Comprehensive Value Analysis Program
Patrick E. Carroll & Associates, Inc. (PECA) developed the Product
Acquisition Consumption and Evaluation Review
(PACER) program to assist healthcare organizations to critically assess the products
and services they consume and the utilization patterns of those products and
services. This assessment involves the application of value analysis techniques to
identify opportunities to significantly reduce operating expenses. The Program
is essentially conducted in two parts:
To Identify the opportunities
To intervene and achieve the savings
program is a comprehensive multidisciplinary process that re-engineers the
hospital's practices. Our program redeploys resources to establish methodologies to
analyze and redesign the selection and utilization of products and services. While the
initial outcome of the PACER program is the
identification of savings potential by product line, the long-term benefit is the
development of an ongoing systematic process to assure the continuation of the benefits
The basic PACER
program entails an analysis of all non-salary expenses. The program entails development of
historical product and service purchasing profiles by product line (i.e. commodity). The
profiles are developed through detailed analysis of a variety of sources including
purchasing, storeroom, and accounts payable records; historical supplier sales summaries;
group purchasing agreements and contract compliance; interviews with key hospital staff;
and tours of the materials management and customer department supply storage locations.
We believe the PACER
program is unique as we develop the profiles rather than ask hospital customers
department managers to complete elaborate survey forms. We believe the manager's time is
too valuable to be involved in the development of historical purchasing records;
additionally, we believe by having the consultant gather the information and then
interviewing the manager, more accurate purchasing and utilization information can be
Upon conclusion of
our extensive data gathering process, we utilize our significant collective experience in
product/service design and function to generate recommendations. To make these
recommendations we utilize the appropriate purchasing contracts, our extensive
pricing/utilization database of over 500healthcare providers, as well as our collective
experience to derive recommendations to change practice and/or products/services to
realize cost savings while maintaining or enhancing quality.
The recommendations can be categorized as follows:
- Price Change - This recommendation entails maintaining the current product and/or service at
less cost. The lower cost may be identified from correct utilization of the contract,
further negotiation with suppliers, or identification of a higher than normal price when
compared to the PECA database. As an example, we may identify that the
healthcare provider is not realizing its contract pricing for a product (say syringes); we
will calculate the savings entailed and reference the specific contract to enable the
hospital's purchasing staff to make the correction.
- Product/Service Change - This recommendation involves utilizing a different product/service from an
alternative source that provides the same function, at the same or enhanced quality, at a
lower overall cost. We may, for example, recommend the converting from one supplier's
urological line to another and suggest trials to provide clinical staff comfort of the
functional equality of the alternative. We will reference the purchasing contracts, which
provides contract pricing for the alternative. In addition, we will utilize our extensive
database to assure the client is receiving competitive pricing. Importantly, all of our
recommendations will be on equivalent situations. Should a current product be acquired
through a distributor, we will add the distributor's margin to the cost of the recommended
product to assure the cost comparison is truly comparable.
- Componentization- In
some circumstances, we will recommend converting from a supplier pre-packaged
product/service to the individual components at a lower overall cost. This recommendation
involves detailed analysis of the hospital's cost of components compared to the cost of
the pre-packaged product/service. The recommendation of utilizing components may involve a
decrease in the usage of the specific components. As an example, we might recommend
conversion from a supplier pre-packaged IV start kit to using the individual components.
Should the componentization involve additional labor for the hospital, we will factor
these costs (i.e. salary, benefits) in our calculation.
We may recommend a hospital acquire a reusable product in lieu of a
disposable product. We will calculate the cost of re-using the product (i.e.
decontamination, cleaning, reassemble, sterilization, labor investment, and initial
purchase investment in reusable inventory) in comparison to the disposable product. For
instance, we might recommend discontinuing the purchasing of a disposable laceration tray
in favor of utilizing a reusable tray prepared by sterile processing. All
recommendations will assure infection control standards are met.
- Converting from Disposable to Reusable Products -
- This recommendation involves
changing the utilization of products and services. In some cases, these recommendations
entail a reduction in the frequency of utilizing the product. For example, we might
recommend establishing protocols for the use of expensive drugs.
Standardization is often an opportunity to identify savings. This is
especially the case in decentralized purchasing environments where individual customer
department managers are provided freedom in product selection. However, standardization is
not a panacea and often the lack of standardization can reflect a more appropriate
utilization of less costly products.
The recommendations emanating from the
program will be distilled from a number of discussions and iterations between the PECA
team and the client staff. The recommendations will include a discussion of the current
practice and products/services utilized, the recommended change, method of suggested
implementation, and the non-measurable impact of the recommended change including waste
generation, additional management support required, etc.
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The basic PACER
program was designed to complement rather than replace quality processes involving
product evaluation and the purchasing function. We believe our greatest value to our
healthcare clients rests in our ability to identify changes in practice and/or products
and services to enable the hospital to exploit these opportunities.
