Get key definitions for contract administration professionals who work with healthcare distributors, manufacturers and GPOs.
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What Is Pricing Accuracy?
Pricing accuracy means that all trading partners’ systems agree on the price that a particular customer should receive for a specific product. To achieve pricing accuracy, the GPO’s, the manufacturer’s, the provider’s, and the distributor’s data must align. This ensures that the customer receives the price they are expecting, without manual intervention or rework. Check out all of HIDA’s pricing accuracy resources at hida.org/pricing-accuracy.
What Is A Chargeback?
A chargeback (or rebate) is a mechanism used by manufacturers to compensate distributors for the difference in pricing when products are sold at a price negotiated by the manufacturer which is lower than the wholesale price to the distributor. When a distributor sells a product to a customer at this specially negotiated price, they are selling at a loss. To rectify this, the distributor sends a report to the manufacturer to receive the chargeback. This chargeback process ensures that the benefits of the special pricing negotiated by group purchasing organizations (GPOs) are passed on to providers while still maintaining the financial viability of the distributor.
What Is A GPO?
A GPO, or group purchasing organization, is an entity that providers join to handle the complex task of negotiating pricing with thousands of different manufacturers on their behalf. By leveraging the collective buying power of hundreds or thousands of providers, a GPO can secure favorable pricing deals for its member providers. The agreements made by the GPOs with manufacturers to determine these special prices are often referred to as GPO contracts.
What Are Tiers?
Contracts negotiated by group purchasing organizations (GPOs) with manufacturers often include multiple pricing tiers. These tiers offer different, often more attractive, pricing to individual healthcare providers based on certain criteria. These criteria can include the purchasing volume of the provider, their "class of trade," or other factors.
What Is Tier Eligibility?
Eligibility is the process of determining that a specific provider qualifies for a particular pricing tier based on the criteria set out in the contract.
What Does Class Of Trade Mean?
“Class of trade” refers to the categorization of businesses based on attributes like their operations or the type of customers they serve. In healthcare, it's used to classify entities such as hospitals, nursing homes, surgery centers, or clinics. Manufacturers sometimes provide pricing concessions to groups of providers based on their class of trade.
How Does Price Activation Work?
Price activation refers to the process by which agreed-upon contract prices for products or services become effective and are implemented within a company's system. In the context of the healthcare industry or other industries with complex pricing structures, the process generally involves:
- Contract Agreement: Parties, such as manufacturers and distributors or providers, negotiate and agree on the pricing of products or services.
- Notification: Once agreed, the party responsible (often the manufacturer or service provider) communicates the pricing details to relevant stakeholders, such as distributors or retailers. This can be done through standardized formats like EDI (Electronic Data Interchange) or other electronic methods.
- Validation: Before activation, the new prices are often validated to ensure accuracy and that they align with the terms of the contract.
- Implementation: The new prices are entered or updated in the relevant systems, such as ERP (Enterprise Resource Planning) or billing systems.
- Activation: On the agreed-upon effective date, the new prices become active and are used for invoicing, billing, or other transactional processes.
- Monitoring: It's crucial to monitor the system after activation to ensure the correct prices are being applied consistently and to address any discrepancies.
In essence, price activation ensures that the right prices are charged to customers based on contractual agreements and that internal systems reflect these changes accurately.
Abbreviations And Acronyms
- ACH: Automated Clearing House
- AM: Asset Management
- ASC: Ambulatory Surgery Center
- ASL: Approved Supplier List
- ASP: Average Sales Price
- BPA: Blanket Purchase Agreement
- CA: Credit Analyst
- CAPA: Corrective And Preventive Action
- CER: Capital Expenditure Request
- CRM: Customer Resource Management
- CY: Calendar Year
- DII: Days In Inventory
(the average length of time items are in inventory)
- DS: Documentation Specialist
- DSO: Days Sales Outstanding
- DW: Data Warehouse
- EFT: Electronic Funds Transfer
- eLOC: Electronic Letter of Commitment
- EOT: End of Term
- EPS: Earnings Per Share
- EVP: Employment Value Proposition
- FCP: Federal Ceiling Price
- FDA: Food and Drug Administration
- FMV: Fair Market Value
- FPC: Fee Per Case
- FPD: Fee Per Disposable
- FPI: Fee Per Implant
- FPP: Fee Per Procedure
- FR: Finance Representative
- FSO: Field Sales Organization
- FTE: Full Time Equivalents
(a 1.0 FTE is a full-time employee)
- GCP: Good Clinical Practices
- GIM: Global Item Master
- GLP: Good Laboratory Practices
- GPO: Group Purchasing Organization
- HCP: Healthcare Professional
- IDN: Integrated Delivery Network
- IDP: Individual Development Plan
- ILT: IT Leadership Team
- IMT: International Marketing Team
- KMA: Key Management Accounts
- LOC: Letter of Commitment
- LOD: Letter of Designation
- LOP: Letter of Participation
- LPO: Lease Purchase Order
- LRC: Local Rep Contract
- M&A: Mergers and Acquisitions
- MDR: Medical Device Reports
- MedSurg: Medical Surgical
- MTD: Month to Date
- NAM: National Account Manager
- NASP: National Average Sales Price
- OE: Order Entry
- QTD: Quarter to Date
- PA: Portfolio Administrator
- PCP: Primary Care Physician
- PER: Product Experience Report
- PIN: Personal Identification Number
- PO: Purchase Order
- POC: Point of Contact
- POG: Price Optimization Guide
- PPA: Product Placement Agreement
- PYTD: Prior Year to Date
- R&D: Research and Development
- Rev Rec: Revenue Recognition
- RFI: Request for Information
- RFM: Regional Finance Manager
- RFP: Request for Proposal
- ROI: Return on Investment
- SAM: Strategic Account Manager
- VPA: Vendor Program Agreement
- WIP: Work In Progress