who is trusted by other clinicians,” says Preslar. The team should also have access to data showing how current products rate in terms of efficacy, patient outcomes and costs.
“A well-rounded team includes executive, supply chain, financial and clinical leadership. While clinical involvement is a must when adding new products to the supply chain, it’s equally important to track financial decisions and the impact of savings,” Preslar shares.
Connect with our team today at solutions@healthtrustpg.com to discuss how we can help your organization meet its performance goals.
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