Hospitals and IDNs who are serious about optimizing costs associated with medical products and supplies often see the establishment of physician-led value analysis committees (VACs) as a fundamental requirement. These committees are aimed at addressing two common barriers to reducing wasteful spending: lack of physician engagement and objective decision making criteria. VACs are considered an effective medium for aligning physicians to undertake value-maximizing initiatives, such as rationalizing vendors or establishing utilization guidelines for premium-priced products.
VACs vary by hospital on three main dimensions: the type of products reviewed (e.g. single committee vs. category-specific committees, new technology vs. existing spend), participants (e.g. physicians, administrators, etc.), and degree of centralization (e.g. facility, division, or system level). While the structure and success of VACs varies, we have observed three common shortcomings:
It is difficult to recruit engaged physicians: While there are physicians at every hospital who are passionate about reducing wasteful spending on medical products and technology, health systems often have a difficult time recruiting a full committee of engaged physicians. The challenge multiplies when hospitals establish category-specific committees or when IDNs establish committees at the facility level.
The focus on products could overshadow more impactful waste-reducing strategies: Achieving the highest quality care at the lowest cost requires optimization of several variables. VACs that zoom in on the product-related variable might be missing out on a bigger opportunity that lies elsewhere, such as aligning physicians around a practice guideline to reduce infection rates, improving operational efficiency in the OR, or expanding a service line.
Despite the best intentions, VAC agendas are dominated by new product requests: While the primary objective for establishing a VAC was to optimize spend, the VAC agenda is often dominated by the review of new product requests. Rigorously analyzing new product requests is certainly necessary to ensure your hospital is not wasting resources on a product that doesn’t yield benefit, but unlocking savings requires a concerted effort at reviewing existing spend. The typical VAC is a multi-specialty committee, with each major specialty being represented by one physician. While approving or rejecting a new product can be handled by such a group, changing ingrained behavior requires far broader physician engagement.
Rather than creating a new VAC structure, a growing number of health systems, including Academic Medical Centers, for-profit IDNs, and not-for-profit systems, are including supply spend review as part of a broader agenda to optimize care delivery. This approach addresses the inherent challenges of the VAC structure.
As discussed in HFMA’s recently published e-book on “Strategies for Supply Chain Success,” Saint Luke’s Health System, a 10-facility IDN serving the Kansas City, MO region, supply chain teamed up with Saint Luke’s Care, a volunteer physician quality organization to tackle several high cost categories, such as orthopedics. Saint Luke’s Care had established Evidence-Based Practice Teams to investigate quality improvement opportunities, implement system-wide care pathways, and define order sets. They applied the processes and methodology of those committees to investigate supply spend. Organizations that don’t have something analogous to Saint Luke’s Care could look to their service line committees as a natural home for supply spend related topics.
Service line committees are tasked with optimizing clinical outcomes and financial performance. As with supply cost optimization, physician engagement is required to make progress toward these goals. Rather than recruiting a separate group of physicians for a Value Analysis Committee, hospitals can leverage the existing structure and team. Our experience suggests that it’s easier to recruit physicians if the mandate of the committee expands beyond products (especially new products). Additionally, the service line structure allows hospitals and physicians to prioritize more effectively. Clinicians are being asked to change several aspects about the way they practice and the service line structure encourages focus on the initiatives that will drive the greatest impact.
Under this model, supply chain plays a primary role in identifying optimization opportunities. Supply chain staff must continually monitor the vendor and product landscape, utilization patterns, and emerging evidence related to product use in order to contribute new ideas. The service line team also relies on supply chain for their product expertise when evaluating the viability of new services, vetting solutions for quality issues, or addressing suboptimal operations.
By doing away with VACs, supply chain becomes integrated into the heartbeat of clinical delivery optimization.