The basic PACER
program involves the following activities:
Initial Meeting - We will conduct an initial meeting to refine goals and objectives for the PACER
program, identify hospital contacts and resources, establish timeframes, etc., determine
decision making process, etc .
Steering Committee - We will assist in the establishment of a PACER
Steering committee to review the recommendations and establish an approval process. This
committee is typically comprised of representatives of senior management, medical
staff, finance and materials management. The PACER steering
committee will also determine implementation methodologies.
"Kick-Off Meeting" - We will conduct a "kick-off meeting" to explain the
program to senior management, department managers and medical staff.
Data Gathering - We will begin the data gathering process which involves interviews,
collection of historical information, departmental tours, etc.
Identify Initial Opportunities
- We will identify initial opportunities in specific
product/service lines for further analysis.
Confirm Pricing and Utilization Data
- The pricing information is normally confirmed from accounts
payable files. Utilization information is confirmed from a variety of sources included the
materials information system, supplier reports, accounts payable records, purchasing
Determine Alternative Practice
Product/Service - This task also involves
confirming the price/cost of the recommended alternative and calculation, if required, of
utilization of the alternative.
Calculation of Savings by Product
Line -This process includes identification of the
impact of the recommended changes.
Summarization of the savings (in total and
by product line)
Development and publication of the draft
report and final report
Presentations of the final report.
Implementation of the changes
Monitoring the results of the program
Our staff typically conducts periodic status briefings
throughout the project. We provide monthly written status reports documenting activities
completed, activities in process, activities to be undertaken, initial impressions, and
any issues that have evolved; the monthly status report also includes a summary of the
savings identified to date by product line. In addition, the PECA team
will attend hospital meetings of the products committee, pharmacy and therapeutics
committee, nursing practices, department managers, senior managers, to present the
program, discuss progress, and/or present opportunities as desired.
The amount of PECA involvement in the formal
education and training of client staff and implementation of the recommendations varies
greatly depending upon the needs and wishes of the client. The basic PACER
program presumes the client is most interested in utilizing PECA's
expertise; thus, the involvement in implementation and formal training is minimized. Other
clients, however, request our extensive involvement in this process. Importantly, we
customize the scope of our PACER program to the needs of our
individual hospital client.
The basic PACER program typically involves
eighteen to twenty-two weeks from initial project meeting to the final report. Delays in
the availability of individuals and/or data essential to the analysis will delay this
The first recommendations are usually generated within thirty days
of program inception. These recommendations are communicated as they are developed
to enable an expedient realization of savings. Recommendations will be generated
throughout the remainder of the four months of the program.
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At the conclusion of the PACER program, the
healthcare provider will receive the following benefits:
1. Specific recommendations to change practice, products,
and/or services with accompanying savings identified in detail. Our clients have
identified annual cost savings ranging from $420,000 to $8,000,000. The savings per
occupied bed per year have averaged over $9,950. In addition, our hospital clients have
realized a high (i.e. ninety plus percent) degree of success in implementing our
2. Purchasing and utilization profiles of the selected
commodities identifying storeroom market share (i.e. percentage of products acquired from
the hospital's storeroom), supplier market share, and degree of standardization.
3. Development of a non-stock database to assist in future MMIS installations, comparison
of future supply consumption profiles, price negotiations, and other management studies.
4. Technology transfer through the education of client staff on the
concept and application of value analysis techniques. This will be accomplished through
one-to-one meetings with customer managers and staff, presentation at various
meetings, and educational seminars, as desired.
5. Assistance in the implementation of the specific recommendations.
We will provide detailed implementation strategies and assist in the presentation of the
change to the specific care provider/manager as appropriate. Typically, one third of the
recommendations present relative ease upon implementation; hence savings can, and have
been, realized upon identification of the opportunity. A second group of recommendations
will realize moderate resistance to change necessitating senior management support and
discussion with the department(s)/individual(s) impacted. The last proportion of
recommendations are anticipated to experience significant resistance thereby requiring
strong leadership, development of study task forces, and an extended implementation
period. Importantly, the nature of implementation varies greatly between clients. Our
implementation strategies are customized to the needs and culture of the specific client.
6. Evolution of the clients products committee to a value analysis
program assuring that the benefits of the PACER program are
realized and continued.
7. Operational recommendations designed to enhance service and/or
reduce costs. While operational issues are not the focus of the PACER
program, our extensive on-site involvement affords us the opportunity to identify areas
for potential redesign/engineering. We will document these issues and our recommendations
in our final report.
8. Development of monitoring systems to measure the success of the PACER
program after presentation of the final report.
9. Conduction of a post-project audit to provide the hospital a
"report card" documented progress accomplished, roadblocks encountered and
10. Comparison, at the time of project initiation and ongoing
thereafter to PECA's national survey of supply costs per patient
11. We will provide on-going support after completion of the
engagement. In addition, we will share new opportunities for savings as they are
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The table below illustrates the success of
our past 10 Projects.
5252 Orange Avenue, Suite 100, Cypress, CA 90630
phone: (714) 236-3743 fax: (714) 236-8480