Want to improve your contract management performance?

Four contracting experts share tips on how to reap recognizable C-suite, clinical, financial and operational rewards through effective and efficient contract management.

Chris Gormley, CEO, Medpricer:

• Acquire data visibility. It is hard to know what to contract when you don’t know what you are buying. Data visibility is most pronounced with Purchased Services where contracts and buying history is typically not centralized. For example, a hospital could be contracting with several service providers for the same service without knowing it. Implementing an analytics tool will help provide the data about what you are buying, at what volumes and with what suppliers which sets the stage for more effective contract management planning.
• Gain executive support. Establish an organization commitment to make sure that the supply chain group and the stakeholders are all on the same page and working together. Support from executive management is important for strategic alignment and if you have an environment that supports this collaboration it creates high-level buy-in from the stakeholders and helps to facilitate project acceptance. Without this, Supply Chain’s goal of optimizing for organizational cost savings could fall to local fiefdoms and preferences.
• Develop an expert skill set. Beef up contracting expertise in your sourcing department to more efficiently enable the contracting process. One approach is to develop someone in your department to become your RFP contracting expert. They become the “go-to” subject matter expert to answer any questions and guide others about the RFP process and techniques. By being an authority in this area, they can help provide insights into the contracting approaches that will add the most value to the organization.
• Go beyond your GPO. Healthcare organizations should consider all available options for outsourcing. Since most contracts are national, healthcare organizations have come to rely on GPOs for the best pricing because they have good coverage. However, there may be times when they can get better savings than their GPO by self-contracting where they can save 3 percent right off the bat by not having to pay the GPO. Or there may be areas where the GPO may not have the experience needed to generate the best savings such as in Purchased Services. Because Purchased Services are regional or local in nature, the GPO may not have existing relationships to cover these categories and other organizations may be better suited to provide better services in this area. Industry benchmarks are useful in determining if a hospital is getting the best prices and can be used to evaluate alternatives.
• Track performance. It is important to be able to trace how suppliers performed over time. Supplier performance data can be used to measure cost and savings [key performance indicators], determine if a supplier has met organizational expectations and provide financial incentives and bonuses. In addition this information can be used to establish a more mutually beneficial supplier relationship. Having fact-based conversations with suppliers helps them to better understand what is important to the organization to enable them to create better contract pricing and terms. This is again most pronounced with Purchased Services that are typically based on less objective standards than goods.
• Maintain upfront stakeholder communications. It is important to lay out clear decision-making steps and processes for post award activity so when a change is necessary it isn’t a surprise. Having open, fact-based discussions upfront with the stakeholders and setting criteria about the price and conditions where it makes sense to move business from one supplier to another will increase the confidence and trust of the stakeholders when moving forward even if you stay you’re your incumbent. You also have to be aware of and communicate the implication of potential supplier transitions and change outs associated with the implementation.

Stephany Lapierre, Founder and CEO, tealbook:

• Make the contract match the relationship. If you profess to be putting a collaborative relationship in place, that should be evident by reading the contract itself. Minute metrics and performance expectations will drive a transactional focus in the supplier, rather than a strategic or innovative one.
• Craft contracts for good times as well as bad. Contracts have a bad reputation for being “prenuptial agreements,” of little value until the relationship — inevitably — goes awry. Yes, contracts should make service levels and performance expectations enforceable, but they should also contain information on what happens if the supplier outperforms expectations. Simply being willing to consider this possibility at the outset of a contract indicates a positive mindset open to additional value creation.
• Write the contract to flex with changes. For as much work as is required to put contracts in place, changes or amendments often require so much additional effort that the time and cost is overwhelming. Business is not static, and while not all possibilities can be foreseen, those that are expected should be incorporated into the contract so that not all changes require amendments for the document to stay enforceable.
• Document outcomes, not methods. The whole reason for working with a supplier is that they can deliver a product/service better, quicker, or more cost effectively than you can without them. As a result, companies should be careful not to negate supplier expertise by trying to dictate how they should conduct business. Metrics should focus on what the company expects from the supplier and then leave it to them to decide the best way to arrive at that point.
• Ensure Fair Balance. A contract should create a foundation for a mutually beneficial partnership. As a result, risk should be distributed evenly, based on each party’s ability to control or affect it. A contract that assigns all of the risk, and therefore the majority of the benefit, to one party or the other is unlikely to generate fruitful or sustainable results.

Bradford Jones, Director, Sales & Marketing, CobbleStone Systems:

• Implement contract lifecycle management software. Contract lifecycle management software allows organizations to automate and streamline the contract lifecycle with email alerts, central repository searching, workflow, reporting, milestones, obligation management, vendor performance scoring, online negotiation, electronic signature, compliance monitoring, contract closeout, document retention rules and more.
• Automate contract authoring for basic contracts. Leading contract management software offers rules-based self-serve contract creation. Contract request wizards guide users to the correct contract type with dynamic clauses based on the user responses. Self-serve access for common contract types allows the legal and procurement teams to focus their efforts on more complex deals.
• Define approval processes. Contract management software allows organizations to define their business processes based on contract type, department, spend amount, GL code and more criteria with email alerts, calendar notifications, escalations and more to ensure the correct resources are taking action on the contract during the review process.
• Implement electronic signatures. Get deals done quicker. Electronic signatures have been estimated to expedite the contract management process by up to 700 percent.

Tom Wessling, Vice President, Contracting Operations, Intalere:

• Look at total cost of ownership and quality versus unit cost of an item. An item does not provide a savings if you have to use two of them or it has a negative impact on patient outcomes.
• Develop strong supplier management programs. Use your suppliers for industry trends and solutions. Suppliers are a wealth of knowledge, use them.
• Develop strong working relationships with department heads. These are the true decision makers in the facility. They can make or break supply chain if forgotten.
• Network with your peers. Learn for each other.

Stephanie Haywood, Senior Director, Group Account Management, MediTract:

• Use of a contract management system that supports enterprise contract lifecycle management across all areas of the organization can lead to rewards. The solution should aid in creating efficiencies through automation and standardization, improving processes which, in turn, yield return on investment in both soft- and hard-dollar savings.
• Automated solutions should support both regulatory and organizational compliance, provide transparency and oversight of contractual arrangements throughout the contract lifecycle process. This includes ongoing monitoring of current agreements from not only a financial aspect but also a focus on regulatory compliance and mitigation of risk.
• Development of contracting processes, policies and procedures and communication throughout the organization can also lead to rewards. Inclusion of key stakeholders and adherence to policies is imperative to gain buy-in. Acceptance and willingness to adhere to processes and policies create operational efficiencies throughout the organization and create an environment in which stakeholders evaluate existing processes to determine where there are gaps and additional opportunities to refine and streamline contracting procedures.

Lauren Dominik, Senior Strategic Account Executive, MediTract:

• Implementation of a streamlined, concise contracting process will result in better overall spend tracking and reduction in possible occurrences in Stark Law and anti-kickback statute penalties. An automated contract lifecycle management system also will assist with monitoring and auditing to detect potential risk areas while creating a comprehensive platform of data for additional oversight of agreements. Having all agreements in one centralized location rather than in multiple systems throughout the organization will create transparency and accountability.
• A definitive audit trail, as well as documentation demonstrating diligence to adhere to regulations, will assist with mitigation during audits by surveyors. The demonstration of diligence drastically reduces many fines and penalties.