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									Value Analysis 101
How to Construct a Solid Foundation for Change




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                                                           Acknowledgements

Aspen Healthcare Metrics would like to acknowledge the support and
dedication of the individuals who participated in the various aspects of this
study. In particular, Aspen appreciates the efforts of the MedAssets Value
Analysis Committee:


    Roxann Barber, Materials Utilization Manager, Northwestern Memorial Hospital

      Derrick Billups, Value Analysis Manager/Black Belt, Charleston Area Medical
                                                                           Center

       Elizabeth Cassin, Clinical Contract Specialist, St. Anthony's Medical Center

              Laura Giostra, Clinical Resource Consultant, Atlantic Health Systems

       Reid Kennedy, Director, Materials Management, Merle West Medical Center

            Joanne Keup, Clinical Value Analysis Manager, Legacy Health System

    Brenda Mellen, Vice President Purchasing/Contracts, HealthSouth Corporation

                      Joan Miller, Value Analysis Manager, Clarian Health Partners

   Deborah Spratt, Director Value Analysis/Nursing Clinical Specialist, University of
                                                         Rochester Medical Center

                      Leanne Paine, VP Field Operations, HealthSouth Corporation

Andrea Pekofske, Project Director, Value Analysis, Rush University Medical Center

         Lois Simpson, Clinical Contract Specialist, Christiana Care Health System

  Linda Skeen, Clinical Standardization Manager, Wellmont Holston Valley Medical
                                                                          Center

         Kathleen Stickane, Clinical Resource Utilization Specialist, UNC Hospitals

    Russell Taira, Contract Administrator / Pharmacy Systems Coordinator, Hawaii
                                                                  Pacific Health

Elizabeth Abrahams, Materials Management Clinical Nurse Specialist, Inova Health
                                                                         System

                           Don Ladner, AVP Procurement, Ochsner Health System

Brandie Hahn RN, System Director Clinical Resources, Baptist Health System, INC.




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Value Analysis-101
How to Construct a Solid Foundation for Change


Contents


Introduction ..................................................................................................................... 4
History.............................................................................................................................. 4
   The Value Analysis Process ........................................................................................................ 4
Structure to succeed ...................................................................................................... 5
   Culture.......................................................................................................................................... 5
     Communication and marketing................................................................................................. 6
   Administrative structure ............................................................................................................... 7
     The Value Analysis Coordinator............................................................................................... 7
     Organizational structure ........................................................................................................... 8
   Knowledge base .......................................................................................................................... 9
Safety ............................................................................................................................. 10
First Steps: .................................................................................................................... 10
   “Helpful hints” ............................................................................................................................. 11
Appendix:....................................................................................................................... 12
   First year initiatives: ................................................................................................................... 12
Value Analysis Toolkit:................................................................................................. 13
      Sample product comparison tool:........................................................................................... 13
      Sample Program Saving Tracking Form: ............................................................................... 13
      Sample Program planning worksheet: ................................................................................... 14
      Sample Project Planning Sheet:............................................................................................. 15
      New Product Request Forms: ................................................................................................ 16
        Product /Equipment Evaluation Request............................................................................ 20
        PRODUCT EVALUATION FORM ...................................................................................... 21
      Decision – Making Template .................................................................................................. 22
      Sample Value Analysis Policy: ............................................................................................... 23
      Presentations:......................................................................................................................... 27
For More Information .................................................................................................... 28




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Introduction
As an industry, healthcare has been increasingly impacted by outside forces such as workforce shortages
and an increasingly stringent regulatory environment. These have lead to progressively eroding margins.
In response to this many healthcare facilities have seen the need to put into place systems that would
help control cost and facilitate change. Value Analysis is one such system.

Value Analysis has taken on many guises from a simple products committee to series of committees used
to evaluate the cost of goods and new technology, but Value Analysis, the systematic process is rarely
found in the standard products committee or in many healthcare institutions today.

The purpose of this paper is to define Value Analysis and to present the Value Analysis process. The
characteristics of a successful program will be presented and discussed. Steps that are needed to start a
successful program as well as suggestions for a new employee in the value analysis role are offered.
Finally a toolkit for the employee who is starting a new program is attached.

History
Value Analysis as a methodology has existed for over fifty years. It was created by Lawrence D. Miles in
1947 to reduce cost at General Electric. Mr. Miles an engineer was interested in lowering cost and
wanted to apply engineering techniques to achieve this goal.

Value Analysis is defined as, a cross-functional objective evaluation used to improve and analyze the
value of a product, system or service. Focus is on the analysis of function relative to the cost of providing
the service. The overriding goal of a Value Analysis program is to decrease cost while improving
performance and/or quality.

The rational behind Value Analysis is:

        Method to look at function rather than cost alone
        Lowering cost for an item has its limits
        Provide the desired function by the customer at the lowest cost

In Value Analysis the value of a product can be determined if the product has appropriate performance
and cost. Value can be increased by increasing the performance of a product or by decreasing its cost.
Simply stated:

                         Value = (Performance + Capability)/Cost = Function/Cost

Value Analysis is effective because it is the analysis of both function and cost. In the past, cost and price
have been associated with the acquisition of goods. Value Analysis associates cost and price with
function. Function is what is truly desired. In health care we purchase and obtain goods and products to
perform a specific function or group of functions, and it is because of this that Value Analysis works so
well.


The Value Analysis Process
Laurence D. Mile’s original process was a six-step procedure which he called the “Value Analysis Job
Plan”. Other industries have varied this process to fit their constraints. Depending on the application,
there may be four, five, six, or more stages, but the four basic stages of Mr. Mile’s processes are:

    •   Information gathering
        What the requirements are for the product/item? Function analysis, an important
        technique in value analysis, is usually performed in the initial stages. The goal is to
        determine what function or performance characteristics are important to the product

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        or item. Questions such as; what does it do? What must it do? What should it do?
        What could it do? What must it not do? Are asked in this stage.

