Prime Vendor: Getting the Most from Your Most Important Supplier

By Jeff Girardi, HIDA

Are You Ready To Take Control Of Your Pricing?

In late April, I was encouraged to see more than 140 contracting and chargebacks professionals gather at HIDA’s 2017 Contract Administration Conference to hear case studies and discuss best practices for improving pricing accuracy across the healthcare supply chain. The meeting provided great ideas to help trading partners improve contract communications. But what really stood out to me was the growing evidence that those who are taking steps to own various components of their contracts and chargebacks processes are already starting to reap the benefits.

David Forbes of Mercy Health Services (Baltimore, MD) explained how he helped align Mercy’s contracting program and corporate strategy by defining, and subsequently standardizing, its contract process. It was a difficult task, requiring stakeholder buy-in from both within and outside the IDN. As a result of these efforts, Forbes now has surveillance and control over Mercy’s contracts and can prevent supply pricing discrepancies before they occur.

Forbes emphasized his process is designed specific to Mercy’s needs while also sharing an insight he’s gathered from his mission to own his pricing. Often, our industry asks, “Who is the source of truth?” when trying to determine the cause or prevention of pricing errors. According to Forbes, the contract and/or agreed upon GPO price tier in place between the provider and supplier is the only source of truth, and each industry stakeholder connected to that contract is responsible for ensuring its compliance. However, a breakdown in process – often caused by the provider’s lack of ownership – results in pricing discrepancies between providers, distributors, and manufacturers. Others added that manufacturer-distributor differences of opinion or interpretation of contract terms also cause errors.

Brian Zuck from Essentia Health (Duluth, MN) highlighted a different aspect of pricing accuracy in which providers can take ownership: location identification. Zuck’s colleague at Essentia, Allen Klingsporn, manages their Global Location Number (GLN) data, which is approaching nearly 125 identifiers across its various locations. The health system took ownership of enumerating its locations and currently transacts with 44 vendors using GLNs for purchase orders. Overall, it’s been a positive endeavor for Essentia since the system was able to clean up its location data and get its GLNs to the point where Zuck and Klingsporn would like to explore future projects to incorporate GLN use.

This message was particularly appropriate for the conference audience since Beth Gibson, GS1 US, presented the day prior to Zuck on a Proof of Concept exercise conducted between manufacturers, distributors, and a GPO to determine the validity of using a standard identifier to synchronize contract communications. “By incorporating the GLN as an attribute in distributor and manufacturer chargeback claims processes,” Gibson said “trading partners can improve line matches by up to 66%.”

Typically, these meetings focus on the areas where distributors, manufacturers, and GPOs can make improvements to simplify medical product transactions and their associated pricing complexities. As a provider, there are still a number of questions you can ask internally to determine your organization’s level of commitment toward improving your pricing accuracy:

  • Are we managing our GLNs? How are you ensuring your location data provided to and used by trading partners is accurate and up-to-date?
  • Do we follow any contract timing standards? Does your organization sign up for GPO price tiers on a timely basis? Do you request to load better prices sooner than approved or delay higher price changes until the last minute?
  • Are we proactively working with trading partners to get ahead of price changes? Are you in regular communication with your distributor, manufacturer, and GPO partners on new or expiring contracts?

I encourage you to visit www.HIDA.org/ContractAdmin to access our updated Improving Pricing Accuracy white paper, which offers best-practice recommendations around three major categories: automation, standards, and timeliness. While the publication primarily focuses on ways distributors, manufacturers, and GPOs can enhance contract performance and streamline overall stakeholder communications, you can benefit from learning more about what our industry is doing to solve this challenging problem.

There are multiple paths to achieving pricing accuracy, and each are becoming clearer for individual stakeholders. With a higher level of engagement from providers and GPO partners, you can help ensure our industry’s keys to success get put into action and bring real progress to this initiative.