By Health Industry Distributors Association
Derek Stewart’s team, as well as the Shared Services Data Integrity Team, plays a crucial role for Adventist Health System (AHS): they administer procurement contracts. “It’s not glamorous by any stretch of the imagination, but it’s extremely important,” he says. Stewart was brought on board in 2003 and part of his role included the pricing side of operations, post-contracting. During his time at AHS and through his prime vendor relationships, Stewart has learned some valuable insights for healthcare organizations wishing to improve pricing accuracy.
Adventist Health System snapshot:
- Operates in 10 states
- 3 materials management information systems (MMIS)
- 45 hospital campuses
- 15 skilled nursing facilities
- 22 home health/hospice agencies
Take ownership of pricing
Initially, AHS had a dedicated distributor resource on site that managed pricing for the entire health system. While this removed a complex process from Stewart and his colleagues’ day-to-day work, “We weren’t minding the store,” he says. “There are a host of practices that cause pricing match exceptions, and we knew we couldn’t fully identify and resolve our underlying issues until we took complete control of our contracting processes.”
With support from a new prime vendor, Stewart’s team assumed full contract administration responsibilities and worked with its distributor to develop a process for managing pricing exceptions. “Goods were shipped to us, then we held match exceptions in a ‘holding pen’ for review prior to releasing them as invoices,” Stewart explains. “This allowed my team and our distributor time to research and correct pricing issues before they became more costly invoice discrepancies.”
This was the first of several eye-opening experiences for Stewart and his team. “You need both an ownership stake in your pricing process and responsibility for the outcomes in order to be successful,” says Stewart. “Only then can you start looking elsewhere for additional process improvements.”
Subhead: Clear communication
Stewart is adamant that any meaningful progress on improving pricing accuracy is a direct result of standardization and communication. Standardized communications allow for more accurate data exchanges, and AHS uses EDI (electronic data interchange) to send and receive contract information with its prime vendor as often as possible. “We’ve found that using EDI eliminates the majority of our price variations, improves our communication, and even assists our trading partners’ internal communications.”
Other quick-tips:
- Work it weekly. Stewart compares pricing changes on a weekly basis with his prime vendor to find variances. Mismatched prices are placed in a ‘holding pen’ to be worked on separately.
- Consolidate price notifications. “Special hospital one-off pricing is very difficult to manage,” says Stewart. “In a large IDN, a single price point for all members reduces variation and improves price accuracy.”
Adopt standards
Taking full control of Adventist Health System’s pricing was a significant challenge, Stewart admits. Adopting Global Location Number (GLN) standards, however, was a no-brainer decision for his team. “Converting to and assuming ownership of our GLN structure was an easy win for us,” Stewart says.
For example, Adventist’s distributor and manufacturer partners initially had difficulty matching information when the health system would acquire new facilities. “Communicating basic data like names and addresses proved challenging, and we needed a better solution.” As a result, Stewart’s team enabled GLN standards with its prime vendor, “to ensure our ordered goods got delivered to the right ship-to locations.”
Stewart is quick to point out that he would like to use GLNs for more of Adventist Health System’s contracting efforts, but since these standards aren’t widely used by manufacturers, pricing issues still remain. “We use GLNs with our prime vendor, but that doesn’t necessarily change the data we receive from suppliers,” explains Stewart. “Without strong matches, pricing can fall out easily; we could elevate our industry as a whole with more adoption of standard communications.”
Now that Stewart’s team has achieved success improving Adventist Health System’s pricing accuracy, their goals have changed. “Early on, we worked through our issues reactively,” says Stewart. “Three years ago, we got our pricing to be so accurate with our prime vendor that we can now get in front of our contracting data to see what our prices will be next month.” Stewart is eager to tackle future contracting challenges and continue to work with his distributor to take pricing accuracy further for AHS, as well as for other healthcare organizations.