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Thursday, October 04, 2018

Contract Price Alignment and Reducing Exceptions: How are you solving for contract alignment and price exceptions in the topsy-turvy world of healthcare M&A?

posted by: Rammi Gill, Executive Director, Product Management, GHX

With the healthcare industry experiencing such a large volume of mergers and acquisitions, many hospitals and health systems are dealing with disparate technologies and its impact on efficiency, data management and cost containment. These obstacles can create an even greater burden on supply chain with misaligned contract pricing and increased supply chain exceptions.  

Healthcare contracting is already a highly complex process. With varied stakeholders and continual price changes, it is unlike any other industry. Disparate technology and data synchronization challenges are well known, but it remains critical to monitor spend and drive compliance. GHX estimates that provider organizations can save one to two percent of spend by ensuring compliance to existing contracts. However, the combined result from the current M&A trend is working against progress in a number of ways — lack of standardization in data and methodology, lack of dedicated resources and a lack of systems to support alignment across the diverse contracting lifecycle.

There is no magic wand but there are specific actions that will help.

  1. Begin with a holistic approach to address where the problem originates and minimize downstream rework
  2. Develop a source of truth for contract price and item attributes
  3. Ensure systems and processes are in place that provide the right level of integration and coordination
  4. Identify and address inaccurate data on the back end of procure-to-pay processes
  5. Develop supply chain dashboards that continuously measure status and progress
  6. Drive standardization in data and processes
  7. Establish consistent communication with trading partners

Often, the primary culprit is just finding time and resources for a dedicated focus when it comes to seeing and maintaining results. Organizational priorities shift during a merger or acquisition and resources may be slim or even eliminated. However, where contracting price alignment and exception reduction is concerned, taking your eyes off of the day-to-day process results in a lost opportunity for savings. With the right strategy and supporting systems, GHX has seen significant improvement in contract compliance, downstream efficiency and even improved internal relationships. You can learn more from this case study.

Managing your contracting process is foundational to a sound financial strategy. Learn more about GHX contracting and requisitioning solutions.

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