Value management holds the ‘full house in healthcare poker’
Too often, value analysis and value management teams seem to focus on product evaluation — arguably whether a device will bring value to their organization in terms of patient outcomes and cost effectiveness.
This plays some not-so-well-acknowledged role in the whole “value-based care” movement, which really hasn’t been applied clearly and directly to the supply chain profession and vice versa.
But is that enough?
Absolutely not, noted Barbara Strain, Director, Value Management, University of Virginia Health System.
“If providers are not looking at the whole value-based purchasing (VBP) gestalt they may be caught by surprise wondering where they went wrong when their readmission rate, for instance, does not maintain a position lower than the expected,” Strain told Healthcare Purchasing News. “The ultimate balance is to maintain financial stability while providing consistent patient care. Consistent is a deliberate term describing an individual’s care across the health continuum. If a provider develops its network in a way to minimize use of in-hospital services and provides a healthy environment for those covered lives under its care, everyone wins.”
Essentially, this balance can be accomplished and the knowledge as an outgrowth of achieving these relationships can influence supply chain management, value analysis and value management processes, according to Strain.
For example, who is looking at the paybacks on what’s already in place?
“Through well-established relationships with Finance, Quality and Information Technology, Supply Chain and value professionals should be asking where are we now, where are we going and where do we need to be?” Strain said. “Directional and actionable data is the full house of healthcare poker. Call it Big Data or the term du jour. If you’re not measuring it you’re not mastering it.”
Who is examining product life cycles on the shelf?
“Depending on where you are sitting this could mean product turns to assure efficiency of supply chain processes as well as avoiding waste due to expired product,” Strain continued. “If you sit in a clinical seat it could mean the differences in use between low, medium or premium products, such as implants, or it could mean the same product line from the same supplier that have been in use for — name your period of time — without regard to market shifts.”
What about usage patterns among clinicians?
“This may sound like the easiest metric to produce while it is the hardest to determine,” Strain noted. “If supply chain is not included in the patient charge and supply use conversation then its method of inventory management or documentation may not be adequate to provide the numerators or denominators required.”
What about IT connectivity?
“Meaningful Use (MU) any one?” Strain countered. “Understanding the CMS Regulations and Guidelines across provider organizations will go a long way to assure that they are not only complying with the tenets of MU but developing a seamless conductivity of data throughout their systems eliminating waste along the way.”
What about equipment? And services, such as diagnostic imaging, kit-and-pack assembly, laboratory and sterile processing? How much value do they bring by performing them in-house when compared to outsourcing to a consolidated service center or third-party service company? And what about products and services that extend beyond the hospital’s four walls and into the nonacute and outpatient settings?
“If supply chain and value professionals have not been addressing these significant opportunities over the past five years they can start a happy dance in the cost savings prom,” Strain said. “Make or buy has long been the mantra as a business strategy and healthcare is no exception. Take the laboratory, for instance, which uses their expertise to determine if a new cutting edge test should be done in house or sent to a reference laboratory. Some of the key characteristics are, but not limited to, test volumes, frequency, expertise, reimbursement, equipment, test capacity/space, turnaround time leading to patient treatment/outcomes and cost to the lab, institution and patient. These same methodologies can be applied to areas other than the laboratory simply by changing the characteristics to best match the situation, such as cancer therapies, interventional procedures, pediatric emergency services, transplantation programs.”
In short, value management, per se, shouldn’t be limited solely to the beginning, middle or end of the so-called “value chain.”
Clinicians need their devices, equipment and products to deliver patient care, for sure, but they also need a business-minded clinical adviser, powered by information with evidence and outcomes data to support performance-based improvement.
Have we progressed that far yet? Experts note that it depends on how you distinguish between value analysis and management.
Analysis vs. management
Dee Donatelli, Director, Healthcare, Navigant, and Past President, Association of Healthcare Value Analysis Professionals, minced no words about overt and covert differences and similarities.
“Value analysis is a noun,” she said. “It is the systematic and critical assessment by an organization of every feature of a product to ensure that its cost is no greater than is necessary to carry out its functions.”
