The second portion of the advisory board presentation focused on the question, what does a good value-based partnership mean to you and how do you measure value? While a partnership suggests an association between two or more persons, relationship suggests that the two are connected. For this reason, the committee’s view on achieving a true value-based partnership was to go one step further and ensure that the HCO and supplier were truly united to address, solve and monitor the impact of the product on hospital identified challenges to achieve sustainable results.
3 Principle Themes
Emerged From This Discussion:
When it comes to managing cost, utilization is key to determining return on investment (ROI). JR commented, “there’s only so far a supplier can drop their price, so, it’s not how much we pay for what we use, it’s how much we use what we pay for.” This statement reinforced the need to differentiate upfront costs from actual performance of a product, especially when comparing commodities. More importantly, the parties need to agree on exactly how each “value-component” will be measured. This should be based on the supplier’s customized value proposition and the HCO’s primary goals. One example to underscore this point from the board was an experience where a hospital converted to a product approximately 50% cheaper than the original product being used, with an appearance of hospital savings.
However, in review of the monthly utilization figures after the conversion, the value-analysis team revealed that the usage had tripled, which was not reflective of an increase in patient numbers, nor did it result in differences in clinical outcomes. Consequently, the cheaper product was costing the hospital more through a negative return on investment – the complete opposite of what they’d intended. Therefore, the board agreed that long term gains through improved outcomes and product performance – truly the total value they aim to capture – should be assured through joint monitoring and education on proper product usage with the supplier to avoid the allure of a ‘quick-savings”.
Specifically , suppliers who flag the potential of overutilization issues ahead of time and suggest corrections that will control utilization costs, even at the expense of short-term supplier sales decreases, will encourage trust and secure long-term sales commitments.
“The best suppliers are the ones who recognize problems but also want to help fix them, providing consistency and sustainability, with both short-term and long-term solutions.” Value in the minds of the advisory board is born from this statement. Moving forward, the supplier- HCO relationship needs to focus on outcomes that reduce variation and directly impact the health of the population, and resource allocation for the hospital. For example, how can the VBP address readmission rates, reduce amputations, and achieve sustainable reductions in hospital acquired conditions such as pressure injuries and hospital acquired infections? Risk-sharing relationships have been suggested to approach these topics, however the board indicated this is not possible for every situation as agreeing on a single point of data that is not overly influenced by staff variation is hard to find. Instead, the supplier should listen to the challenges and needs of the HCO and consider creative opportunities to meet the need, not offering a take-it-or-leave-it-cookie-cutter corporate approach. HCO leadership has become savvier in their understanding of clinical outcomes and the value-analysis-nursing-leadership collaboration is crucial for success.3 There is a willingness to spend more or invest in a product, especially when it can be tied to outcomes that matter: shorter length of stay, decreasing time to healing, reducing procedural times, et al – it’s the total value that really matters. When a relationship goal can be established, the HCO is often willing to engage in a paid conversion-and-evaluation period where a reasonable amount of time to accomplish the goal is decided ahead of time, the impact is monitored, and the supplier partnership involves a commitment to successful implementation, utilization, and outcome monitoring.
However, measuring quality and value can be difficult. Differences in infrastructure, clinical processes, and short-term versus actual outcomes have led some to suggest that VBP programs need to be designed by stratifying measures based on their impact on cost effectiveness and true clinical benefit.2 Avoiding soft dollars is key. For example, estimations of reduced nursing time don’t result in actual savings for the hospital if they are still being paid for their full shift. So, these soft-dollars must be translated into actual value, such as increasing case turnover in the operating room or increasing number of visits in the clinic. Too often, the board agreed, suppliers may follow a sale with a hands-off approach that will typically comes back to bite them. Given the distraction caused by COVID-19 on value analysis professionals, the supplier should proactively provide updates on integration success and outcomes, anticipating the HCO need, and reducing costs when possible, instead of being reactionary.