    •   Alternative generation or Creation stage
        In this stage the question of; what are the various alternative ways of meeting the
        requirements is answered. What other products or items will perform the desired function
        is also investigated and answered.

    •   Evaluation
        In this stage all the alternatives are assessed by evaluating how well they meet the
        required functions and what the cost savings is, if any.

    •   Presentation
        In the final stage, the best alternative will be chosen and presented for final
        decision.




Structure to succeed
In order for a value analysis program to be successful three basic characteristics have been identified that
need to be put into place; Culture, Administrative structure and knowledge base.

Culture
Culture as it relates to Value Analysis has two connotations. First, how well the program is supported at
all levels of the organization, specifically upper administration and whether the program is integrated
throughout the institution. Senior leadership will set the tone and help communicate the importance of the
program.

Secondly, is the programs integration within the organization. One way to visualize this integration is with
a circular model. Where the end-user/clinicians are at the beginning of the process and are also the end
point. Traditionally, it is the end-users/clinicians who will drive need and the Value Analysis Committee
will be analyzing and working with the end-users to help determine the appropriateness of the request.
The committee can also facilitate between the end-users and purchasing department to make sure that all
of the steps have been followed so that products can be acquired in a timely manner.
Integrating Value Analysis into the culture of the institution will help the program with the identification of
initiatives and more importantly converting identified initiatives into actual savings or cost avoidance.
Cultural integration may be the biggest challenge for a program in achieving sustainability, but the
greatest benefit will be achieved when the entire institution is involved.




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Communication and marketing

Communication and marketing of the program is critical to the success of any Value Analysis program.
Information that must be developed and communicated are:

        •   The purpose of the program
        •   The purpose of the committee
        •   The members of the steering committee
        •   What the program is trying to do
        •   The dollar goals
        •   Definition of savings
        •   How they can help

A set presentation should be prepared that addresses all of these points and used to communicate to all
levels. It can be very helpful if a senior member of leadership attend the initial presentations and actually
introduces or assist in the presentation. This can provide the program instant credibility. Some examples
of kick-off presentations are included in the attached toolkit.

For a program to be truly successful it must be integrated into the culture of the institution. The more that
Value Analysis is an organizationally wide program the more successful it will be.




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Administrative structure
Administrative structure referees to the makeup of the Value Analysis Committee(s) and how they are
organized within the organization. It is important to ensure that the committee structure makes sense for
the organization and that the correct persons are on the Value Analysis Committee or sub-committees. If
the programs committee structure does not accurately represent the operations or culture of the
organization, it will probably not be successful nor have the buy-in that is required. Traditionally, Value
Analysis is organized under a Service-Line model, Surgery, Cardiology, Medicine…

It is equally important that each committee have the right people in attendance. If the organization is an
IDN, the program will need to make sure that all facilities are adequately represented. The program will
need to be supported by a strong steering committee. The steering committee needs to be comprised of
senior/executive level personnel and members of the physician leadership. A strong steering committee
will communicate to the institution the commitment to the process and provided the backing that is
needed for the program to be successful. The committee will be needed to provide the backing for when a
difficult decision needs to be made or to make the actual decision. Some of the tasks of a steering
committee will be to:

        •   Develop institutional goals that will improve product and service utilization
        •   Clearly define the program organizational structure and responsibilities
        •   Define a marketing strategy
        •   Develop and define any necessary operational policies.
        •   Assist with the communication and marketing of the program
        •   Support the activities of the program
        •   Support inter-departmental activities
        •   Identify and projects
        •   Review and approve recommendations from project teams
        •   Identify and assign resources as needed
        •   Make decisions
        •   Not be afraid to say “No”

In addition, the steering committee will need to define what a saving is to the organization, and how
theses savings are to be calculated. This will need to be understood in advance and communicated to the
institution, so that there are no misunderstandings on what and how this is done.

The Value Analysis Coordinator

One of the keys to a successful program is having a dedicated employee assigned to the role. This
provides the program an identity and produces sustainability. Ideally the person in this position should
report to a senior/executive level person within the organization. This will provide the program with the
needed backing to be able to be successful in their role.

Ideally, the employee will be a team player who has credibility within the organization. Clinical experience
is recommended but not absolutely necessary. A clearly defined job description will need to be developed
by the institution for the position that outlines the specific duties and reporting structure. Examples of the
some of the basic responsibilities of the role are:

    •   Work with clinicians on product selection and process refinement
    •   Conduct cost analysis of non-salary expenditures, focusing on total delivery cost
    •   Facilitate standardization of all types
    •   Facilitate coordination between different departments to achieve the target goals set by
        administration.
    •   Dissemination of information regarding the program and the communication of successes.




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Organizational structure

The Steering Committee as well as any Value Analysis staff will need to develop and distribute the
organizational structure for the organization. This will need to be part of any communication plan so
everyone understands the Value Analysis program and how it fits within the institution. It is at this point
that the members of the steering committee are presented.

A simple value analysis structure is presented below. The departments listed are for illustration purpose
and are not representative of the only departments that can be impacted by Value Analysis. The goal of
this model is to not to have a set of standing committees, but a more flexible dynamic structure.



             Purchasing/Supply Chain                   Steering Committee                 Chief Medical Officer




                                                         Value Analysis




   OR/
              Radiology        Peds    Non-Med    ED                  GI    Nursing   Clinic            Lab       Cardiology
Anesthesia




After the structure, the processes that will be used need to be developed and distributed throughout the
organization. The Value Analysis process needs to become known to ensure buy-in and understanding
by all employees. Processes that will need to developed are:

              •      how to access the system
              •      What paperwork is required and were they can find it.
              •      What happens to their request once you receive it. (so they do not think it just sits on
                     someone’s desk)
              •      What will happen if their product is accepted
              •      What will happen if it is denied and what the appeal process is.
              •      What is the process for emergency orders

All of the above can be illustrated using flow charts or distributed in policy format. Below is an example of
a Value Analysis process. The process is an actual Value Analysis process, but is for illustration purpose
only.




