Pricing problems are a costly hassle for both providers and suppliers. When the price in the provider's system doesn't match the invoice price, automated processes grind to a halt while people take time to research the right price and do the necessary rework.
Why are these problems so common? Timing is a major factor — providers, group purchasing organizations and suppliers sometimes let their negotiations run late in hopes of a better deal. In fact, roughly 15 percent of price changes are finalized after the previous contract has expired, leaving partners to implement cumbersome retroactive changes or allow prices to revert to list.
Distribution and manufacturing professionals met at the Health Industry Distributors Association's Streamlining Healthcare Conference to discuss ways to make contracting processes more consistent and more efficient. Here are some of their recommendations:
1. Begin contract negotiations early. Contract negotiations should begin at least two months before the expiration of current contracts. This keeps providers and suppliers from running into "overtime," where old contracts expire before new ones are final, leading to confusion and rework.
2. Ensure timely price change communications. Distributors usually must notify providers of pricing changes 30 days in advance. To do so, they need to receive contract changes at least 45 days in advance of the contract's effective date. This gives all parties time to load the new pricing, ensuring that all prices match and invoices flow smoothly through the system without manual intervention.
3. Include the freight. Have you ever bought something online at one price, only to see a much higher price on the invoice? Often it's because you weren't aware of add-on fees. This issue occurs in the healthcare supply chain as well, and it often leads to wasted staff time figuring out why prices don't match. One easy solution is to include costs like freight into the negotiated price.
4. Keep it simple. Contract complexity makes it difficult to accurately automate contract administration processes — and anything that can't be automated increases total supply chain costs. Supply chain partners who keep terms and tiers manageable and clear reduce costs across the board.
Overall, business partners can save each other time and money by implementing uniform processes across the industry, ultimately improving pricing accuracy.
Elizabeth Hilla is executive director of the HIDA Educational Foundation, an affiliate of the Health Industry Distributors Association. The Foundation is devoted to education and research that increases efficiency and effectiveness within the healthcare supply channel. She also serves as a senior vice president at HIDA.
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