As your GPO and local contracts yield less and less savings into today’s healthcare marketplace, which we call cost savings (that do not change over the term of your contracts), you will then need to look to your variable cost savings (that can increase or decrease over the term of your contracts) to fuel your VA projects. For instance, a new or renewal GPO contract with a new price for two years that saves $15,000 is a fixed savings. If you are spending 2x your peers or $30,000 on this same commodity over two years, then the difference or $15,000 is considered variable savings. This is a new VA paradigm shift that needs to be institutionalized.
Now that we hope we have built a case for you to select your next VA savings projects based on your variable supply cost where do you find these utilization misalignments or wasteful and inefficient consumption, misuse, misapplication or value mismatches? Here are three things to look for when making your selection:
- Shadowing Your Customers: Any time you have a new request, new or renewal contract or VA study of a product, service or technology you need to visit the customers of these commodities at their job site to review how they utilize the product, service or technology. These visits will be an eye opener for you.
- Year-Over-Year Spend Reports: This is a report (*) that we provide our clients that they have found to be invaluable in quickly identifying overspending at their hospital, system or IDN. It helps you to ask the right questions, that will lead to variable savings for you.
- Variation in Practices: If you look across your system or IDN utilizing a total cost lifecycle measurements (*) you will discover hundreds of variable cost savings opportunities that you didn’t know existed.
Value analysis is entering a new stage of maturity in healthcare. No longer is VA just about price, applicability and sustainability. It’s now also about controlling your variable cost, which represents 80% of your healthcare organization’s lifecycle cost of any product, service or technology you are buying. That’s why it is mission critical for you to select your value analysis project wisely.
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(*) These reports are generated by our SavingsValidator™ tool that can make your savings job easier. Detail on the tool can be found at www.SavingsValidator.com.