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Knowledge base

For Value Analysis to be successful, committees will need to be staffed by cross functional
team(s). The make-up of the committees should be comprised of both administrative and clinical
disciplines. Physician leaders will be a critical component to any successful committee.

Clinicians should be front –line users of the products and goods used within the organization. If
the committee understands the operations and processes of the organizations and can integrate
this knowledge, then “best functionality” can be obtained.




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Safety
After the release of Crossing the quality Chasm: A new Health System for the 21st Century.
Patient safety has become one of the foremost concerns in Healthcare today. Crossing the quality
Chasm outlined a strategy for improving quality through redesign of the entire health care
system. The report points to six key aims of a high-quality health care system: safety,
effectiveness, patient-centeredness, timeliness, efficiency, and equity.*

To address this it is important that Value Analysis address patient safety at every stage of the
process. Patient Safety should be mentioned in the program charter and can become one of the
main charges/purpose of the committee. This can be useful in eliminating an overriding focus on
cost and help focus the committee on the function of what is being evaluated and how patient
safety is impacted by the change or the introduction of the item. Issues related to patient safety
that need to be addressed are:

            •    Training; Has all of the clinicians who use new product been properly trained in
                 the use of the item.
            •    Standardization; Appropriate standardization will decrease the variability in the
                 method and means that procedures are performed. (while this seem to be obvious
                 it can be very difficult to identify) If the committee can decrease the amount of
                 different types of items that a clinician has to know the potential for error can also
                 be reduced.
            •    Usability; Is the item easy to use, front-line, clinical input is critical here. The
                 committee needs to make sure that any new item is not too cumbersome to use.
                 What may seem easy and convenient in the conference room may not work well
                 on the unit or OR.
            •    Tracking; The committee will need to ensure that the institution has an adequate
                 system to track any new items incase of incident or recalls.

*Crossing the quality Chasm: A new Health System for the 21st Century. Committee on Quality of Health Care in
America, Institute of Medicine. Washington, DC: National Academy Press; 2001.

Outside of these basic characteristics, there are many directions/formats that a program can take but
some recommended first steps are outlined below:



First Steps:
Once the program is underway, dedicated employees hired, steering committee formed, goals set
and the program communicated, there are many different directions that a program can take. For
the first year, it is recommended that the program concentrate on products and develop the skill
set necessary to tackle more difficult initiatives in the future. It is vital that the program achieve
quick wins and not get bogged down in difficult to achieve initiatives. Nor does the program
want to concentrate on too many low dollar low impact initiatives. I list of fist year initiatives is
included in appendix.

During the first year, the person in the Value Analysis Role will need to develop relationships
with the purchasing department and the physician leaders of the institutions. He/she will need to
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understand the systems and how products enter the systems, and know where the holes are. They
will need to determine where they will be able to obtain the data that they will need to
accomplish their initiatives. (See the paper Data Drive Value Analysis)


Following is a check list of “first steps” that a person in the Value Analysis role might wish to take:

        Obtain reliable data sources
        Obtain “go-to” people
        Obtain physician champions
        Develop a work plan
           o Have a dollar goal
           o Have a general idea how you are going to get there
           o Stick to it
        Determine what and how you will quantify a savings.
        Understand your purchasing systems
           o Make friends
           o Understand its weaknesses
           o Meet regularly
        Continually communicate the program
           o Who you are
           o Goals
           o What’s in it for them


“Helpful hints”
Following are some “helpful Hints” from Value Analysis personnel in starting up a program:

    •   Focus on products for the first year
            o Standardization and charge capture
    •   Understand how products/goods enter the system
            o Close the holes
            o Understand the pipeline
    •   Listen to people
            o Get the front line user/worker involved
    •   Give credit to others
    •   Have physicians champions
    •   Don’t allow yourself to become bogged down on any one initiative.
            o If you do move on. Keep the program fluid and always moving forward
    •   Keep it simple
            o If the process starts to become too complicated you may me on the wrong track
    •   Don’t be afraid to ask for a better deal
    •   Communication is key




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Appendix:
First year initiatives:
The following is a list of initiatives that Value Analysis can work on to get “quick wins”. The list is derived
from other programs, and comprises mainly commodity items that will generally not present political
difficulties for a new program. This list is for information purpose only and the initiatives are not listed in
any order of significance.

Cardiovascular Services:

           Custom Packs                   Pre-filled Injector syringes                 Contrast media
                                             Dilators and Stents

Anesthesia Services:

     Epidural & Spinal Trays                        IV sets                                Circuits



General Surgical:

     Orthopedic prostheses                          IOL                               Custom Packs
            Suture                            Endo-mechanicals                      Gowns and drapes
            Consignment Evaluation                                           Surgical Gloves

Med/Surg Commodities:

     IV and Blood Tubing                          Orthotics                      Anti-Embolism Stockings
           IV pumps                      Coated Catheters and Lines                    Reprocessing
 Medication Rebate programs                    Specialty Beds                          Skin Care kits
         Blood Filters                        Casting Supplies                         Exam Gloves
       Cervical Collars                           BP cuffs                                IV Kits
       EKG Electrodes                      Needles and syringes                    Resuscitation Bags
 Non-sterile gowns and aprons                 Invasive line kits                     Urology Supplies
       PusleOx Probes                          DVT Stockings                     Tympanic thermometers

General:

    Maximization of Rebates                     Patient Labels                         Bottled Water
        Medical Forms                            X-Ray Film                           Office Supplies
    Linen USE & Utilization                        Copiers                          Telecom Equipment
                                                 Printer toner




                                                 Page 12 of 28
Value Analysis Toolkit:
Following are examples of basic tools that can be used. This toolkit is intended to assist the new Value
Analysis program in taking those first steps towards setting up a successful program. The tools were
derived from tools that have been used successfully in other Value Analysis programs. The samples
provided are for illustration purposes, and are simple examples of what is possible.

