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By Kathy Dix
InfectionControl Today recently looked at what makes up a good product evaluation andselection 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 officerfor St. Francis Medical Center in Monroe, La., and the president of theAssociation for Healthcare Resource and Materials Management (AHRMM). "Butif 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 onvalue and cost. "Price alone is only a part of the equation," Cooksays. "If the product being studied has a failure rate of 1 in 10 uses andthe new product has a failure rate of 1 in 100, the difference is measurable andhas value. Many product evaluation committees are now changing to value-analysiscommittees."
Ideally, a new product is evaluated from the clinical perspective of whatadvantages it offers. "If the new product is less expensive and (from aclinical perspective) provides an equal or enhanced clinical performance, it isa slam dunk that the product should be introduced to the system. The reallytough part is when there is higher cost involved," Cook emphasizes."The question then is, 'Will the clinical performance reduce costs in otherways? Will it lower actual infections and decrease length of stay? Will itreduce the nosocomial infection rate and lessen the costs of antibiotics?' Theseare measurable benefits, and most materials managers are capable of extendingthese kinds of direct cost reductions and applying them to the 'value' of theproduct. The really difficult ones are the ones that lower the potential foremployee injury or lessen the liability to the corporation. Somehow, the cost ofthe new product must be justified in increased volume with the same resources orthe same volume and decreased resource consumption. The institution can nolonger 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 besurprising to some. Why not be state of the art? Because, as Cook has alreadysaid, the point of being state of the art is delivering better value at the sameor a reduced cost. If new technology does not provide that value, it ispointless.
Standardized products can go a long way toward delivering that value. Theyhave typically achieved acceptance across wide-use perspectives, Cook notes, andare 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 samecriteria," he emphasizes. "With internal holding costs of upwards of30 percent of the value of the items, it is easy to see why splitting theproducts that are meeting widespread criteria is often not effective incontrolling costs. Add to that the increased potential of delays and errors whenthe wrong products are sent to the wrong areas and rework has to occur to fixthe mistake."
Managed care does have some effect on limiting costs, although Cook is notconvinced that managed care affects value analysis. "It most certainly putsmore pressure on holding costs to their lowest level. If the product reallyprovides true value and that value can be demonstrated to the institution interms of decreased length of stay or decreased product failure or actualreductions in employee injuries, it should not be affected by whether it is usedin a managed care environment or not," he says. "The real question iswhether the product adds value. Managed-care contracts have reduced the cushionthat hospitals used to have in relationship to cost and for that reason, thereis now a higher focus on products, their cost, and their return to theinstitution."
With the recent release of the procedures newly approved by the Centers forMedicare and Medicaid (CMS), there may be an effect on product as well, albeit asecondhand one. "Products contain the costs that are related to proceduralreimbursement but so do labor, service, and other use factors," Cook pointsout. "In my opinion, procedural reimbursement will heighten the interest invalue analysis so that the entire cost of the procedure may be examined, and ifthe product demands more staff time to use or has a higher cost associated withits use, the product will be a potential for replacement. If the same resultscan be obtained procedurally by using a less expensive product that delivers thesame value as the current product, the change should be engaged."
On the surface, it seems like a simple concept: choose the product that givesthe best quality at a reasonable price. Quality can represent a shorter hospitalstay, a lower incidence of infection, a quicker recovery, even fewer employeeinjuries. It is the material manager's job -- and the job of the entire productevaluation committee -- to determine what (if any) benefits a new productprovides, 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 managercollaboratively have the best opportunity to work together to identify productsthat deliver real value to the institution and allow the organization to remainfinancially viable," Cook says. "After all, how much value does anempty hospital represent to the people it serves?"