Achieving a World Class Expense Management & Enhanced Value Analysis Program

It’s not new and it’s not old, healthcare organizations continue to make it a priority to evaluate their cost structure on an ongoing basis and identify opportunities to reduce spending while maintaining or improving patient outcomes.  Hospitals continue to be under significant competitive pressure to reduce costs, improve quality, achieve superior outcomes, and enhance the patient experience. These competing priorities often create challenges in the decision-making process, and potentially creates the inability to move forward with initiatives that have a financial benefit for the organization.  Cost optimization may take on many forms, yet there remain key areas in which to focus. Removing excess cost and redundancy from the system, evaluating and restructuring businesses to assure community needs are met, and moving toward a clinically integrated approach are all critical steps in achieving organizational success in today’s market.

In today’s environment, implementing a world class Value Analysis program to standardize decisions on the most cost-effective utilization of products and services is crucial. Leading organizations partner with their clinicians and physicians to normalize practices and standardize sourcing and contracting initiatives.

Combined with an expense management initiative, a comprehensive Expense Management & Enhanced Value Analysis Program will provide you with a systematic assessment/approval and implementation process for spend analysis, research, evaluation and acquisition of supplies, equipment, purchased services, and clinical technology for use by all levels of your organization’s facilities and end users.

Aligned Objectives are Necessary for Success

The objective of an Expense Management & Enhanced Value Analysis Program is to continually seek opportunities to reduce costs and improve processes and performance through a cost-effective selection & standardization of supplies/devices, equipment, purchased services, and clinical technology while maintaining or improving the quality of care provided to your patients. Specifically, an Expense Management & Enhanced Value Analysis Program should deliver upon the following:

  • Achievement of cost savings target and positive ROI
  • Maximize physician and clinical engagement to optimize cost savings
  • Maximize strategies that balance cost, quality, and outcomes from a transactional to a transformative model to maximize the achievement of cost reduction initiatives
  • Enhance supply chain operations
  • Establish a central contract repository for tracking and monitoring all contracts and expiration dates for renegotiation/renewal purposes
  • Implementation of an on-going process for facilitating interaction between supplies & purchased services end-users and supply chain & sourcing/contract management support resources

The Critical Framework for Success

There are seven critical framework components necessary for developing and sustaining a successful process.

Organizational AccountabilityOrganizational Accountability

  1. Culture
  2. Executive Leadership

Infrastructure and Resources

  1. Data and Tools
  2. Metrics and Measurement
  3. Communication Tools

Documented Program

  1. Processes
  2. Policies

Organizational Accountability encompasses Culture and Executive Leadership, referring to leadership support, organizational accountability, physician and clinician engagement and overall organizational buy-in and commitment.

Infrastructure speaks to having a solid model and structure with program goals and objectives. It should incorporate a team with the expertise to make informed decisions from clinical, financial and operational perspectives.  Data and Tools should be comprehensive and accessible. Decision making should be data driven and support the methodology and algorithm established for process flow, policies and review of new opportunities. Metrics and Measurement is the key to sustainability. Developing key performance indicators to monitor overall program activities and success is important, as is creating reports and metrics for monitoring and managing clinical and financial results.  Establish a Communication Plan. Communication must be frequent, with content and channels appropriate to each audience, e.g., leadership, clinical staff and physicians.

A Documented Program is a lasting program.  Processes and Policies document what is to be executed and what the organization is expected to adhere to. It is vital to incorporate decision making matrices and mechanisms for ongoing monitoring and sustaining results.

Building an Effective Model for Change

Building an organization-wide Expense Management & Enhanced Value Analysis Program can drive cost savings and deliver quality. The difference between failure and a success is adopting a process model aligned with organizational needs and designed for sustainable results. Regardless of the scope of the initiative, incorporating a framework that supports transparency and innovation facilitates the processes for delivering the highest value. Instituting Lean principles and methods to all work processes (e.g., meetings, clinical processes, etc.) and tracking the effectiveness of the change helps to create value and eliminate inefficiencies in the process. An example from a service line initiative, the initiative may entail assessing cost per case by service line and by physician to identify non-value added cost. Ensuring service line leaders are held accountable for the generation of ideas, along with hypothesis and experimentation development to reduce non-value added processes, helps to engage those performing the set of tasks. Meanwhile, a way to engage department leaders and physicians early in the process is to educate on the need for redesign and collectively identify redundant services across the care continuum.

Key starting points are:

  • Assessing and understanding your organization on the fundamental elements of a successful and sustainable Expense Management and Enhanced Value Analysis Program.
  • Understand your supply chain model and internal processes.
  • Identify key individuals involved with internal processes.
  • Identify the resources necessary to implement the expense management and value analysis process.
  • Develop your expense management and value analysis process to incorporate internal processes with foundational elements of a leading practice model.
  • Map your current expense management and value analysis process to ensure all elements are captured.
  • Establish a timeframe to set expectations for the completion of steps.
  • Develop an internal plan to communicate and educate the organization on the process.

Leadership must be committed and unwavering in delivering a vision to transform the cost and care structure of the organization. By employing a transparent, accountable, and team-based approach, the vision can be owned by all. If an organization is not yet positioned for facility-wide initiatives, “pilot” process review and transparency within certain service lines or departments can be an effective starting place.  Using internal and external benchmarks to identify areas of savings opportunities provides quantifiable objectives for teams.  Communicate expectations and challenges while encouraging all staff to actively seek out road blocks, these road blocks are opportunities for the staff to tackle difficult issues and “own” the process. Sustaining the process improvements and cost reduction initiatives can be achieved through effective communication and actionable data.  Finally, utilize a Balanced Scorecard, a performance management tool that is used to provide an integrated perspective of your organization.  The Balanced Scorecard should show quantitative financial outcomes, internal performance measures, external customer measures, and clinical outcomes.

A comprehensive Expense Management & Enhanced Value Analysis Program is more than a one-time process, it is an innovative and transformational approach to meet the cost optimization needs of today’s healthcare organizations.

About the Author:

Erik brings a wealth of experience with an outstanding track record as an executive who has held a wide range of operational and strategic roles. Throughout his career Erik has helped organizations identify, evaluate and capitalize on market opportunities.