Sample product comparison tool:

Value Analysis Team - Cost-Benefit Form
Cost Comparison: Current Product "A" vs. Proposed Product "B"

                                      CURRENT PRODUCT                      PROPOSED PRODUCT "A"                             PROPOSED PRODUCT "B"
                                                             Total                 Estimated                Total                      Estimated         Total
                                                Current     Current   Proposed     Proposed               Proposed   Proposed          Proposed        Proposed
   Opportunity # MS-              Current       Product     Supplier Product Unit   Product                Product    Product           Product         Product
                                   Cost       Used/Month     Cost       Cost      Used/Month                Costs    Unit Cost        Used/Month         Costs
Detail Costs                          $0.00             0       $0.00      $0.00             0                 $0.00      $0.00                    0        $0.00
Detail Costs                          $0.00             0       $0.00      $0.00             0                 $0.00      $0.00                    0        $0.00
Detail Costs                        $65.00              0       $0.00      $0.00             0                 $0.00      $0.00                    0        $0.00
Detail Costs                          $5.00             0       $0.00      $0.00             0                 $0.00      $0.00                    0        $0.00
Detail Costs                          $4.62             0       $0.00      $0.00             0                 $0.00      $0.00                    0        $0.00
       Total Monthly Costs                                      $0.00                                          $0.00                                        $0.00

Annual Expense                                                 $0.00                                              $0.00                                     $0.00
Annual Cost Differentials (not including labor savings)                                                           $0.00                                     $0.00

Background Factors:
1.
2.
3.

Benefits
1.
2.
3.

Disadvantages
1.
2.
3.

Novation Impact
1.
2.

Medical Center Reimbursement Impact
1.
2.




Sample Program Saving Tracking Form:

Cost Savings Achieved on Purchases Evaluated through Value Analysis Team
As of

Requisition                                                      Initial         After Value                                        Reason for
   Date             Description                 Vendor          Proposal          Analysis          Savings       Savings %          Savings

              Sharp Containers                                $ 154,628.80   $     126,263.20   $    28,365.60         18% Larger container @ less cost
              Isolation Gowns                                                                   $    25,227.00             Standardize to lower cost alternative
              Yankauer Suction Tip                            $ 27,301.92    $      13,947.72   $    13,354.20         49% less cost
              Detergents                                      $ 5,340.24     $       3,005.28   $     2,334.96         44% less cost
              Sterile Gloves                                                                    $    17,496.00             Standardize to lower cost alternative
              disposable washcloths                           $ 133,875.00   $      54,684.00   $    79,191.00         59% competitive bid process
              Safety Butterfly                                $ 89,109.00    $     155,598.76   $   (66,489.76)       -75% More safety features




                                                              Total Savings Year To Date        $ 99,479.00               19% Average Savings




                                                                       Page 13 of 28
Sample Program planning worksheet:

             Medical Center                                                                                                                                        VAT Opportunity Tracking
             Cost Savings Worksheet - 8/04                                                                                                                          VAT or                             Post-Imp.
                                                                                                             Targeted Savings       Opportunity Types   Opportunity Ad Hoc      VAT       Complete &     Audit
 Targeted
   VAT                                         Cost-Saving Opportunity                                       Low          High      Primary Secondary Quantified    Reviewed Approved    Implemented   Complete    Status
Anesthesia
   VAT                                                                                                   $      -     $         -     1                     Y          Y         Y            Y           N
Anesthesia
   VAT                                                                                                   $      -     $         -     1         2           Y          N         N            N           N
Anesthesia
   VAT                                                                                                   $      -     $         -     1                     Y          N         N            N           N
Anesthesia
   VAT                                                                                                   $      -     $         -     1                     Y          N         N            N           N
Anesthesia
   VAT                                                                                                   $      -     $         -     2                     N          N         N            N           N
Anesthesia
   VAT                                                                                                   $      -     $         -     1         2           Y          N         N            N           N
Anesthesia
   VAT                                                                                                   $      -     $         -     11                    Y          N         N            Y           N
Anesthesia
   VAT                                                                                                   $      -     $         -     1                     N          N         N            N           N
             Total Savings                                                                               $      -     $         -

                                                             Savings Identified & Implemented

LEGENDS
           Opportunity Types
         1 Product Conversion                    9 Labor Savings
         2 Inventory Reduction                  10 Consolidated Compliance
         3 Credit to Offest Current Invoices      11 Lower Cost Contracted Fees/Contract Renegotiation
         4 Reprocessing / Recycling             12 Alternative Replenishment Method
         5 Reduction in Purchases               13 Practice Change or Modification
         6 Product Standardization              14 JCAHO Requirement
         7 Vendor Consolidation                 15 State / Public Health Requirement
         8 Correct Usage Conversion              16 Opportunity Type To Be Determined
         9 Labor Savings




                                                                                                                   Page 14 of 28
Sample Project Planning Sheet:
               Identified Opportunities and Initiatives

                                                                                                    Quantified
                                                                         Estimated      Initial      Savings        Realized        Projected      VA Signed by
                                                                         One Time     Estimated    Presented to   Accepted by    Implementation     Committee
Area    ID #                     Description                     Type     Savings      Savings      Committee      Committee       Start Date         (Y/N)       Comments

