Where’s the Value? Installment III

If you sell devices that rely on physician preference to drive adoption, you have no doubt been through a Value-Analysis procedure. Whether you were present to answer questions for a committee, or responded in some other way, you likely felt scrutinized and a little vulnerable.

The appeal to physician preference has been a curiosity for those outside healthcare. Almost everyone agrees that doctors know best, and quality healthcare depends on proficiency in device utilization. However, the price differences between two seemingly identical devices can be massive. And the ability to drive down the price paid by the hospital for a device is actively resisted by the device company’s relationship with the physician.

Consequently, Physician Preference Improvement (PPI) or management has been employed by many healthcare provider corporations to maximize the cost savings associated with higher volume commitments to fewer manufacturers. PPI programs rely on the establishment of specific “thresholds” of clinical capability. In this way, physicians’ preference for an item can be coopted and shaped by group dynamics, including the desire to remain a member of a peer group.

The way this happens is by asking physicians, or other clinical experts, a few distinctive, and different questions about the array of offerings provided by vendors in a category. These questions broadly include:

1. Can all of these devices live up to their approved claims?
2. Can all of these devices function adequately in appropriate cases, and with appropriate technique?
3. Can all of these devices adequately treat the disease states they have been designed and approved to treat?
4. Are there any of these devices that cannot work here at our hospital, given that adequate training and proficiency demonstration is completed.
5. Are there any insurmountable obstacles to learning how to use a different set, or device, or solution?

When a supply chain manager has succeeded in convening a committee for value analysis, and securing agreement from the clinical staff about an acceptable array of alternatives, he has what he needs.
If the value analysis committee has endorsed more than one potential device, a market can be created, and competition can drive down the price.
What then can be done to either avoid the adverse consequences of VA, such as exclusion from a current account, or market share loss? How should an evolved company and sales team react?

Recall, there are some tips for navigating Value Analysis.

1. Know the purpose of Value Analysis.
2. Remember that you’re not selling during Value Analysis.
3. The Value Analysis process is not designed to help you.

To win in this situation, or at least minimize losses, it really helps to get ahead of the process, and not be surprised by it.
Further, when addressing the committee’s concern, it is usually helpful to recall and try to derive the explicit or implicit value equation in use during the process.

The basic equation is:

Value = (Tangible and Intangible benefits) – (Cost)

Best practices in using this formula are many, and require a bit more explanation and consultation than what we can provide here.

In the end, it is recommended that the Clinical Benefit of the solution on offer be correlated with operational requirements and non-core product related costs and financial returns, in addition to the core product costs and returns.
Using the COF℠ Framework will give you better responses to Value Analysts activities and in certain instances, the ability to create winning situations.

Join the conversation. How are you positioning yourself in this new normal world?
Also, if you’re challenged by this situation and need to develop a more coherent strategy, you may want to give us a quick call.

Total Innovation Group, Inc.
5401 W Kennedy Blvd
Suite 750
Tampa, FL 33609
813-814-1902

By:
Gunter F. Wessels, Ph.D., M.B.A.
Total Innovation Group Inc., Practice Principal, Partner
and
Sam O’Rear
Total Innovation Group Inc., Senior Partner