Leveraging Value Across the Entire Healthcare Supply Chain

One of the missteps we observe with supply value analysis programs is that healthcare organizations aren’t leveraging value across the entire healthcare organization, thereby leaving millions of dollars of purchases annually not value-justified. It’s almost like there is a sign posted on thousands of dollars of non-clinical products and services that reads “off limits.” It shouldn’t be that way! 

Purchased services alone represent 39% of a typical healthcare organization’s supply spend. 57% of this is of non-clinical nature (i.e. telecommunications, records storage, utilities, insurance, IT services, office rentals, etc.). The time has arrived to treat all non-salary expenses the same: Suspect all expenditures until they have been value-justified!  

I remember assisting an IDN client in saving $750,000 in their telecommunications expenses because their value analysis team never value-justified this category of purchase. It was always thought to be “off limits” until their value analysis steering committee authorized a value analysis study. Another one of our client’s value analysis teams is targeting their food service contract with the goal of reducing it by a half-a-million dollars that had never before been vetted. The moral to these stories is that nothing is off the table at these two healthcare organizations.

When we perform a Strategic Value Analysis planning session for our clients’ executive management teams, one of the questions we ask them is, “What is the scope of your value analysis program going to be?” Inevitably, their answer is EVERYTHING and EVERYBODY! No executive team (we have done hundreds of these sessions) has ever limited the scope of their value analysis program. So, why shouldn’t you do the same when your executive management thinks the same way? All you need to do is just ask them to broaden the scope for your value analysis program, or as I did, enlarge your scope until someone challenges you and says you can’t do it.  

The truth is that I don’t need to tell you that we have entered a new era in healthcare, where every dollar saved is mission critical to generate a bottom line for your healthcare organization. This means that no stone should be left unturned with your value analysis program in meeting this goal and no commodity group should be excluded from your value analysis agenda. It saves dollars and makes sense to do so!