73% of hospital leaders want to enter value-based contracts with suppliers

Seventy-three percent of hospital leaders consider value-based contracting with suppliers a priority for improving return on investment, but opportunities for these types of contracts lag, according to a recent Premier survey.

For its survey, the healthcare improvement company fielded responses from 203 C-suite and materials management personnel to find insights into value-based contracting trends.

Premier defined value-based contracts as agreements that have terms and conditions holding suppliers accountable for costs and quality of services and products.

Here are five insights form the survey:

1. About 38 percent of respondents currently participate in value-added contracts with suppliers, which require companies to meet or exceed pricing targets. Only 16 percent of those respondents participate in two-sided risk contracts, where the vendor agrees to offer a money-back guarantee if it fails to meet promised outcomes.

2. Eighty-one percent of hospital leaders want to extend the option to enter into value-based contracts with suppliers.

3. The biggest reason hospitals said they were unable to secure more value-based contracts was due to a lack of supplier engagement, cited by 67 percent of respondents.

4. Most providers (55 percent) said they didn't understand enough about shared-risk contracts to implement them.

5. "In an environment where value is the new economy and measures are its currency, we are seeing an uptick in the number of providers interested in securing outcome guarantees from their business partners," said Myla Maloney, vice president of strategic accounts for Premier. "The challenge is that value-based contracts between providers and suppliers are a relatively new phenomenon, and there are few best practice examples for how they should be structured."

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