Friday, March 22, 2019
Pricing Alignment in Healthcare: Why 2019 is the Year for Action
posted by: Susan LaFountain, Product Contract Data Manager, GHX
In my previous blog post, I described how the healthcare industry has yet to tackle standardization and automation of so-called “advanced” supply chain transaction sets. These are processes around pricing alignment and reconciliation that go beyond the basics of placing an order, delivering the products and billing for those products. The manual management of price changes in healthcare is complex, challenging and costly, placing a significant burden on all parties to a contract (e.g. manufacturer, distributor, provider, GPO).
But based on a number of factors converging in healthcare, I believe 2019 will be the year that supply chain partners tackle this industry-wide challenge with an industry-wide solution. We have successfully standardized and automated purchase orders (850), purchase order acknowledgments (855), advance ship notices (856) and invoices (810), which has saved our industry billions of dollars in time, labor and downstream errors. It’s now time to take that recipe and apply it to all of our advanced processes (see my previous blog post for a list of these transactions with definitions).
Here are the top 5 drivers to price alignment transformation in 2019:
- We have the standards: The Health Industry Distributors Association (HIDA), which recently merged with the Healthcare Industry Supply Chain Institute (HISCI), has already done all of the legwork to establish pricing alignment standards in healthcare. The organization collaborated with over 120 organizations throughout the healthcare supply chain to publish a set of industry recommendations and best practices that we are all encouraged to follow, with a key focus on automation, standards and timeliness of contract change notifications. The roadmap is there – we just have to use it.
- We have the technology: Collaborative third party service and software companies recognize the need for healthcare to use HIDA standards and have worked to create outputs and inputs for the business processes related to pricing alignment and reconciliation. For example, Model N is a collaborative partner with GHX that has worked to adopt the HIDA standards for the sake of helping our mutual customers. Model N has customized its outputs and inputs for advanced transaction sets to work with GHX-specific mapped advanced business processes. This makes it easier for Model N’s customers to connect via GHX and add additional trading partners.
- Regulatory pressures are building: Regulatory requirements or government mandates continue to shape our industry, and they show no signs of stopping. On the electronic data interchange (EDI) front, Canada is leading the way toward automation of advanced transaction sets in healthcare. The Quebec Ministry of Health and Social Services (MSSS) is mandating EDI automation for suppliers doing business in the province. By January 2020, suppliers will be required to send sales tracings (867) and price catalog (832) files via EDI. At the same time, groups in the U.S. are exploring the use of EDI sales tracings for group purchasing organization (GPO) admin fee reporting in the states.
- Industry pressures are growing: Some suppliers, distributors and self-distributing integrated delivery networks (IDN) are writing automation requirements into their business partner agreements, with some partners imposing penalties for non-compliance.
- Stay ahead or be left behind: In today’s healthcare environment, supply chain partners are looking beyond product price and examining the overall cost of doing business with one another. Standardization and automation have become factors in trading partner choice. Those organizations with streamlined and efficient processes have a competitive edge over those stuck in the historic mode of doing business. In fact, a company recently told me they were working on automating standards in their advanced business processes to gain back credibility with their partners and be seen as “easy to do business with.”
Are you ready?
Even if your organization or some of your partners are not yet EDI capable, there are still many ways you can standardize and automate most or all of your advanced transactions for pricing alignment and reconciliation.
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