The new world of value analysis

Edition: March 2012 - Vol 20 Number 03
Article#: 3936
Author: Repertoire

Product selection in today’s IDN is a blend of old and new. Just as they have been for years, supply chain executives are charged with balancing cost, quality and clinician preference when introducing new products and technologies to their IDNs. They have to be adept at value analysis. And they have to be smart, diplomatic and persuasive.

But supply chain executives face a new world in many ways. Concerns about the cost of healthcare and the quality of healthcare – expressed in terms of patient outcomes – have never been as severe as they are today. Concepts such as “value-based purchasing,” “technology assessment” and “comparative effectiveness” are raising the stakes. And government and private payers are beginning to demand that providers address the total cost of care, rather than care delivered just in the acute-care facility, or the doctor’s office, or the long-term-care facility, or the home.

But something else that’s new is helping supply chain executives face these challenges. Unlike their predecessors, today’s executives have a wealth of automated data at their disposal, and well-trained people to analyze it and apply it to product and technology decisions.

Lessons from industry

Even though “value analysis” has high recognition in healthcare today, relatively few people are actually doing it, says Bob Yokl, founder of Strategic Value Analysis in Healthcare, Skippack, Pa. “They’re doing something else. That something else is price shopping, standardization, [working] GPO contracts.” That’s the bad news, he says.

But there’s good news too. For one thing, IDN senior managers are more attuned to the need for value analysis than ever before. Yes, many still believe that value analysis is about price, not total cost, but they’re learning, he says.

The other good news is this: Many value analysis efforts have moved from a committee approach to a team approach. “A committee reviews information and makes decisions on the fly,” says Yokl. “Team structure calls for teamwork. You actually go out and see what the customer is doing; you shadow your customers; and you come back with much better information.”

By “shadowing,” Yokl means talking to customers with knowledge. “They’re asking, ‘Why are you using this feature?’ ‘How many times do you use this a week?’ ‘What patients do you use it on?’ So it’s not blindly shadowing them. It’s coming up with good questions based on data you’ve seen.” If that data shows that the hospital usage is out of sync with what other facilities are using, or if the products being requested are overkill, then some action can be taken.

Today’s value analyst

With a master’s degree in business administration from the University of Dallas, Sandy Wise, RN, might represent the new breed of value analysis professionals. As director of clinical resources for the Texas Purchasing Coalition, Wise has been developing a clinical value analysis team program for the past year. Developing such a team for a regional purchasing coalition, as opposed to a hospital or even an IDN, presents its own set of challenges.

Texas Purchasing Coalition is a regional purchasing coalition, or supply chain management partnership, comprising 27 acute-care hospitals in the state. TPC has a variety of standing groups that consider product and technology issues, some examples being pharmacy, general medical, perioperative, cardiology and imaging. Various ad hoc groups are pulled together as necessary. One example: ICU nurses, infection control and others convened recently to hammer out oral care issues, in an effort to curtail ventilator-associated pneumonia. TPC’s supply chain executives make up a Texas Purchasing Coalition council, whose members, after considering clinical input, ultimately decide whether or not to pursue a particular technology.

Once the decision to introduce a new product or technology has been made, the member representatives take that information back to their facilities “and run it through whatever process they need in their organization in order to get consensus at home,” explains Wise. While consensus is the goal, TPC members are free to follow their own path. In one example, the majority signed on to a contract for suture, endomechanicals, topical skin adhesives and mesh. “Very difficult categories,” notes Wise. “Each member evaluated the products with a consistent tool, but customized the process to meet the needs of their clinicians.”

Clinical and business expertise

Another example of the new breed of value analysis directors is Terri Nelson, RN. She began her healthcare career at Mayo Clinic in Rochester, Minn., as a staff nurse, then worked as a nurse manager for many years. She then held a position in Mayo’s quality office, collecting quality data and measuring quality outcomes. When the value analysis position opened up in the supply chain management department in 2002, she applied. Her master’s degree in healthcare administration combined with her clinical background made her a successful candidate.

