With over 30 years of experience in the healthcare supply chain, Robert W. Yokl, is the senior VP, operations, at SVAH Solutions. Robert leads the team in day-to-day operations on various clinical supply utilization, value analysis and supply validation solutions. Throughout his career, Robert’s worked with over 355 hospitals, integrated delivery networks and health systems. He has engaged in value analysis and supply utilization at every level of a healthcare organization. He recently spoke with Caresfield about how value analysis teams have evolved and where they could go in the future.
How have value analysis teams evolved over the decades you’ve spent consulting with the industry?
Value analysis has been around as an improvement methodology since the mid 1940s. General Electric value engineer Larry Miles created the tool. This was post World War II and there was a lack of raw materials and very high manufacturing costs. Larry created a process called value analysis to focus on the functional requirements of products. The goal was to find lower cost but equal or higher quality alternatives.
The process entered healthcare in the late 1970s when Alex Vallas piloted a new way of thinking. At the time he worked for the Hospital Council of Western Pennsylvania which is now part of Intalere/Vizient. Alex started performing value analysis studies on products and product categories and then publishing reviews for customers. Alex had many followers, including my father and CEO Robert T. Yokl (SVAH Solutions), as well as William McFaul (McFaul & Lyons) and Tom Hughes (Concepts in Healthcare) who are all part of the Healthcare Supply Chain Hall of Fame today. In the 1980s and early 1990s, hospitals and health systems had basic product evaluation committees in place. These committees then morphed into value analysis teams which focused on cost reduction using the functional approach.
The new focus needs to be on cost optimization versus price alone. Price has been king so long that we tend to forget that there is more to the total cost of a product, service or technology to save on.
Evolving further into the early 2000s we saw the emergence of full-time value analysis coordinators and managers. These were mostly clinicians. We also saw the founding of the Association of Healthcare Professionals at this time. By 2010 and beyond, there was a high level of maturity in value analysis teams. These units focused on an evidence-based approach to the evaluation of products, services and technologies. It’s exciting to see that we now have professionals with the title of vice president of value analysis, director of value analysis, etc. There is still much more that value analysis can do!
How did the rise of GPOs affect value analysis teams in the 2000s?
The maturity of the group purchasing organization in healthcare with the emphasis on national committed volume programs had a major impact on value analysis. Due to the nature of product conversions and solving problems related to changes of contracts in over 500 major and over 1,000 minor product categories, this left a major hole in healthcare supply chain departments. The natural evolution was to allow value analysis professionals and the teams they facilitate to handle these day-to-day issues, as well as the incredible influx of new product requests we now see in our industry.
There is some great work being done throughout our industry by value analysis professionals and the teams they facilitate. However, the focus has changed in many respects. Job one is to implement group purchasing contracts for price and standardization savings. Right behind that is managing hundreds and even thousands of new product requests that healthcare systems field. This is a daunting challenge for any professional or team, but they are getting the job done.
With the maturity of group purchasing, we’ve seen price savings are suffering from the law of diminishing returns. Add in the higher inflation levels in 2022 and the net price savings is having a difficult time offsetting inflation. Does this mean there are no savings in healthcare supply value analysis? The answer is no. Now is the time to look at things like consumption, waste and inefficient use. In many ways, this is getting back to value analysis origins in healthcare back in the early 1980s.
How did the value analysis process change with COVID-19?
Value analysis went back to basics when there were supply shortages and searched for lower cost, equal quality yet reliable products. These are the core methodologies of the value analysis functional approach. Value analysis pros can use them for product sourcing and solving problems. That is exactly what value analysis professionals are employed to do. They facilitate and coordinate solutions to product shortages. They seek out lower cost alternatives that meet customers’ requirements with equal or better quality. This is where value analysis started at the end of WWII and the methodology is holding true through COVID.
Where is the biggest opportunity to strengthen supply chain efficiency in 2022?
There is a high level of maturity with value analysis programs at healthcare systems. That does not mean that there are not double-digit supply savings from total budget, because there are. The new focus needs to be on cost optimization versus price alone. Price has been king so long that we tend to forget that there is more to the total cost of a product, service or technology to save on.
Organizations should look to create value analysis teams that are focused on cost optimization. At minimum, use your existing teams and carve out 20-40 percent of your agenda for optimization. Value analysis teams can only affect what they focus their agendas on. If you focus on GPO contracts and new products, then those are the only results you will gain. If you focus on things like clinical integration strategies to reduce waste, optimize utilization and meet your customers’ requirements exactly on a department-by-department basis, then you will gain these results.
What opportunities do you see for value analysis professionals in the next five to 10 years?
It’s easy to get caught up in the, “this is how we’ve always handled value analysis” cycle of the supply chain. I suggest that professionals look to grow their capabilities in supply utilization, benchmarking, clinical integration, and cost optimization beyond price. GPOs give you the easy button with pricing and tiers. The big savings are now within the contracts you are purchasing, not the price at the pump. You want to focus on gaining the most for the dollars purchased to optimize life cycle use to the fullest, drive out waste/inefficiency and focus further on meeting your customers’ requirements.
What can a supplier like Caresfield do to make it easy for providers to complete a conversion to our solutions?
Value analysis professionals should look to partner further with organizations like Caresfield because they know their product lines that their customers buy from better. Case in point: If a health system has found a major savings opportunity in a particular category, instead of totally switching contracts or making their own assumptions, the health system can bring the supplier/distributor rep into the mix. It is a lot easier to adjust within an already contracted product than to go for a wholesale switch with the promise of big savings only if you don’t incur costs in that switch. It is a lot easier, faster and better for the organization’s bottom line to work with the existing vendor to gain the cost optimization rather than changing out contracts.
There are also opportunities for suppliers to point out products or categories that are outside the norm of spend for the healthcare supply chain. I saw a sales rep do exactly this during a distributor spend review. The rep pointed out that the client was spending $45K too much on an antimicrobial reusable blood pressure cuff. He knew the nature of their business was mostly outpatient. He pointed out they should have a comparable disposable blood pressure cuff with the same manufacturer meeting their exact requirements. The client did not even realize this was happening, but the business review bore this out. The bottom line here is that what may hurt you in the short-term market-share wise will pay major dividends by being a trusted supplier who can make cost optimization part of the value analysis conversation for their customers.
Related: 5 Hospital Analysis Best Practices
Robert W. Yokl is the co-author of Healthcare Supply Utilization Revolution – The Future of Supply Chain Management. In addition, he is the managing editor and continuing article contributor for Healthcare Value Analysis & Utilization Management Magazine since 2012. Robert is the chief software architect for SVAH with many value analysis, benchmarking, supply utilization, supply validation and purchase services solutions in production. He recently spoke with Caresfield about how value analysis teams have evolved and where they could go in the future.