Donatelli then quoted the Institute of Value Management to distinguish value management as being “concerned with improving and sustaining a desirable balance between the wants and needs of stakeholders and the resources needed to satisfy them. Stakeholder value judgments vary, and value management reconciles differing priorities to deliver best value for all stakeholders.
“Value management is based on principles of defining and adding measurable value, focusing on objectives before solutions, and concentrating on function to enhance innovation,” Donatelli continued. “It uniquely combines within an integrated framework a value-focused management style, a positive approach to individual and team motivation, an awareness of the organizational environment, and the effective use of proven methods and tools.”
For Strain, value management represents something larger and more comprehensive.
“Value management uses the principles of value analysis along with Lean methodologies in determining the overall value of the initiatives important to meeting the goals of your healthcare institution,” she explained. “Value analysis professionals bring critical thinking skills to multidisciplinary groups charged with assessing gaps in current state versus ideal state of care pathways. Eventually these lead to the development of key performance indicators (KPIs), which can be measured along with costs saved/spent and improvements made using the equation value equals quality divided by costs.”
Robert T. Yokl, President and Chief Value Strategist, SVAH Solutions, applied a linear perspective to the relationship between the two.
“In the classic sense, value analysis is the study of function and the search for lower cost alternative products, services and technologies,” he said, “while value management is the comprehensive process of managing your products, services and technologies during their lifecycle. For example, value analysis is employed at the beginning of a product, service and technologies’ introduction into your facility. On the other hand, value management is focused on the middle and end of life for your products, services and technologies. They are two different cost management tools, but should be integrated for the greatest possible effect.”
Kathy Schwartz, Solutions Owner and Associate Vice President, Strategic Messaging, Craneware Inc., emphasized the comprehensive nature of one that includes the other.
“Value analysis can be defined as a measured analysis across a multi-dimensional clinical, financial and operational team to evaluate new products or compare existing products for inventory reduction or clinical quality and effectiveness,” Schwartz said. “The value analysis focus is meeting the market demands and drivers to provide the best care at the lowest cost. Value management is the comprehensive evaluation of products, services and equipment that help to coordinate and deliver quality care, engagement and satisfaction to patients. Value management encompasses value analysis and together they enhance the provider’s ability to improve quality outcomes and lower costs across the enterprise.”
Value analysis, which can be classified as an organized, informed approach to products and services that provides safe, quality and cost-effective patient care, really is a journey that every hospital takes, according to Deborah Roy, RN, CMRP, Senior Director, Performance Services, CQVA and Clinical Operations, Vizient Inc. “Moving closer to total cost of care brings in the value management piece, where the most efficient healthcare facilities are looking at value analysis through the eyes of the patient,” she added.
For Kim Barker, RN, NE-BC, Director, Performance Improvement Advisory Services, Vizient Inc., value management includes the monitoring and measurement of outcomes and costs that enable health care providers to improve the delivery of care. “It goes beyond price to include process improvement across all service lines with the result of showing a full financial picture back to their organization,” she said. “It is driven by the clinicians and supported and often facilitated by the value analysis leader within the organization. It is a team-focused look at care from the value that is delivered to the patient.”
Key value management parameters include understanding variation in practice, waste throughout all service lines, length of stay, patient throughput and resource management, Roy added.
Program’s progress?
Whether you include value analysis as a component of value management or keep them distinct and separate, observers offer mixed reviews on how far the healthcare industry has maximized the results of either.
“The majority of healthcare organizations have embraced a value analysis mentality — the noun — but [fewer] have fully activated a process of value management that focuses upon total value versus a requesting process for new technology,” Donatelli noted. “Even fewer have engaged with physicians and clinicians to conduct an objective analysis before approval. Thus, the industry has not remotely begun to maximize the benefits of value management.”
Legislation and regulation may be shifting practices to accelerate adoption and implementation.
Schwartz pointed to the federal government’s January 2015 announcement that Medicare would be tying 50 percent of payments to value-based reimbursement models by the end of 2018.
