Analyzing value during a global pandemic

Jan. 22, 2021
COVID-19 response need not thwart progress but enhance it

Just as the definition and parameters of value vary from person to person, organization to organization, so goes the definition and parameters of value analysis.

Short of universal acceptance and implementation, value analysis seems to slide along a scale of convenience. Some consider value analysis to be a synonym for “product evaluation,” even though the former tends to be more strategic, less tactical and transactional than the latter. Further, value analysis concentrates more on people – patients, staff, etc. – through personal and professional relationships as key to process improvement, whereas product evaluation focuses on technology and device use connected to costs and outcomes.

Unfortunately, delineation between the two can be murky.

But not everyone thinks so. For example, Lumere subscribes to product evaluation as a function of the larger and more encompassing value analysis process.

“Product evaluation is a single component of Value Analysis,” observed Suzanne Smith, RN, Senior Solution Advisor – Value Analysis, Lumere, a GHX company. “There were ‘Product Evaluation’ committees a long time ago that have since evolved into Value Analysis committees, which are much broader and more strategic in scope. Organizations that narrowly define Value Analysis as only product evaluation are typically very nascent in their maturity.”

Smith encourages Value Analysis teams “to create a charter that defines product evaluation as a component – not the sole purpose of the function. This charter must then be broadly socialized within the organization to ensure uptake. If you want something to stick, you must preach it to anyone who will listen!”

Smith contends it’s critical that the Value Analysis charter connects to an organization’s strategic goals – particularly now during the pandemic.

“What many failed to recognize – until COVID-19 brought perspective – is that the Supply Chain department is a strategic partner in helping organizations realize these goals,” she noted. “They have the data and insight to help connect the dots.”

Smith’s colleague Dan Hermes, Senior Solution Advisor at Lumere, views the connection and integration between the two functions as evolutionary. In healthcare, product evaluation began as an independent process that migrated to becoming a “single input” within Value Analysis, he indicates.

“The profession may have started out by evaluating products, but it’s evolved into informing evidence-based decision making that’s integrated with clinical practice,” Hermes said. “It’s about clearly communicating that Value Analysis goes above and beyond evaluating a product’s cost or efficacy. To do this, you must have a champion that’s willing and able to build a coalition of Value Analysis supporters across departments and service lines. This doesn’t happen by osmosis. You need to change the culture.”

Ron Denton & Associates LLC COO  Angie Haggard advocates a holistic approach with value analysis that incorporates a broad framework with strategic direction reaching into the C-suite. (See Figure 1, page 52.)

“Value Analysis is the collaborative structure and process to make decisions for products, services, capital and pharma that are used across multiple departments,” she said. “More importantly, it is a decision structure and process that incorporates CQO [Cost, Quality and Outcomes] – not just price. Value Analysis can be used for product evaluation but Value Analysis is much more. Value Analysis evaluates process, services, equipment and their impact on clinical outcomes. It is a structure that is driven by clinicians, facilitated by Supply Chain and led by a CXO.”

Value Analysis represents a transforming methodology to help providers select products and services on the value they bring to the organization and its patients – and not on price, according to Jenny Sydnor, RN, Director, Healthcare Consulting, Advisory Services, Premier Inc.

“Looking beyond product evaluation and selection, today’s value analysis enables enterprise-wide decision making on high-quality supplies, services and equipment by first considering care delivery, safety and outcomes as well as total cost,” she noted. “It strives to balance issues related to quality, patient and staff safety, revenue enhancement and reimbursement optimization across the continuum of care.”

Fusing the two makes sense from an operational evolutionary perspective, muses Keith Lohkamp, Senior Director, Industry Strategy, Workday.

“The confusion or equating of the two terms is certainly understandable, particularly as organizations continue to mature their value analysis processes,” Lohkamp said. “For many organizations, the initial driver for setting up value analysis is to expand on the product evaluation process by coordinating more inputs from more teams and including evaluation of the impacts on how care is delivered. We’re starting to see organizations look to tools like Workday Strategic Sourcing to formalize intake processes to prioritize value analysis projects and keep stakeholders involved. This allows a direct connection to subsequent sourcing and contracting activities needed to execute on committee recommendations and track results.”

Power among people

Sydnor insists that successful value analysis programs require strong relationships and ongoing collaboration among multidisciplinary teams that incorporate the engagement and support of executive leadership as well as collaboration with suppliers.

“Robust and contemporary value analysis programs focus on the intersection of cost, quality, safety, outcomes and patient experience,” she continued. “Alongside these goals, the scope of value analysis moves far beyond that of product evaluation ─ requiring a strong people element and coordinated effort across provider departments, service lines and vendor partners.”

Value analysis is all about relationships across providers, clinicians and supporting departments all aligned with the strategic vision of the organization and its providers, according to Deborah Roy, Principal, Vizient.

“A solid clinically integrated value analysis process empowers providers to work on initiatives that are most important to their patient care,” Roy indicated. “That effort includes a review of variation in practice, which gives providers a burning platform for change. This results in measuring the total cost of care across departments and into the post-acute space. Organizations need to structure what works best for their culture, establish executive guidance, communication methods and an alignment strategy. They must also share success stories and develop a widespread education plan that becomes a standard part of daily work activities for all staff.”