CCL     1      Generators and AICDs                               Cost                   $28,030
CCL     2      Inventory Reduction                                Inv      $15,235                      $15,235       $15,235          6/15/2003             Y
CCL     3      Sheaths and Guidewires                             Cost                    $2,210         $2,210
CS      4      Inventory Reduction                                Inv      $98,000       $84,000        $84,000       $76,049          6/15/2003
DI      5      Contrast Media Volume Utilization                  Util                   $82,259        $82,259       $52,625          12/1/2002             Y
FS       6     Cafateria Subsidy (Increase prices by 6%)          Cost                   $81,143        $81,143       $81,143           1/1/2003             Y
FS       7     Dietary Initiative (Employee Free Meals)           Util                   $69,376                           $0
FS       8     Food Cost Initiative (chg menu, reduce late tray usUtil                  $188,428       $150,799      $150,799          5/28/2003             Y
FS       9     Supply Cost- Non-food (reduce paper/disposablesUtil                       $73,660
FS      10     Eliminate catering costs                           Cost                   $61,000        $61,000       $40,870           7/1/2003
FS      11     Reduce number of wasted patient food trays         Cost                   $10,000        $10,000
LA      12     Analyzer Consolidation                             Cost                   $63,256        $63,256            $0                                N
LA      13     Blood Product & Service Pricing                    Cost                   $52,399        $52,399            $0                                N
LA      14     Blood Tube Utilization                             Util                      $821           $821            $0                                N
LA      15     Non-Blood Product Pricing (distributor)            Cost                  $108,576       $108,576
LA      16     Reference Testing Utilization                      Util                   $53,421        $53,421
LL      17     Linen Losses (Ambulance Service)                   Util                    $6,569
LL      18     Linen Utilization                                  Util                   $52,000        $52,000
MM      19     Transcription Services Pricing                     Cost                   $37,812        $37,812
MS      20     Admission Kits                                     Util                   $18,264        $18,264       $16,930                                Y
MS      21     IV Start Kits                                      Util                   $13,459        $13,459       $13,459           8/1/2003
MS      22     Nitroglycerine Tubing to Standard Tubing           Util                    $3,344         $3,344        $3,344           1/1/2003             Y
MS      23     Nursery Admission Kit                              Util                   $13,805        $13,805        $4,024          11/1/2002             Y
MS      24     Urine Midstream Kit                                Util                   $10,764                       $8,844           8/1/2003             Y
OR      25     Electrosurgical Dispersive Electrode Cable         Util                   $10,840                           $0
OR      26     Endoscopy Products                                 Cost                    $2,268         $2,268        $2,268          8/31/2003
OR      27     Intraocular Lens Pricing                           Cost                   $29,611         $6,120            $0
OR      28     Inventory Reduction (Endomechanicals)              Inv      $33,450       $33,450        $33,450       $33,450           7/1/2003
OR      29     Inventory Reduction (Neuro/ENT/Ophth)              Inv
OR      30     Inventory Reduction                                Inv     $300,000      $300,000       $300,000      $300,000          6/15/2003
OR      31     Inventory Reduction (Surgical Supplies)            Inv
OR      32     Inventory Reduction (Sutures-Estimate)             Inv       $29,562      $29,562        $29,562       $29,562           6/7/2003
OR      33     Orthopedic Implants (Total Joints)                 Cost                   $91,822
OR      34     Peripheral IV Tubing for Surgical Procedures       Util                   $15,312        $15,312       $15,312          6/20/2003
OR      35     Medical Device Pricing                             Cost                   $57,455
OR      36     Surgical Instumentation                            Cost                    $2,789
OR      37     Tourniquet Cuff Utilization (reprocessing)         Util                    $7,144         $7,144        $7,144           7/1/2003
OR      38     Trauma Implant Pricing                             Cost                  $119,815        $84,000       $84,000          8/31/2003
RT      39     Inventory Reduction                                Inv.
ANE     40     Inventory Reduction                                Inv
WHSE    41     Inventory Reduction-Warehouse (Estimate)           Inv.    $200,000     $200,000       $110,000       $237,657          6/15/2003
TOTAL                                                                     $676,247    $2,014,664     $1,491,659     $1,172,715




                                                                                                     Page 15 of 28
New Product Request Forms:

Below are couple of examples of a new product request and product evaluation forms. These forms are
for illustrations purpose only. The purpose is to provide general templates and guidelines for the
development of your own form. In all likely hood the Materials Management Department will have a form
in use. The Value Analysis Program will want to evaluate that form and make sure that it is used
effectively. What is important is that a form be uses to help track and gate-keep all new products and
product changes.
                                          VALUE ANALYSIS
                                 PRODUCT EVALUATION REQUEST FORM


             Request for:           Addition                  Deletion               Change

Name of Product(s):        ____________________________________________________________________________



                                               GENERAL INFORMATION

1. Briefly describe this product and clinical impact (also, describe other required components
or accessories if applicable and reason for request):
 _______________________________________________________________________________________________________________

 _______________________________________________________________________________________________________________

 _______________________________________________________________________________________________________________


2. Is there a product in-house now performing the same function?       YES                                NO
   If YES, what product(s) with (Hosp. #, description, manufacturer & catalog #)?
_______________________________________________________________________________________________________________


3. Will the requested product(s) replace, supplement or delete current in-house product(s)
now performing the same function?        YES      NO      If YES, what product(s):
_______________________________________________________________________________________________________________

4. What improvements to patient care and/or cost reductions are anticipated?
_______________________________________________________________________________________________________________


5. What other department(s) and/or facilities will use and/or be affected by this product?
_______________________________________________________________________________________________________________


6. Under what circumstances will this product be used?
_______________________________________________________________________________________________________________


                                               PRODUCT INFORMATION

7. Manufacturer:      ____________________________________    Manufacturer Catalog #:       __________________


8. Vendor/Distributor:       ______________________________   Vendor/Distributor Catalog #: ____________

10. Package/Unit:      ______________   Cost Per Unit: $ __________ Commodity Code:              _____________


                                         PRODUCT INFORMATION (Continued)

11. Is Product available through our Primary Distributor?                YES      NO         DON’T KNOW

12. If No, have you investigated alternative products                YES          NO          DON’T KNOW
    available through this Primary Distributor?

