Community Health NetworkEnhancing the Value of Value Analysis Using the

VHA Total Spend Analysis

Sheryl D. Joyner, M.S.W., M.B.A.

Network Director, Purchasing

COMMUNITY HEALTH NETWORK• Five acute care hospitals.

• Seven surgery centers.

• Five urgent care centers.

• 165 family practice providers.

• 50 ancillaries.

• Largest expansion in the Network’s history.

• Bring enhanced value to value analysis.

• Attain a reduction in supply expense by $3 million for FY 2006.

GOALS

CHALLENGES• Single value analysis team creating a long cumbersome

review process that was often undocumented.

• Lack of formalized contracts management and administration to ensure contract compliance and best pricing for the same product throughout the Network.

• Manage our vendors instead of having our vendors manage us - too many “doors” for vendors to access our Network and circumvent Network Purchasing and value analysis.

• Physicians utilized technology that was unfamiliar to nursing staff thus affecting the quality of patient care.

CHALLENGES cont’d

Old process:Vendor with new product/technology→Physician→Patient→

Clinical Staff→Value Analysis→ Buyer/Contracts

IMPROVEMENT PROCESS• Network Purchasing reorganized to support Network’s

service line strategic approach.

• Contracts Manager was hired to oversee all contracts negotiations, contract language review and Vendor Certification program.

• Vendor Certification was initiated to include vendor education that focused on how to conduct business within the Network.

IMPROVEMENT PROCESS• Policies were revised to include:

“All vendors bringing in supplies or equipment in the Community Health Network without the proper authorization from the Network Purchasing Department should consider such items as a CONTRIBUTION to the Network, and will not be reimbursed.”

VALUE ANALYSIS• New Technology Analyst was hired to serve as the primary

point of contact for all new products and new technology.

• Established value analysis as the deciding body for the introduction of new products and technology into the Network.

• Teams identify product substitutions and deletions that would result in bottom line savings.

VALUE ANALYSIS• 16 value analysis teams were established to support our

service lines.

• Service line value analysis teams were identified to include: • Behavioral Care Orthopaedics

• Interventional Radiology Cardiovascular/Pulmonary

• Rehabilitation/Wound Ostomy Family Practice Physician Groups

• Respiratory Medical-Surgical/ICU

• Surgery Bariatrics

• Women and Children

• Emergency Departments/Urgent Care

• Neurology

• Oncology

RESULTS• Over 1,600 vendors have participated in Vendor Certification

education sessions.

• Our New Technology Analyst screens products before introduction to our clinical staff.

• Initiated strategic pricing in major procurement initiatives.

• Increased the involvement of physicians in the procurement of products and services.

• Enhanced data capture and measurements from our value analysis teams.

RESULTS cont’d• Network Purchasing is now on the front-end of new product

and technology introductions.

New process:

Vendor with new product/technology→Vendor Certification→ New Technology Analyst→Buyer→ Clinical Staff→

Physician→Patient

• More effective utilization of VHA tools such as the Total Spend Analysis, Contracts Manager and LOP Manager.

TOTAL SPEND ANALYSIS• Analytical tool to analyze our organization’s spend against

Novation contracts.

• Identifies where we have maximized our spend and as well as the areas for improvement.

• Provides an immediate visual breakdown of our data that is easy to comprehend.

• Aids in establishing a roadmap or action plan to attain financial goals.

GROUP 4: UNMATCHED ITEMS• Items include products and services that could not be

matched to a Novation contract.

• Examples include local janitorial or cleaning services.

• We are doing nothing with these items at present.

GROUP 3: PACKAGING/PRICING• Products may be a match but could not be compared due to

differences in Units of Measure.

• Pulled these items and have corrected UOM in our Item Master.

GROUP 2: REALIZED SAVINGS• Represents those products or services where we have either

maximized Novation pricing or negotiated better than Novation.

• We are hoping to increase this group.

GROUP 1: POTENTIAL SAVINGS• Two categories within Group 1: Matched Items and

Substitutions

• Matched items are those products that we purchased through Novation but did not receive the best price.

• Substitutions are those items that we purchased but did not utilize Novation contracts.

Substitutions• Substitutions have been pulled and categorized by the

different Value Analysis Committees.

• Committees will review and determine whether or not we should switch to a similar product through Novation or keep our current product.

Matched Items• There are usually two reasons why we are not receiving best

pricing:

1) We have not signed the Letter of Participation.

2) We have not met the requirements for penetration. We are only taking minimal action if #2 is the

reason.

Letters of Participation• Visit Novation Contracts Manager to determine whether or not

we need to have an LOP.

• Utilized the online LOP feature and downloaded missing LOPs.

• Working with our VHA Account Manager to get these completed.

FY 2006 ANTICIPATED SAVINGS• Annual savings of $840,000 in Total Joint Implants.

• Total Spend Analysis identified approximately $650,000 in immediate savings that we are attempting to realize.

FUTURE ACTIVITIES• Awaiting our next spend analysis report. We will run the

report every 6 months.

• Meet bi-weekly with our VHA Account Manager to ensure that we are current with LOPs and contracts.

• Implemented GHX to facilitate EDI transactions. Continue to add vendors for increased transactions.

• We are in the initial stages of a pilot project to link our Item Master to our Charge Master.