A little over four years ago, my organization, the Health Industry
Distributors Association, launched an initiative to streamline
healthcare contracting communications. This was a top-priority issue for
our distributor members who sit in the middle of the process, between
the manufacturers and GPOs who negotiate the prices and the end
customers who just want to get the right price on their invoice.
Our ultimate goal is to ensure everyone has the right price, one that
matches their trading partner’s price. But we also wanted to improve
business processes for all trading partners –GPOs, distributors,
manufacturers and providers – along the way.
After years of work, we haven’t yet “fixed” the healthcare contracting process, but we have made progress.
We’ve learned that inefficient contract management practices create
cost and rework not only for our distributor members, but also for
manufacturers, providers, and GPOs. Everyone is spending too
much time trying to resolve pricing mismatches and errors. We heard this
from six GPO executives who spoke at a recent HIDA Contract
Administration Workgroup meeting, and we’ve heard it from providers at
conferences like AHRMM.
We’ve elevated the discussion, by bringing together suppliers,
providers, and GPOs to share their pain points and discuss solutions.
Our second-annual Contract Administration Conference will take place
April 19-20, providing a forum for trading partners to collaborate on
And we’ve determined that the guiding principles with which we
started are still the most important keys to improving contract
- Automated, electronic processes
- Industry standards
- Timely communications
|HIDA’s principles for improved contract administration processes
- Automation: 100 percent of communications and
transactions should be electronic. Any process that cannot be automated
should be redesigned.
- Standards: For transactions, EDI
(electronic data interchange) formats are the gold standard for
communicating information; CSV files matched to EDI formats are
acceptable alternatives.For product and location identification,
GS1 standards (GTIN/GLN) are strongly encouraged, followed by alternate
third-party standard identifiers as acceptable cross-reference data
- Timeliness: Trading partners must embrace contract
negotiation deadlines that allow timely notice of contract changes.
Distributors must have 45 days’ notice prior to a contract’s effective
date to load pricing, communicate to providers, and allow providers the
opportunity to review and load pricing.
There’s a lot more to it, but clearly we still need to embrace these
basic principles. Instances of providers and suppliers using email, fax,
or even handwritten orders still occur in healthcare and lead to costly
errors or rework. Even if materials managers can’t justify the cost of
investing in EDI systems, adopting standardized formats for
communicating contract changes can greatly improve end-to-end automation
We recognize that some of these principles are harder to adopt than
others for certain constituents. Some require changes to information
systems, business processes, or even company culture. But the hardest
truth is that the costs of not embracing and adopting these
three pillars, or demanding them from your trading partners, will only
multiply for organizations operating beyond the scope of what are
quickly becoming accepted as the industry standard.
Healthcare as a whole continues to experience unprecedented change,
and will only become more sophisticated as customers demand more than
the status quo. HIDA will soon release updated contract communication
standards resources for manufacturers, distributors, providers, and
GPOs. Visit www.StreamliningHealthcare.org/Improving-Pricing-Accuracy for more information and to start taking action.