13. What is the anticipated annual usage volume of this product?
_______________________________________________________________________________________________________________

                                                    Page 16 of 28
14. Will there be additional implementation costs, such as installation,              YES       NO
  cost of education, impact on equipment, construction?
   If YES, describe:___________________________________________________________________________________

15. Manufacturers with a comparable item:
___________________________________________________________________________________________________________


16. Should these be looked at:                  YES                 NO
    Why?____________________________________________________________________________________________________
   ____________________________________________________________________________________________________________


                                                 INVENTORY METHOD/IMPACT

17. Inventory Type         STOCK                 JIT (JUST IN TIME)                  Consignment

18. If STOCK, what quantity on hand will be required: _______________________________________________
19. INVENTORY IMPACT:               _________________ X _______________             = $_______________________
                                 (Required Stock on Hand) (Cost per Unit)             (Total Inventory Dollar Impact)


20. If STOCK, provide justification for increasing inventory values:                              _______________________________

_______________________________________________________________________________________________________________


                                                    CONTRACT INFORMATION
                  If you are in need of specific contract information, please contact the Purchasing Department

21. Under a current contract?               YES         NO         DON’T KNOW                (Confirm with Purchasing)

22. If YES, please specify: _____               VHA/Novation             _____ OTHER

23. If MedAssets: Contract Number: _________________________________________________________________

                      Contract Vendor:           _________________________________________________________________


24. If MedAssets, is this a Committed Volume item?                           YES             NO             DON’T KNOW
                                                  PATIENT SAFETY INFORMATION
                                  (If you are in need of help with Patient Safety contact XXXX)

25. If medical equipment, has biomedical staff                       YES            NO             DON’T KNOW             N/A
    been involved in selection?

26. If this product/equipment is used by more    YES     NO      DON’T KNOW         N/A
    than one area, have representatives from those areas been included in this process?

27. Would this require additional staff training?                    YES            NO            DON’T KNOW            N/A

28. Has a market research for patient safety been                         YES          NO            DON’T KNOW            N/A
   completed on this item?




                                                             Page 17 of 28
29. Have there been variances related to the current product?                  YES         NO
  DON’T KNOW        N/A

30. Is this product anticipated to improve Patient Safety?                     YES        NO
  DON’T KNOW N/A
   How? _________________________________________________________________________________
   ____________________________________________________________________________________________________________

                                             EVALUATION INFORMATION

31. How will the requested product(s) be evaluated for improved patient care, patient safety,
and/or cost reduction? ___________________________________________________________________________________

32. Will you lead the evaluation?           YES          NO

33. Who needs to be involved in the evaluation?

Name: ________________________________ Dept:     _________________________       Ext:     ___________________


Name: ________________________________ Dept:     _________________________       Ext:     ___________________


Name: ________________________________Dept:      _________________________       Ext:     ______________



                                          MISCELLANEOUS INFORMATION


34. How did you find out about this product? (Check all that are applicable)
    Prior experience with product          Trade show                ?
                                                                     Contract review
    Sales Rep came to department           Other (specify): _____________________________________

35. Sales Representative’s Name:          ______________________________________________________


36. Sales Representative’s Phone Number:              ______________________________________________________


37. Please attach manufacturer’s specifications, sales literature and representative’s
business cards.

38. Do you or your family have an economic interest in this vendor or product?                     YES      NO
    If YES, please disclose any special relationship.
___________________________________________________________________________________________________________

___________________________________________________________________________________________________________


39. Name of Requesting Party: _____________________ Signature:           __________________   Date:   ________


40. Department:     __________________________   Phone#:    ______________ _ Facility:   ______________




                                                    Page 18 of 28
     ***Please attach supporting documentation that can assist in the review of this
                                      product.


After completing, forward this form directly to:       XXXX, Chair
                                                   Value Analysis Committee

                                                       or-
                                                       XXXX, Co-Chair
                                                   Value Analysis Committee


                     If you need assistance in completing this form, please contact:




                                                   Page 19 of 28
                                  Product /Equipment Evaluation Request
Individual submitting request:                                         Department:                       Date:
Product/Equipment description:


Vendor/Manufacturer:                                                  Catalog #

     New product                          Replacement                 Existing product            Addition to existing product
Purpose of Request:




Estimated product cost:                                                Estimated annual usage:
Product Classification:
                  Non-patient charge               Patient Charge                        Patient care necessity
                  Reduce existing costs            Convenience item                      Enhance existing operation
                  Other (explain)
Is an evaluation required?                                             Will you be assisting in the evaluation process?

Does this item require physician involvement? If yes, who?
                                                                      Department Head signature                                  Date



Date received in Material Management:                            Prepared by:

                       Profile                      Current Product                      Proposed Product
                      Catalog #                    ____________________                  ____________________
                      Supplier                     ____________________                  ____________________
                      Manufacturer                 ____________________                  ____________________
                      Stock/Non-stock              ____________________                  ____________________
                      Unit of Measure              ____________________                  ____________________
                      Unit Cost                    ____________________                  ____________________
                      Savings (indirect)           ____________________                  ____________________

Advantage to new product purchase:


Disadvantages:


Will current product consumption be reduced?
Comments:


RESULTS OF EVALUATION


The product/equipment listed above that you recommended was considered by the P.E.C. on: _____________________
The committee recommended, and it was subsequently approved by administration that the product be:
                    Denied for the following reason: ____________________________________________________
                    ______________________________________________________________________________
                    Evaluated for 30 days
                     Evaluated for 60 days
                     Evaluated for 90 days
                     Approved as a standard item

The Product Evaluation Committee extends its sincere appreciation to you for your appreciation in the P.E. Process.



