Product Evaluation: Bringing Consensus to the Table
By Kathy Dix
Infection Control Today recently looked at what makes up a good product evaluation and selection program. Now we focus on the financial aspect of product selection. How do materials managers keep infection control practitioners (ICPs), physicians and finance personnel happy?
Granted, that latter goal of keeping everybody happy might be likened to "Mission: Impossible," according to Al Cook, chief resource officer for St. Francis Medical Center in Monroe, La., and the president of the Association for Healthcare Resource and Materials Management (AHRMM). "But if value is real, the results are often eye-opening to all," he points out.
Money is always an object -- and evaluation committees have a constant eye on value and cost. "Price alone is only a part of the equation," Cook says. "If the product being studied has a failure rate of 1 in 10 uses and the new product has a failure rate of 1 in 100, the difference is measurable and has value. Many product evaluation committees are now changing to value-analysis committees."
Ideally, a new product is evaluated from the clinical perspective of what advantages it offers. "If the new product is less expensive and (from a clinical perspective) provides an equal or enhanced clinical performance, it is a slam dunk that the product should be introduced to the system. The really tough part is when there is higher cost involved," Cook emphasizes. "The question then is, 'Will the clinical performance reduce costs in other ways? Will it lower actual infections and decrease length of stay? Will it reduce the nosocomial infection rate and lessen the costs of antibiotics?' These are measurable benefits, and most materials managers are capable of extending these kinds of direct cost reductions and applying them to the 'value' of the product. The really difficult ones are the ones that lower the potential for employee injury or lessen the liability to the corporation. Somehow, the cost of the new product must be justified in increased volume with the same resources or the same volume and decreased resource consumption. The institution can no longer be 'state of the art' just for the sake of being state of the art."
With all the fuss over technology these days, that last statement may be surprising to some. Why not be state of the art? Because, as Cook has already said, the point of being state of the art is delivering better value at the same or a reduced cost. If new technology does not provide that value, it is pointless.
Standardized products can go a long way toward delivering that value. They have typically achieved acceptance across wide-use perspectives, Cook notes, and are unique in that they manage to fit wide categories in the use of the product. "New products must be considered only when they can meet that same criteria," he emphasizes. "With internal holding costs of upwards of 30 percent of the value of the items, it is easy to see why splitting the products that are meeting widespread criteria is often not effective in controlling costs. Add to that the increased potential of delays and errors when the wrong products are sent to the wrong areas and rework has to occur to fix the mistake."
Managed care does have some effect on limiting costs, although Cook is not convinced that managed care affects value analysis. "It most certainly puts more pressure on holding costs to their lowest level. If the product really provides true value and that value can be demonstrated to the institution in terms of decreased length of stay or decreased product failure or actual reductions in employee injuries, it should not be affected by whether it is used in a managed care environment or not," he says. "The real question is whether the product adds value. Managed-care contracts have reduced the cushion that hospitals used to have in relationship to cost and for that reason, there is now a higher focus on products, their cost, and their return to the institution."
With the recent release of the procedures newly approved by the Centers for Medicare and Medicaid (CMS), there may be an effect on product as well, albeit a secondhand one. "Products contain the costs that are related to procedural reimbursement but so do labor, service, and other use factors," Cook points out. "In my opinion, procedural reimbursement will heighten the interest in value analysis so that the entire cost of the procedure may be examined, and if the product demands more staff time to use or has a higher cost associated with its use, the product will be a potential for replacement. If the same results can be obtained procedurally by using a less expensive product that delivers the same value as the current product, the change should be engaged."
On the surface, it seems like a simple concept: choose the product that gives the best quality at a reasonable price. Quality can represent a shorter hospital stay, a lower incidence of infection, a quicker recovery, even fewer employee injuries. It is the material manager's job -- and the job of the entire product evaluation committee -- to determine what (if any) benefits a new product provides, and to upgrade if it is in the best interests of the patients, employees and the hospital as a whole.
"My best advice is that the ICP and the professional materials manager collaboratively have the best opportunity to work together to identify products that deliver real value to the institution and allow the organization to remain financially viable," Cook says. "After all, how much value does an empty hospital represent to the people it serves?"