PRIME DISTRIBUTOR
Pricing Accuracy Starts with Smarter Contracts I recently returned from HIDA’s 7th annual Contract Administration Conference,
ʯ Organizations should build
which focused on improving pricing accuracy and reducing mistakes and rework. This
stakeholder consensus
year, one of the big takeaways was that many contracting problems could be resolved if
surrounding exceptions. Sales
we worked to build more supportable contracts from the outset.
teams must communicate with their internal contracting teams from the beginning of the contracts
In their attempts to remain competitive, salespeople often agree to
process in order to determine when
contract terms that their operations team cannot automate or mea-
exceptions can be made and how
sure. They make exceptions, customizations, and accommodations
they will be approved. If every
for specific provider requests without consideration for how the
exception is considered unique and
contract administration team will interpret these complex, some-
essential to the contract, then they
times conflicting agreements. Although such flexibility is often seen as a sign of dedication to patient care, it can have unintended consequences. Speakers and participants at the conference noted that:
ʯ When customers start layering multiple local and national agreements with different terms, they exponentially increase the likelihood that those terms will not be supportable by
won’t be able to arrive at standard By Manpreet Kaur Sandhu, Program Manager: Supply Chain Collaborative, Health Industry Distributors Association (HIDA)
the supplier.
contracts and pricing.
ʯ Often customers will sign multiple competing contracts that impact their pricing for a single product. This leads to contracts being re-written and re-worked. In order for our industry to reduce the rework we are conducting across the supply chain, we must improve our contract creation processes. Among the best practices we should keep in mind:
ʯ Key terms and requirements should be clearly defined, so that anyone reading the contract will understand what’s expected. Focus on terms that matter the most for our contracts and consider what data is needed for compliance/reporting.
ʯ Companies should internally standardize their contracting language and processes, to reduce the misunderstandings and rework that come from vague terms and unique contract provisions.
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across partnerships. Developing clear and consistent language in contracts helps all partners to have a simpler understanding of
ʯ Lack of clear language and consistent practices results in a great deal of customer confusion around their own
templates that can be replicated
contract terms, and this transparency
In order for our industry to reduce the rework we are conducting across the supply chain, we must find ways to standardize our contract creation processes.
can help build trust between partner organizations. This standardization also helps the operations team transform the contract terms into data points that can be understood at aggregate levels and support future automation of contract administration work. In today’s era of labor shortages, simplifying contracting processes is essential to remain competitive. HIDA is launching a new workgroup dedicated to the Contract Creation process. We hope to help the industry develop some of the best practices and standard templates that will enhance pricing accuracy and allow customers to focus on patient care.
April 2022 | The Journal of Healthcare Contracting