_____________________________________________
Chairman                           Date




                                                             Page 20 of 28
                              PRODUCT EVALUATION FORM
PARTY RESPONSIBLE for Product Evaluation

Date:                         Name:                             Title:                  Department:


BACKGROUND INFORMATION and PURPOSE of Product Evaluation :




PRODUCT SPECIFICS of Product Evaluation

Category / Type of Product:
Product Specifications:


Name / Description                    Manufacturer / Supplier            Item Number           Name of
Representative

Name / Description                    Manufacturer / Supplier            Item Number           Name of
Representative

Name / Description                    Manufacturer / Supplier             Item Number          Name of
Representative


PROCESS FOLLOWED and RESULTS of Product Evaluation :




CONCLUSIONS / RECOMMENDATIONS of Product Evaluation:




                                              Page 21 of 28
                                                                          Medical Center
                                                                        Value Analysis
                                                              Decision – Making Template
     Quality               Higher          Higher        Higher          Same            Same          Same        Acceptable        Acceptable           Lower

      Price                Higher           Same         Lower          Higher           Same          Lower          Higher             Same             Lower

                         Discussion                                       Do             Do                             Do                Do          Discussion
Recommended                 Must           Accept        Accept          Not             Not          Accept           Not               Not             Must
                            Take                                        Accept         Accept *                       Accept            Accept           Take
  Decision
                            Place                                                                                                                        Place

* NOTE: Any new product will add to an existing formulary of items.


Quality indicators are derived from the four quadrants of the Clinical Quality Compass: Clinical Outcomes, Patient Satisfaction, Functional
Outcomes and Cost & Utilization.

Examples of Quality Indicators are: Post-op wound infection rate; Ventilator-associated pneumonia rate; Patient loyalty; Patient complaints; Time
to regain pre-op functioning; Procedural cost; Length of stay; etc.


Pricing decisions are based on: MedAssets unit pricing, locally-negotiated agreements, product availability, State of                 Purchasing
requirements, product formulary acceptance, third party or contracted entity reimbursement, Vendor end of quarter / fiscal year incentives, etc.


Influencing factors to consider: New or alternate product’s effect on staffing / productivity, Market conditions, Product or equipment life cycle costs, Product
merchantability, Safety issues, Clinical Engineering & Maintenance issues, Infection Control issues, Vendor’s customer service record, Effect on           Primary
Distributor, Capital equipment requirements, Education in-services for medical & hospital staff, Disposable vs. reusable issues, Product & service maintenance
agreements, Elimination of any current Medical Center services, Costs of Novation non-compliance, Wireless vs. cable issues, FDA approval issues, “Sacred
Cow” effect, Physician preferences, HIPPA Regulations or requirements, etc.




                                                                           Page 22 of 28
Sample Value Analysis Policy:

The Value Analysis program will want to make sure that all new products, product changes and product
trials are reviewed by Value Analysis. For this to be accomplished the process should be made into
system policy and procedure. This is one of the best methods to ensure that the institution understand the
process.

The creation of a policy is a good way for the committee to make ensure that they understand the process
and that facets of the process have been addressed. A good policy will also provide direction for the
institution for when they wish to have a product enter the system.

The following is an example of a policy used at a medical center to have all new products evaluated by a
central value analysis program.




              SUBJECT: Material Selection, Procurement, and Standardization


                                              OBJECTIVE

To establish value analysis as the primary philosophy for the evaluation and selection of all
materials, supplies and equipment not considered capital used at the Medical Center.

To establish a format for introducing new and/or replacement products as well as to determine
product acceptability through a trial and evaluation process.


                                             DEFINITIONS

For the purpose of this policy, the following definitions apply:

Value Analysis – The process used to reduce costs and improve performance through cost-
effective utilization of products, services and processes while maintaining or improving the
quality of patient care.

Value Analysis Steering Committee – The overriding governing body that will monitor and
supports all Medical Center Value Analysis Activities. Monitors the activities of the products
committees.

VAC Committee – The body that is responsible for reviewing and evaluating all new products
prior to entry to      . The VAC committee is responsible for the review of all products that do
not originate in the Operating Room. The VAC will report up to the Value Analysis Steering
Committee.

OR Products Sub Committee – A sub committee of the OR committee that is responsible for
the evaluation of all products prior to entry that originate in the operating room. The OR
products Sub Committee reports up to the Value Analysis Steering Committee



                                                POLICY

                                              Page 23 of 28
Departments or users requesting a product or non-capital equipment must submit a completed
New Product and Trial Request Form (see Addendum           ). This form is to be used for
requests for new as well as products and/or equipment that will replace existing items.

The VAC Committee is responsible for recommending additions, deletions, and changes to the
medical and surgical supplies as well as other products used that do not originate in the
operating room. The OR products sub committee will be responsible for the evaluation of all
supplies that originate in the OR.

                          MANAGEMENT POLICY AND PROCEDURE

The VAC and the OR Product Sub Committees will ensure that all users are notified of
additions/changes and that the appropriate training is in place prior to the introduction of a new
product. Products/equipment will be evaluated not only for price, but clinical acceptance, safety
and compatibility with existing product/equipment.

The VAC and the OR Product Sub Committees will evaluate existing product/equipment used in
the effort to decrease cost and eliminate waste in the medical center without affecting the level
of patient care provided.

The Value Analysis Steering Committee will monitor all activity for the products committee and
settle any disputes between the products committee and the requester.

                                          PROCEDURE

Requests for New Products
   1. Recommendations for introducing new and/or replacement products, to standardize, to
      improve utilization, to improve efficiency and safety within the Medical Center should be
      made via the New Product and Trial Request Form.

   2. Obtain a New Product and Trial Request Form from the Materials Management
      Department and complete as follows:

       a. The department name, person requesting the new product, telephone number and
          pager number (if available), must be provided.

       b. The department administrator, manager or director for the area in which the
          product(s) will be used, must sign the form or it will not be processed.

       c. Products that are used throughout           do not require department head signature.

       d. The item name, purpose, company name and reason or justification for the product
          must be defined.

       e. If the new product is to replace an existing product, the product(s) to be replaced
          shall be listed on the form. Include the name and company of the old product (s).

       f.   If the new product is more expensive than the old product, the new product will need
            to be supported with literature and/or outcome data as well as a cost benefit analysis
            if possible. When objective data is not available, a logical non-empirical rational may
            be considered.

       g. A product’s potential revenue will be considered in any analysis.


