Solutions for Healthcare Contract Management with VIE
At VIE, we recognize the need to go beyond a “set it and forget” automated Healthcare Contract Management software solution.
That’s why hospitals rely on our expertise to help with:
- Measuring the performance of your agreements through data analytics
- Supporting quarterly business reviews with key vendors and suppliers
- Guiding your team through an effective agreement renewal process
Get started with our Healthcare Contract experts today. Call VIE at 1-888-484-3332.
What Is ‘’Healthcare Contract Management?’’
Definition: Healthcare contract management is the execution and monitoring of a contract for the purpose of maximizing financial and operational performance and minimizing risks.
Purpose: The contract is foundational to the relationship that hospitals and health systems have with their vendors and should inform every decision made regarding services provided.
Your hospital must coordinate and manage its contracts, with a detailed contract in place with each vendor for areas including purchased services spend.
- Sets out the terms of the agreement between you
- Details the expectations within that partnership.
These contracts form the basis for your health system’s relationship with each vendor. As your organization expands, these become more difficult to manage, often because of the sheer volume and complexity of the terms and conditions.
Goal: The goal of an effectively managed contract is to ensure pricing is honored, terms and conditions are adhered to, and discounts and rebates are received in a timely way to optimize cost savings.
Going Beyond Automating Healthcare Contract Management
Why Your Hospital Needs A Contract Management System
Vendor agreements contain defined terms covering areas including renewals and changes to pricing. Contractual notification dates can range from thirty days prior to a renewal period to twelve months. Missing these key milestones can mean being subject to auto-renewal. Do not allow your contracts to auto-renew. More on this below.
Without a healthcare contract management system in place, these key dates are difficult, if not impossible, to manage.
One of the common errors a health system makes is to neglect its need to regularly examine its relationship with each of its vendors. Your leadership team must prioritize the need to review all contracts with third parties.
That’s where VIE Healthcare® can help. Potential cost savings in healthcare contract management are identified through our contract review, or contract compliance audit.
As profit margins are often relatively thin within the healthcare industry, the right contract management system is a near-critical asset for healthcare organization growth.
VIE Will Perform a Contract Compliance Audit
Contracts are becoming more complex in their language and terms and conditions and must be tracked through their entire lifecycle. A digital system allows a more efficient search and review than a manual or paper system. Contract compliance audits or contract reviews ensure your vendors are meeting their contractual obligations, with timely performance and accurate pricing. They can result in significant cost savings for your health system.
At VIE Healthcare®, the most common objection we hear is: “Our hospital does not have the time or the resources to invest in a contract compliance audit.”
Hospitals are missing out on the hidden cost savings in their purchased services spend by overpaying for substandard services or by paying for services that are simply not being provided (on- or off-contract spend).
Your ability to renegotiate effectively may be severely limited if your organization is auditing a contract with missing pieces.
Healthcare Contract Review Best Practices
A successful contract review requires the right people involved in the process.
Your contract management team should be in regular communication with physicians, clinicians, and department heads to assist with the evaluation and negotiation process. End users who work directly with the vendor can evaluate whether or not they are meeting expectations.
The following steps offer best practices in healthcare contract management:
Step 1: Review the Detail
- Identify key dates in your contract. Some contracts renew automatically (often called “evergreen contracts”) while some have a predetermined completion date.
- What notice is required to terminate the contract?
- What is the initial term of the agreement?
- How are renewals handled, and what are the important contractual milestone dates?
- Does your contract contain credits or built-in costs?
- Were you charged the correct price for items/services throughout the length of the agreement?
- Were annual cost increases in line and were you notified of them in accordance with your written agreement?
- Establish whether there is price protection from year to year. Often vendors will begin a contract with competitive pricing, only to raise rates that are less competitive later in the contract.
- Examine the language and parameters within the contract to understand all commitments, incentives, and penalties, including penalties for early termination.
- Assess minimum purchase obligations and financial repercussions for failing to meet that minimum.
Step 2: Carry out a line item analysis of invoices
At VIE Healthcare®, we gather the line item details for 12-18 months of invoices to gain a historical perspective.
