Pricing Accuracy

Published on July 7, 2017

There’s always room for improvement

 

The average hospital has more than 1,200 GPO and local contracts in its portfolio, and activates contract pricing for more than 40,000 new line items every six months. When you look at those numbers, you think everyone involved in the supply chain—providers, suppliers, distributors, and GPOs—must have procedures and techniques in place to improve pricing accuracy and avoid discrepancies. After all, when any one of those involved parties has inconsistent or inaccurate contract pricing in their systems, frequently all parties must work to identify and resolve the discrepancies. The truth is, however, that while pricing accuracy can positively, or negatively, affect a provider’s bottom line and the care it provides, it remains a complex issue that may keep many an executive awake at night!

 

Many issues at play

You may ask, what makes it so complicated? If I sign an agreement for Ethicon Suture with my GPO, and we agree on a price, that’s the price, right? There are many issues at play here, but challenges include:

• A large volume of contracts across many product categories (suture, endo, mesh)
• The frequency of pricing updates and changes
• The addition of new products
• Disparate IT systems that do not share information
• Lack of widespread adoption of industry data standards

It’s also important to remember that GPOs negotiate multiple pricing tiers to allow manufacturers to provide more attractive pricing to individual facilities based on their purchasing volume, “class of trade,” or other factors. Then, manufacturers may unintentionally hinder the process even more by creating tier structures that can be difficult to interpret and support. With all this in mind, what happens when that agreed upon price for Ethicon Suture isn’t the invoiced amount? More importantly, what can providers, manufacturers, GPOs, and distributors do to improve pricing accuracy in order to avoid problems altogether?

 

A proactive approach is best

While there are many steps and goals to consider, industry insiders agree that improving contract communications should be a top issue, especially distributors who sit in the middle of the process. For pinpoint accuracy, 100% of communications and transactions should be electronic, avoiding a messy paperwork trail that more easily results in errors. Providers and those organizations with whom they work also concur that a proactive approach to pricing changes is best. Notifying customers well in advance to contract pricing expiration and changes means fewer surprises down the road.

 

 

Suture Express seeks contract precision

Here at Suture Express, our quest for continuous process improvement toward contract/pricing accuracy means a focus on four fundamental core functions:

• Data Integrity: Collaborating with manufacturer partners led to the alignment of the interpretation and validation of data that is transmitted daily. This has allowed our team to build our systems and processes to accurately interpret, validate, and load the vast amount of records provided. Ensuring data integrity on the front end of the process also allows us to provide accurate sales tracing and rebate requests back to the manufacturer.
• Price/Change Notifications: Timely notifications initiated from the manufacturer allows the distributor to update contracting systems and deliver timely electronic price change notifications (PCNs) or EDI 832 Price/Sales Catalogs to our customers so they can update their pricing/contracting systems prior to the price changes taking effect. Collaborating with our customers regarding the data content has allowed us to develop and provide more effective and manageable data for our customers to interpret.
• Order Acknowledgements: Customer Purchase Order Acknowledgements or EDI 855 delivered to our customers directly after processing each purchase order allows our customers the ability to review pricing and communicate with us for any exception prior to creating invoice discrepancies that result in time-consuming additional invoice activity to correct pricing exceptions.
• Chargeback/Reconciliation Process: It is very important to establish this process with the manufacturer once the EDI 867 Product Transfer or Resale report is transmitted on a timely and routine basis, with the primary objective to correct identified pricing exceptions immediately to avoid the potential for additional price exceptions to the customer.

We’ve developed these process improvements by collaborating with manufacturers and our customers. Even if your pricing accuracy stands at 95%, there’s always room for improvement. To learn how Suture Express may be able to help, go to sutureexpress.com or call 877-790-1873.

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