                                           Page 24 of 28
       h. Potential consequences of not being able to acquire the new product should be
          supported by data if at all possible.


   3. Obtain department administrator, manager or director approval and signature.

   4. Submit the completed New Product and Trial Form to the Director Of Materials
      Management c/o Materials Management Department.

   5. The request will be reviewed and forwarded to either the VAC Committee or the OR
      products Sub Committee as appropriate. A person knowledgeable about the product will
      need to plan on attending the committee meeting to present and answer any questions.
      Vendors will not be allowed at any of the Committee meetings.

VAC Committee
  1. The VAC Committee is the recognized body, comprised of representatives of key
     Medical Center departments, that is directed by the Value Analysis Steering Committee
     to achieve specific annualized cost reduction targets, determine product acceptability,
     approve/deny/delay new product requests, and establish guidelines for product
     evaluations.

   2. The VAC Committee will ensure that all users are notified of any additions/changes and
      that the appropriate training is in place prior to the introduction of a new product.

   3. The        is designated the Chair of the committee. A designee may fill in as needed.
      The Chair of the committee will respond to all submitted New Product and Trial Request
      Forms.

   4. A person knowledgeable about the product will need to plan on attending the committee
      meeting to present and answer any questions. Vendors will not be allowed at any of the
      VAC Committee meetings.

   5. The Department of        , acting as staff support for the committee, will review contracts
      and agreements as well as performing data analysis to determine opportunities for
      standardization, reprocessing, reduced consumption, improved utilization and possible
      elimination.

   6. The committee will ensure that all trials and evaluations will be conducted in accordance
      with procedures established under these policies and procedures and others as
      appropriate.

   7. The committee will ensure that the product is not already in use and that standardization
      is used appropriately. The committee will also ensure that the necessary training has
      taken place prior to a new product being introduced. All products will be evaluated for
      patient safety and compatibility with existing product/equipment.

The OR Product Sub Committee

   1. The OR Product Sub Committee is the recognized body, comprised of Key
      representatives of Medical Center’s OR department, and is directed by Administrative
      Staff Committee to achieve specific annualized

   2. Cost reduction targets, determine product acceptability, approve/deny/delay new product
      requests, and establish guidelines for product evaluations for products that originate in
      the Operating room.
                                         Page 25 of 28
   3. The OR Product Sub Committee will ensure that all users are notified of any
      additions/changes and that the appropriate training is in place prior to the introduction of
      a new product.

   4. The          is designated the Chair of the committee. A designee may fill in as needed.
      .

   5. A person knowledgeable about the product will need to plan on attending the committee
      meeting to present and answer any questions. Vendors will not be allowed at any of the
      OR Product Sub Committee meetings.

   6. The Department of Materials Management, acting as staff support for the committee, will
      review contracts and agreements as well as performing data analysis to determine
      opportunities for standardization, reprocessing, reduced consumption, improved
      utilization and possible elimination.

   7. The committee will ensure that all trials and evaluations will be conducted in accordance
      with procedures established under these policies and procedures and others as
      appropriate.

   8. The committee will ensure that the product is not already in use and that standardization
      is used appropriately. The committee will also ensure that the necessary training has
      taken place prior to a new product being introduced. All products will be evaluated for
      patient safety and compatibility with existing product/equipment.

The Value Analysis Steering Committee will oversee all activities of the products committee.
The           will report up as appropriate. If a product is denied by the committee. The requestor
my resubmit to the Value Analysis Steering Committee. The Value Analysis Steering Committee
is the final ruling on any and all new product request.

Products that do not follow this procedure will not be approved for purchase by the
Medical Center and the Chief Financial Officer reserves the right to deny any future
purchases.



One time/emergency purchases.

If a department needs a product/supply for a “one time” emergency use, such as for a surgery,
the following process will be adhered to.

   8. Call or E-mail the Value Analysis Coordinator or the Director of Purchasing if the VAC is
      not available.

   9. Notify them of the product/supply needed and the purpose of that supply/product.

   10. Explain why an existing product is not suitable.

   1. A one time approval can be given, and an e-mail confirmation will be sent.

   2. All one time purchases will be tracked by the Materials Management Department.




                                           Page 26 of 28
    3. If the product/supply will be needed on a continual basis, the New Product and Trial
       Request Form will need to be completed and the product presented to the VAC or the
       OR Product Sub Committees.

    4. If a “one time/ Emergency product is continually ordered without going through the VAC
       or the OR Product Sub Committees, the Chief Financial Officer reserves the right to
       deny any future purchases.


Presentations:
Attached are two presentations that a program can use to present their new program to their institution.
The two presentations are similar in breath and scope and the user should feel free to adapt both or
either to suit their needs.




                                              Page 27 of 28
For More Information


Aspen Healthcare Metrics

             Aspen Healthcare Metrics is a national clinical service line consulting firm that has been
             providing management consulting and benchmarking services to hospitals and specialty
             physician practices since 1994.

             Aspen has worked with hundreds of hospital programs to reduce clinical costs, improve
             physician-hospital relationships, and provide benchmarking and performance analysis.

Aspen is renowned for its experienced consulting staff and ability to effect positive outcomes by using
proven processes and comparative data. It is a wholly-owned subsidiary of MedAssets.




For more information on this Value Analysis study, please contact:

Lisa Dietz
Manager / Six Sigma Black Belt
Value Analysis Project Manager
Aspen Healthcare Metrics
7670 S Chester Street, Suite 100
Englewood, CO 80112
(720) 407-1723                          office
ldietz@aspenhealthcare.com              email

Andrew Knight
Manager, Supply Continuum Services
Aspen Healthcare Metrics
7670 S Chester Street, Suite 100
Englewood, CO 80112
(720) 407-1742                          office
aknight@aspenhealthcare.com             email




                                             Page 28 of 28

								
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