Developing Partnerships Through Value Analysis

March 2024 – The Journal of Healthcare Contracting

Value analysis is a critical piece of the healthcare puzzle and crucial to building partnerships between IDNs and suppliers. At IDN Insights West, sponsored by Allergan Aesthetics, Dee Donatelli, Lead Spend Management at symplr, hosted a panel that included:

Cheryl Anderson Smith, BSN, RN, MBA, DNP, System Director, Value Analysis at Steward Health Care

Dr. Jimmy Chung, MD, CMO at Advantus Health Partners

The two supply chain leaders discussed what value analysis looks like in their organizations and what they are looking for in partnerships.

Dee Donatelli: Please tell us about your value analysis program and how you feel it’s creating a more clinically integrated approach.

Cheryl Smith Anderson: We define it as an integrated analytical approach to evaluating medical products and services for the medical and surgical area. We do it from the perspective of looking at what the patient care outcomes are, patient quality, patient care, and then the last one being cost effectiveness. That’s really critical to us.

One thing that happened when I got to Steward is that we had a lot of committees for value analysis on the corporate level, but they didn’t have the right people on board. We didn’t have the clinicians, the nursing educators, the advanced wound care nurses, all the different people that are critical in the decision-making process. We’re doing good with working with our nurses and getting their input on a lot of product categories, but I wish we had more physician involvement. We do get our physicians involved when we’re looking at specialized categories.

One category we worked on was cellular regenerative tissue. We had our chief medical officer nominate which doctors could be on that committee. We worked with those doctors, spoon-feeding them all the data that we could from a clinical side point and the data point. From there we would meet with these doctors and make sure that the meetings were very comprehensive, concise and would get them out within 30 to 45 minutes – at the times when the doctors were available. All of them had very busy schedules, but we were able to make some significant improvements in the areas that are critical. We worked on hip and knee; we’re getting ready to work on trauma. We also started soft tissue biologics. And one thing that I’m proud of that I was able to accomplish there – we developed an advanced wound care formulary and we worked with our AWC chairs at the hospital, and they helped us to go from 248 products with 16 vendors to 26 products and two to three vendors.

Jimmy Chung: Value analysis is really more than just analysis. We’re trying to value optimize, and we’re optimizing the value. What does value mean from the perspective of the patient? That means we have to kind of steer away from how valuable this process is to the physician. And I know some of you have heard me say this before, but it’s my life’s mission to remove the word preference from all things supply chain.

No matter what anyone tells you, medicine is not an art. There’s no room for creativity. There’s no room for preference. Individual preference should not be a decision-making tool for healthcare, and we have data to support that. We waste a quarter of our healthcare budget every year. Almost a trillion dollars goes to waste. It’s not all supply chain of course, but a lot of it has to do with the lack of interoperability and lack of coordination of care, and duplication and unnecessary care and things like that. So now coming back down to that supply chain value analysis level, what can we do? I would imagine a value analysis process at some point that actually ends up not needing value analysis, so that hospitals don’t really have to do value analysis because we already know where the high value is.

Donatelli: What does partnership mean to you?

Chung: Some of the vendors and suppliers who we have what we would consider a partnership with, we meet very regularly. Depending on the level, we have executive level quarterly business reviews, and then we have director level monthly review meetings. At the more site manager level, they sometimes will meet weekly. Maybe it’s the same agenda every time, but it’s still just to keep everybody on the same level in terms of what data are we looking at, what we need to do at that site level to get more compliance, or to make sure that we’re hitting our goals. There’s more to this financial relationship than just spending money.

Every once in a while, somebody we thought that we had a partnership with raises their prices without even any warning whatsoever and says, “Starting 30 days from now, your product is going to be $200 more.” And we’re like, “Where did that come from?” I think there must be a lot more flexibility and transparency in terms of what your strategy is versus ours. How can you guys help the health systems meet their margins? Because we’re going to be looking for every opportunity to cut costs because revenue is not something we have a lot of control over.

Anderson: If we’re going in partnership with you on a particular product category, we’re going to back you up by making sure that our organizations honor when your representatives come into their hospitals, and that they will meet with you. If they don’t meet with you, we will be asking them, “Why are you not meeting with our vendor? This was a savings initiative launched from our value analysis committees that your people were sitting on. This is system-wide, and you need to comply.” We will show them their compliance data, we’ll say, “Well, you’re still buying 70% of your products from this vendor, and you’re only buying now 30% from the new vendor we want you to move to. How soon are you going to get there?”

We do an educational process too, so that people know when they become a value analysis committee member at the local level and at the corporate level, what their duties and responsibilities are, and that they’re supposed to be our communicators at the hospitals because we have a small team too.

Donatelli: How do you choose partnerships?

Anderson: It’s by their product categories. We know where our spend with our five or six top vendors at our IDN. If a HealthTrust contract comes up, we’re going to be looking to you all, especially if we’ve had a relationship with you in the past and you’re on that HealthTrust contract. We’re probably going to give you priority to come in to talk to us.

Chung: Before AHP became its own company, Bon Secours Mercy Health had relationships with certain suppliers with whom they had more of a partnership type of relationship with. And that may be more of the traditional way of looking at, “Okay, who’s giving us the best response in our RFP? And are you ready to be a partner?” From the AHP perspective now that we’re creating our own GPO portfolio, it’s really more about, “Do you see a vision into the future with us? With our clinically driven model and value creating model, do you understand what we’re trying to do? Are you willing to do away with this every three years contract cycle, to look at more of an evergreen, perpetual relationship where we’re constantly looking at how do we bring value to each other?” For example, AHP has a partnership with Medline.

We have a partnership with GE for health technology management, and it’s all out there, so it’s no big secret. And the terms are very clear. We have a vision to grow together into the future. We’re going to help each other. We’re going to expand this model of business to other health systems and so forth. So, we’re in similar discussions, and in a particular category, we might have more than one partner.

We may have about four vendors who are willing to play that partner role with us just in different scenarios. And I’m also not saying that every category has to have a partnership. You don’t have to have a partnership for every subcategory of a clinical product, but if you have a generalized way of creating partnerships for things like distribution and med/surg products, or purchase services and things like that, then I think that will help define that relationship with the vendor.

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