There is no other way to guarantee you are being billed correctly unless you compare the line item details of your invoices with the contract over an extended period of time.
This analysis gives you the insights and direction for better pricing and utilization improvements for overall cost optimization. If invoices are not compared with contracts, incorrect pricing can continue throughout the length of the contract and beyond.
Consistent billing does not necessarily ensure accurate billing. Pricing errors and off-contract prices are often identified.
Through this process, you will be able to determine on-contract versus off-contract pricing and validate any rebates or credits that may be due to your organization.
Step 3: Benchmark
Benchmarking helps to secure the best pricing for your hospital. Geographic location and scale will impact pricing, but variances exist even between comparable hospitals within the same city limits.
Step 4: Evaluate vendor performance
It takes resources, commitment, and in-depth analysis to uncover where or how your vendor is not fulfilling their obligations. Depending on the communication between the decision-makers and the frontline users at your hospital, this can potentially be a very time-consuming process.
Pricing provides a concrete way of gathering and comparing data, but payment is only half of the equation.
Consider a performance-based contract in which pricing is linked to key performance indicators (KPIs) that the vendor is responsible for delivering. This ensures that measurements take place and payment is based on a vendor’s performance. These expectations are built into the contract, creating what is also called a shared-risk or shared-benefit agreement.
Vendors undergo extensive negotiation training to maintain or increase their margins and minimize price reductions. Every hospital needs a well-defined negotiation strategy in place, with hospital support and alignment from physicians, executives, and department heads.
Step 5: Do not allow your contracts to auto-renew.
Set a limit of five years and ensure a focus on annual price increases. Most hospitals don’t realize contracts will auto-renew.
Vendors typically include CPI increases every year.
Auto-renewable contract lengths vary from month to month, a year, and sometimes up to the initial term of the agreement. For instance, it is not unusual for a bulk oxygen supply agreement to auto-renew for anywhere from five to seven years in length.
If your organization either misses its window to begin negotiations or fails to notify your vendor of non-renewal, you could be locked into a contractual period with no ability to alter price or terms.
Do not be afraid to negotiate in the middle of a contract. While certain contract terms and conditions may present a challenge, it is never too late to negotiate.
Create High Performing Healthcare Contracts
Effective healthcare contract management is challenging but offers an opportunity for cost optimization. To realize the most value, it is important to organize your contracts in one centralized location with a clear process in place for achieving cost savings.
An efficient healthcare contract management system alerts your hospital to auto-renewal dates or when you may need to exit a contract. This will allow your hospital to:
- Perform contract compliance audits in a timely manner.
- Monitor contract accuracy through monthly invoice to contract reconciliation.
- Measure quality and service, through feedback loops from your clinicians, front-line employees, and through data analytics.
Quarterly business reviews allow your hospital to conduct a detailed review of the last quarter’s performance and how the vendor can improve and innovate.
Analytics are delivered through utilization reviews and price benchmarking even during the term of the agreement. Quarterly data analytics updates help your hospital to see your contract is performing and compares to the marketplace.
If your utilization or market conditions have changed, your contract may need to be renegotiated to secure a substantial price reduction now, versus at the end of the agreement.
Many hospital leaders only review a contract with a particular vendor on agreement or when at the time of renewal.
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Erase Inaccuracies, Eliminate Non-Compliance & Save $$$ With Our Peerless Expertise
When we map out the contracts of healthcare organizations with a contract management system, we often identify missing amendments, auto-renewals, CPI increases. Their contract to spend is often 50 to 60%. Your organization needs to bring it as close to 100% as possible.
With VIE Healthcare you can.
As your trusted partner, VIE Healthcare provides proven hospital contract management solutions to identify cost saving opportunities, including:
- Management of all phases of contract creation
- Expert oversight of the hospital contract review process.
- Streamlining and improvement of contract approvals.
- Efficient execution of contract agreements.
- Lifecycle management of end-to-end contracts.
- Choice of a procurement-only approach or a holistic strategy.
- Customized solutions for each hospital.
- Providing clarity on complex contract language.
- Uncover contractual inconsistencies and errors to streamline operations.
Call VIE at 1-888-484-3332