Prime Vendor: Getting the Most from Your Most Important Supplier
By Jeff Girardi, HIDA
Every day, pricing discrepancies increase operating costs for providers, group purchasing organizations (GPOs), manufacturers, and distributors. Different factors can cause these discrepancies, but the majority of issues could be moderated if involved stakeholders embrace better business practices.
At HIDA’s annual Contract Administration Conference, contracts and chargebacks professionals examine and discuss various scenarios they typically encounter on a daily basis that lead to costly waste and rework. By doing so, participants are able to identify stakeholder pain points, but also share process improvements and suggestions that can benefit trading partners.
These discussions served as the foundation for the latest output from HIDA’s Contract Administration Workgroup: Recommended Solutions for Common Contracts and Chargebacks Scenarios. This resource highlights 13 different examples of everyday issues companies encounter that lead to pricing inaccuracy, grouped under the categories of “Contract Eligibility,” “Contract Notification,” and “Chargebacks/Rebates.” For example:
Affiliate/ownership – An IDN directs its distributor to extend pricing to all its affiliates. The manufacturer is only willing to offer the contract pricing to hospitals owned, managed, or controlled by the IDN. If the distributor follows the customer’s direction and applies pricing across all affiliates, significant denials are generated between the manufacturer and the distributor.
Eligibility issues remain the number one obstacle to achieving pricing accuracy, according to a recent HIDA poll. In this specific example, some of the recommended solutions that can help minimize conflict and denials include:
- Write clear contracts that define owned and managed entities. Any class of trade exclusions that occur should also be specified in the contract, and final terms should be communicated to all trading partners.
- Use EDI (electronic data interchange) to share eligibility rosters and price/sales catalogs. Manufacturers must communicate eligibilities to distributors, and it’s additionally helpful if providers confirm or acknowledge eligibility back to both manufacturers and distributors
- Collaboratively work to address conflicts and educate partners. Distributors should get on the phone with both the provider and manufacturer together to sort out issues and clarify all locations up front. Manufacturers should educate providers and distributors on the distinction between owned and affiliate entities, as well as clarify how their business rules treat each type of location.
Accompanying each individual scenario are voluntary actions companies may choose to pursue or adopt that are intended to achieve long-term fairness, efficiency, and pricing accuracy for the entire healthcare community. While each issue has its own unique solutions, all are consistent with the three guiding principles of our Pricing Accuracy Initiative: automate communications and transactions wherever possible, implement process and data standards, and follow timely contract notification practices.
We recognize that some of these principles and solutions may be more difficult to implement than others. However, companies that are adopting them are already starting to realize efficiency gains, sharing results with their peers, and proving why the value of contracting standards has never been greater.
As healthcare continues to become more sophisticated, automated, and connected, plenty of opportunities exist to take your first or next step toward improving pricing accuracy and achieving a four-way contract match. I encourage you to visit www.StreamliningHealthcare.org/Improving-Pricing-Accuracy, where you can download the free Recommended Solutions resource and other tools to help make the supply chain leaner and less costly.