Marc Phillips, Senior Vice President, Corporate Sales, Medline Industries, embraces Clinical Value Analysis as multiple teams promoting systematic change based on areas of care or service line.

“This allows subject matter experts within particular areas to have a refined approach and build strong relationships with critical physicians and clinicians,” Phillips said. “This approach engages clinical stakeholders and leads to conversion and changes that sustain value over time. As a result, it can also develop greater trust in Supply Chain leadership to make the tactical decisions that are in the best interest of the health system.”

Depth and maturity

Fred Crans, a veteran healthcare supply chain executive with extensive experience in hospitals, healthcare systems, group purchasing organizations and consulting/service firms, delineates the terms with surgical aplomb, dissecting title from function.

“Value Analysis is process-driven. Product Evaluation is acceptance and price-driven,” summarized Crans, Business Development Executive – Healthcare, St. Onge Co. “One focuses on the best way to approach a situation while the other focuses on the best way to do things the same way we are doing them now.

“The challenge is to define and enact the process in a real-time manner so that it becomes what the title implies, i.e., analyzing the ‘value’ of doing something – and ‘value’ includes more measurements than simple price. The Association of Healthcare Value Analysis Professionals (AHVAP) has extremely clear-cut definitions and guidelines as to what constitutes a legitimate Value Analysis operation. The key is to have a title mean something. You can’t just take down the Standardization Committee sign and replace it with one that says, ‘Value Analysis Committee’ and have a legitimate VA function any more than you can take down the ‘Materials Management’ sign, replace it with one that says ‘Supply Chain’ and have a functional supply chain operation.”

Supply Chain executives, leaders and professionals should look at the five-year-old Value Analysis Maturity Curve, which was published in 2015 through a collaboration between the AHVAP and the Strategic Market Initiative (SMI), insists value management expert Barbara Strain, CVAHP, Managing Principal, Barbara Strain Consulting LLC. (See Figure, below.)

For so long the notion of basic patient care products evaluation was synonymous with value analysis with a focus on price, along with the vestiges of product standardization to eliminate variation,” Strain added.

During several live and virtual workshops and panel discussions the past 18 months, Strain recalls sharing the maturity curve and asking participants to place themselves along the curve. She found that roughly 75 percent of provider value analysis participants ranked themselves between Levels 3 and 4, while five percent selected Level 1 and seven percent Level 5. Suppliers, who based their positioning on their perceived readiness to address customers, posted similar results within a few percentage points, according to Strain.

Enter COVID-19.

Prior to 2020, healthcare value analysis was evolving to the point that providers recognized and understood it was not a person, a team or a program, Strain cites. “Value Analysis is a profession based on proven processes that move organizations from one level of maturity to the other all the while improving quality of care at reasonable costs,” she added.

“In 2020, however, healthcare leaders, physicians and clinicians quickly became aware of the value [that] value analysis professionals play,” Strain continued.

AHVAP hosted a podcast series from mid-April through mid-July 2020. The content ranged from vetting supplies and suppliers to lab tests, communication, collaboration and community outreach. The subject matter experts in the last few podcasts were value analysis professionals from various sized provider organizations that were asked, “What is value analysis like today?” Strain recalls the participants expressing a contextual understanding of the process against the backdrop of the pandemic.

Strain also envisions a “new value analysis” emerging from 2020 that will spend time differently on the medical/surgical supply process and more time on “need-to-have” initiatives that will move organizations to population health and quadruple aim maturity levels.

Alternate states

The Resource Group, which provides a variety of supply chain and support services to the members of Ascension Health, developed their own alternative to what they term the “traditional” Value Analysis process, stripping out the “emotional” attachments, according to Scott Caldwell, TRG President and CEO.

“The organizations that we serve asked us to innovate a means by which products and services could be evaluated objectively, without the emotional attachment, to brands and brand representatives oftentimes present throughout the process,” Caldwell stated. “Our User-Directed Strategic Sourcing process begins with Decision Teams and Affinity Groups comprising clinicians and end users who evaluate products and services based on attributes. By defining the attributes required, we identify a wider range of clinically acceptable products that are well established in the market but may not be top of mind for clinicians who may be considering a singular brand with which they may be comfortable and familiar. While this may seem similar to Value Analysis, evaluation of attributes of a product rather than the evaluation of a product as a whole has proven highly effective. The process has resulted in the establishment of a comprehensive and highly accepted contract portfolio that has delivered $1.2 billion in annual savings to our participants.”

Robert T. Yokl, Veteran supply chain executive-turned- value-analysis-consultant, and Founder, CEO and Chief Value Strategist, SVAH Solutions, embraces more of a purist philosophy of value analysis, hearkening back to the late 1940s and what emerged at General Electric Co.

“When asked about this topic, I always like to say that value analysis is one of the most misunderstood terms in supply chain management,” Yokl noted. “By definition, value analysis is the study of function and the search for lower cost alternatives as described by Larry Miles, ‘the Father of Value Analysis.’ Unfortunately, this definition has been lost in translation in healthcare. Instead, in healthcare value analysis is just another name for ‘product evaluation,’ thereby misinterpreting the true purpose of value analysis, which is to reinvent the way we specify, analyze, and classify our products, services and technologies. I suggest that VA practitioners read Larry Miles’ book, ‘Techniques of Value Analysis and Engineering’ if they want to gain the full benefits of this powerful cost and quality management technique.”

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