“The traditional fee-for-service revenue cycle is becoming a data-intensive, fee-for-value ‘value cycle,’” Schwartz indicated. “Looking at both value analysis and value management is taking the aggregate data that begins with the patient registration and ends with claim generation. The key is the data that will allow organizations to better understand clinical effectiveness and clinical variations for specific care protocols. Value management with value analysis creates a value cycle that will present opportunities to improve efficiency without sacrificing quality. This will enable providers to identify new protocols and business models. Physician involvement is key to this process to ensure that there are no negative consequences for the quality of care or patient experience.”
Still, Strain said she sees the level of awareness around value analysis continuing to lean toward products because that remains the “easiest” to comprehend. “Value management is picking up speed as we continue to reach milestone dates outlined in the Affordable Care Act,” she said. “Having roots in value methodologies that are well established can prevent reinventing the wheel each time institutions are faced with new challenges.”
Roy acknowledged that every hospital and every facility with a system acts differently so they may operate at different places along the path, but that only reinforces the motivation behind value analysis. “We know that every organization’s bottom line is under attack…or will be in the near term,” she said. “The demands for higher quality and appropriate care are creating the environment for increased emphasis on the total cost of care whether that be product- or process-related. The most sophisticated hospitals are relying on their value analysis teams to assist with and consolidate the research and data to understand how they can maximize results along the continuum.”
References to value analysis concepts and teams may be in flux, too, according to Barker. “Value analysis teams are moving toward being termed ‘clinical resource management’ teams,” she noted. “References to total cost of care are moving toward ‘value management.’ While the new terms are interchangeable with the previous versions, the new references reflect a more patient-centric or clinical-centric focus for the activities.”
Regardless of semantic shift, Yokl cautioned against distinguishing terms and instead emphasized embracing the concepts.
“I wouldn’t call value analysis and value management a subset of each other, but a continuation of the effort to purchase and then maintain the lower-cost products, services and technologies during their lifecycles,” he insisted. “No longer can we just look at the upfront cost of a product, service or technology and not its cost and quality implications over the life of the commodity now that we are in a value-based environment.”
Unclogging bottlenecks
If value analysis and value management offer such potential, what’s impeding, if not slowing, momentum?
Donatelli pointed to clinician demand as the “single-largest impediment” to value analysis and minces no words about probable causes.
“The fear that if a clinician does not get what they want quickly they will be upset,” she said. “As a result, we tend to rubber stamp approvals and take short cuts in the process, if a process even exists in the first place.”
Meanwhile, Schwartz attributed the challenges to much larger market factors that may be beyond provider control.
“The combination of an unprecedented influx of data, ever-changing regulations, and the need to implement cultural changes all can be barriers to success in the world of value-based care,” she observed. “This paradigm shift to the value cycle requires clinical integration and expertise to manage populations at risk and improve care coordination and delivery.”
But Yokl blamed integration problems to the time it takes to evaluate new contracts and contract renewals with group purchasing organizations.
“Most value analysis coordinators, facilitators and managers and their teams devote 98 percent of their time vetting these GPO contracts,” he lamented. “This practice leaves little time for actual value analysis or value management techniques to be employed at almost all healthcare organizations.”
To overcome barriers, hospitals have to ask themselves some tough questions and be realistic in their answers, according to Roy. “For some, it is simply an awareness of educating the organization on how to be successful,” she said. “Many hospitals struggle with clean data that can provide sustainable monitoring and reporting. Finding the right people and resources to manage and ensure optimum outcomes can be a challenge. Empowering and fostering a collaborative, culture that is not afraid to make improvements is critical.”
But guidance and support must come from the top, Roy continued. “Without that, the importance of the process, and its value to the organization, is missed by those who are being asked to participate and implement,” she added.
Barker advised an executive champion and executive oversight must keep the focus on outcomes and patient care by providing good data, and transparent and timely information for physicians and clinicians to make informed decisions.
Sidebar: Doctors without hoarders can amplify value management
Rick Dana Barlow | Senior Editor
Rick Dana Barlow is Senior Editor for Healthcare Purchasing News, an Endeavor Business Media publication. He can be reached at [email protected].
