by Lumere

Sep 17, 2015

3 Steps to Creating a Value Analysis Dashboard

In recent years, healthcare has become increasingly focused on simultaneously improving cost, quality, and outcomes. With these important objectives top-of-mind for providers, it’s not surprising that smart organizations are pursuing initiatives that can impact not just one of the goals, but rather all three. One of these key strategies, which is often underutilized, is optimizing clinical product spend.

Clinical product spend, including the selection and purchasing of Physician Preference Items (PPI), frequently falls under the domain of the supply chain’s Value Analysis Team (VAT). They are responsible for executing on this strategy—and achieving results. Since PPI spend is one of the fastest growing cost segments for hospitals nationwide, it represents a significant opportunity for savings.

However, VATs typically face an uphill battle because despite the importance of a robust value analysis program, the team’s role is not widely understood. VATs often struggle to engage the physicians and operational leaders whose support is crucial to their success. To increase visibility and drive results, experts recommend creating a Value Analysis Team Dashboard that measures key performance indicators (KPIs).

This dashboard is mission critical to not only to monitor progress towards clinical, financial, and operational targets, but also to help improve efficiency and promote accountability within the team. By measuring trends, VATs can evaluate which approaches yield the greatest ROI. Most importantly, VATs that demonstrate impact are more likely to garner additional investment and backing from leadership.

Below is a 3 step quick-start guide for creating an effective VAT dashboard:

Step 1: Revisit the objectives of the value analysis program: Does your program have a mission statement? If so, has it been reviewed recently? If not, it’s worth updating because value analysis programs now have a broader set of objectives to align with the mandates of value-based care. The team’s mission is no longer simply about approving new product requests as it had been in the past. Also, take the time to review job descriptions for value analysis team members.  These descriptions should be both well-defined and clearly communicated to the staff tasked with fulfilling these expectations.

Step 2: Define key performance indicators (KPIs) and set goals:  Below are the recommended basic metrics:

  • Financial metrics:
    • Savings achieved – Setting quarterly and annual goals for the VAT that roll up into the organization-wide cost reduction goals promotes alignment. Similarly, conducting a regular audit of anticipated financial impact versus actual allows the VAT to re-forecast goals and pursue savings more aggressively if needed to ensure that overall targets are met.
    • Cost avoided – For organizations with a high volume of new clinical product requests, cost avoidance is a useful metric to demonstrate the VAT’s impact. Cost avoidance is calculated as the dollar amount averted by not bringing in a new product into the organization.
  • Operational metrics:
    • New product request approval rate – The new product approval rate is an indicator of the diligence and objectivity of the value analysis process. Analyzing this trend over time illustrates the team’s ability to impact purchasing decisions and control the volume of new products brought into an organization. This a significant gage because savings are often depleted by the introduction of new, low-value products. Hospital’s new product approval rates that are too high suggest a significant opportunity to improve the rigor of the process, the need to improve leadership alignment, or both.
    • Average days to resolve a request – For VATs, clinicians are the main customer. To build trust with clinicians, it is paramount that requesters receive a timely response and have transparency into the product review process.  Consider starting with a goal of 30 days from request submitted to decision made. If that timeline seems too difficult right now, aim for 45 days for the first 6 months of the year and then 30 days in the latter half.
  • Clinical metrics:
    • Product approval rate based on clinical outcomes – Hospitals should only be approving premium priced products on the basis of clinical superiority. Tracking how often VATs find that products have improved clinical outcomes has profound implications about the thoroughness of the product review process. Also, if products are deemed on par with competitors, this clinical evidence should be used to drive pricing negotiations with vendors.

As the dashboard evolves, it can be leveraged to track more advanced KPIs as well.

Step 3: Determine a regular cadence to review performance as a team: Assign a team member to prepare monthly or quarterly reports. But rather than just distributing, schedule time to discuss performance. Then, collaborate to develop action plans that address red flags, as well as to celebrate small wins. Some health systems choose to dedicate the first 10 minutes of committee meetings to discuss metrics. Discussing progress holds the team accountable for efficiency metrics and promotes a customer service mentality that keeps physician “customers” satisfied with the value analysis program.

To see an automated dashboard report available from Lumere, contact us at insights@lumere.com.