June 27

How to Take Your Value Analysis Program to a Whole New Level of Performance


As we have often discussed in this blog, most value analysis programs are bogged down with evaluations of their new and reviewal group purchasing contracts. While this is important work, it isn’t at the core of the value analysis methodology.

I would call this work due diligence rather than value analysis work, since the GPO evaluations don’t look at lower cost functional alternatives. To the contrary, GPO contracts are either approved or disapproved. They are rarely, if ever, modified!

Use your GPO contracts as an impetus for Positive change

One change in your GPO evaluation process that will take your value analysis program to a whole new level of performance is to use your new and renewal GPO contracts as an impetus for positive change.  For instance, one of our clients used a wound care GPO renewal contract as an impetus to save $262,000 on their wound care supplies and $40,000 per incidence on ventilator-associated pneumonia avoidance.

Here’s how they did it.

Instead of automatically approving a renewal wound care contract from their GPO that would have saved our client a few thousand dollars, in its place they benchmarked* their wound care supplies against their peers which they discovered exceeded their wound care cost per adjusted patient day by hundreds of thousands of dollars.

They then established various value analysis workgroups to tackle the specific area of opportunity uncovered by our analytics. A dedicated program coordinator was assigned the role of troubleshooter, helping working groups overcome obstacles that were impeding progress.

During the initiative, the value analysis workgroups reviewed its use of patient transfer devices, skin care and incontinent care products, ultra-absorbent pads, bedmaking process, and transport team training. In doing so, our client uncovered inefficiencies in the use of patient transfer devices, the efficacy of the skin care products, value mismatches with absorbent pads, and lack of consistent process in bedmaking.  Once these inefficiencies were corrected, our client reduced its ulcer rate by 10 percent while reducing its wound care supply spend by $262,000 annually.

A road less traveled by supply chain/value analysis professionals

Unfortunately, this is the road less traveled by supply chain/value analysis professionals.  And considering that your new and renewal GPO contracts are only generating savings yields of one to three percent of total supply budgets, isn’t it time to look to a new value analysis methodology that yields eight to 17% of your total supply budget. That’s what using your new and renewal GPO contracts as an impetus for positive change can do for you.


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