Value analysis started with each Mayo Clinic location (that is, the group practices located in Rochester; Scottsdale, Ariz.; and Jacksonville, Fla.), as well as the Mayo Clinic Health Systems (a network of clinics and hospitals in Minnesota, Wisconsin and Iowa), having their own value analysis committees, she explains. These committees were charged with reviewing and selecting products.

Today, the Mayo Clinic has one multidisciplinary, multisite committee called the Mayo Clinic Commodity Committee, which is charged with approving recommendations for products that have been reviewed by clinical staff. Despite the word “Commodity” in the name, the committee reviews both commodity and clinical-preference products. Products defined as “physician preference products,” which are used by staff in various specialties, such as surgery, cardiovascular, radiology, etc., are approved via physician practice committees.

Overseeing the value analysis process for multiple locations gives Nelson a unique perspective on the nature of clinical wants vs. needs. “What we’re asking of our staff is this,” she says, “‘Don’t tell me something doesn’t work. Instead, tell me what outcomes you expect to achieve, and then which of these outcomes aren’t being met by this product.’ We then need to ask the question, ‘Did we select the right product?’”

What she is trying to do – and what she wants the clinical staff to do as well – is to move beyond “I just don’t like it.” Rather, she’s looking for concrete and actionable data. “We ask for as much detail as possible. We share this detail with the manufacturer. Our commitment is to work with a manufacturer to resolve any issues.”

Tapping into vendors’ strengths

Indeed, today’s healthcare environment calls for new relationships with vendors, says Tom Lubotsky, vice president supply chain, clinical resource management, Advocate Healthcare, Oak Brook, Ill. Accountability is an important part of the puzzle. But vendors are also a source of information, so why not tap into that, he says.

In the future, IDNs may write more agreements with vendors that share the accountability for agreed-upon results, as a way of rewarding vendors whose technologies perform as promised, and penalizing those whose technologies fail to do so, he says. “We write consulting agreements that way,” says Lubotsky. Why not agreements for products and equipment? “Legally, I’m sure there are some hurdles. But that’s something we’ll have to address.

‘What I’m saying is, why not rely on the technical knowledge of the supplier to guide us and help us develop appropriate performance criteria that can be measured?” With close to 150 clinical performance measures, Advocate has plenty of experience monitoring the performance of its clinical staff. “Much of it is focused on clinical quality and safety. There’s no reason we can’t do the same thing in the supply chain. It will take some effort, but I think we can do it – develop measures around utilization and appropriateness.”

Value analysis for the continuum of care

Used to be the healthcare supply chain executive had one concern – the inpatient facility and those who worked and care for people in it. And the fact is, hospitals still account for most supply chain spending.

But as the federal government and private payers try to coax providers into assuming responsibility for patients’ care across the so-called continuum – from the physician’s office, to the home, to the long-term-care facility, to the hospital – contracting executives are being forced to look at a bigger picture.

Tending to the entire continuum offers contracting executives new opportunities to engage physicians and suppliers in meaningful ways, says LeAnn Born, vice president, Fairview Health Services, Minneapolis.

Fairview’s Care Model Innovation initiative stresses innovative care delivered in its clinics and other settings. The supply chain team is an integral part of it. “Our ‘Triple Aim’ focuses on cost, quality and experience,” says Born, referring to total cost of care, clinical outcomes and patient experience. “In my conversations with physicians and suppliers, instead of just talking about the price of a product, we’re looking at what delivers better outcomes and how we can work together to reduce the total cost of care,” says Born. That doesn’t change, regardless of where the product or technology under discussion is to be used.

But contracting executives face a challenge: Only those suppliers whose products are used in the hospital, clinic and possibly the home can help reduce the total cost of care, that is, care across the entire continuum. When she talks with other suppliers, “it still feels a bit theoretical conversation, but it is stimulating new and different conversations,” says Born.

Nevertheless, Fairview is definitely moving in that direction. “I’m excited to be working here, because we’re positioning ourselves for the future, where we won’t work in silos,” says Born. “We’re partnering with our physicians, and we have [agreements] in place with commercial payers that recognize how we have partnered with our physicians. We’re making the investments today that are necessary for our success in the future.”