Solving Pricing Alignment in Healthcare

Transcription

1 Educational Paper Solving Pricing Alignment in Healthcare From Difficulty Comes Opportunity February 2014

2 Administrative costs along healthcare supply chains make up roughly 30 to 40 percent of healthcare costs, compared with 3 to 6 percent in the grocery industry. The healthcare contracting process is one of the most complex pricing processes of any industry, with a myriad of challenges, including disparate information technology systems that don t share information or standards. GHX Collaboration Portal makes it easier for GPOs to quickly share accurate information related to tier pricing and commitments, customer eligibility and activation dates, providing a neutral platform through which all parties to a contract can be confident that a member s price activation is accurate. Solving Pricing Alignment in Healthcare From Difficulty Comes Opportunity Introduction Inconsistent, inaccurate pricing in the healthcare supply chain has resulted and continues to result in increased costs for providers, manufacturers and distributors. Administrative costs along healthcare supply chains make up roughly 30 to 40 percent of healthcare costs, compared with 3 to 6 percent in the grocery industry 1. Industry leaders have identified pricing alignment issues within and between companies as a top priority because bad pricing data undermines critical business objectives such as sales revenue, profits and customer satisfaction. This is not news. The healthcare industry has been plagued by pricing alignment issues for years. It has seen some forward momentum with exception management solutions that enable providers to compare pricing on a purchase order (PO) to the purchase order acknowledgement (POA) from manufacturers or distributors. These solutions help identify discrepancies proactively, but the number of errors is far too large to manage. Price discrepancies occur on between 5 and 30 percent of all line items on a daily basis, which means many pricing issues are left unresolved, only to occur week after week when additional POs are generated. Exception management solutions would be much more effective if fewer orders had pricing discrepancies. As an industry, healthcare is just not yet there. So, how can the entire industry get to the point at which pricing exceptions are truly exceptions that can be managed effectively? There is no quick, easy solution. To solve pricing alignment issues, we need to look at how every trading partner contributes to misalignment problems. Unlike other industries, healthcare involves numerous trading partners and products: there are hundreds of thousands of products in multiple units of measure purchased by hundreds of providers from hundreds of manufacturers and distributors on a daily basis. The volume of transactions flowing through the healthcare supply chain coupled with the volume of changes to product catalogs and price is huge. And often, when pricing updates are being applied to downstream trading partners systems, new pricing is being negotiated. The rate and volume of change is the core of the pricing alignment issue, but this is only one of the challenges. Healthcare trading partners have different capabilities, different systems, different definitions of customers and different internal contract management processes. They also cannot adopt new industry solutions at the same pace. 2

3 Albert Einstein once said that, In the middle of difficulty lies opportunity. And for the healthcare industry, solving or minimizing price alignment issues is a problem that presents great opportunity. GHX Pricing Alignment Solutions: The Vision With all of these challenges in mind, GHX is working on tools to drive down pricing exceptions. It is important to note that when GHX began defining how it would create an industry solution for pricing alignment, it realized that a one-size-fits-all approach wouldn t work. The GHX vision for improving pricing alignment includes a combination of simple, easy-to-implement solutions and more complex, fully integrated solutions that will evolve and improve over time. The goal is to drive down price exceptions in the industry through automation in a manner that enables continuous improvement and thereby, continuous and sustainable savings for all trading partners. The goal of GHX Pricing Alignment Solutions is to help: Establish consistent, standard data file formats for sharing pricing data across trading partners based on industry best practices Establish the information exchange infrastructure needed for manufacturers and GPOs to share pricing changes in a timely manner Proactively identify and resolve day-to-day pricing discrepancies Share account cross reference data across trading partners Develop longer-term interface solution options to push updated pricing into trading partners systems in a manner that supports internal contract change management approval processes Provide simple, affordable options to non-edi and non-ghx Exchange trading partners Solving pricing alignment issues across healthcare trading partners cannot be accomplished with a single solution: it requires a suite of solutions and capabilities. Following is an overview of the components that make up the full suite of GHX Price Alignment Solutions. GHX My Exchange Since 2005, trading partners participating in the GHX Exchange for electronic purchasing have had access to My Exchange, a web-based tool that provides access to order status and information on discrepancies. Buyers login to a home page where they can see the up-to-date status of their POs, as well as alerts on orders that require attention. They can go to a single place to find out which orders have discrepancies, rather than having to sift through all of their POs and gather information from multiple sources to determine if there are problems. When buyers are alerted to a discrepancy, they can also use My Exchange to quickly determine the type of problem and, in many cases, resolve the issue before it results in a time-consuming and costly invoice exception. The buyer version of My Exchange provides information on all of the POs processed, which can be sorted by single buyer or organization for that day, the previous day and the past seven days. Buyers can get additional detail on specific line items that have price or product data discrepancies, or that are on backorder. They can even get detailed information on POAs and advance ship notices provided by the supplier. To help resolve discrepancies, buyers have access to GHX Order Center and GHX CCXpert directly from the My Exchange home page. Order Center enables healthcare providers to synchronize their product data with information verified and maintained by suppliers, while CCXpert lets them see their current contracts and validate that accurate pricing is being used for contracted items. Buyers can also use CCXpert when ordering specialty items that might not be loaded in the hospital s item master to determine if they are including the correct price in the PO. Increased productivity resulting from improved contract visibility gives buyers more time to focus on strategic activities such as monitoring contract compliance, addressing critical clinical supply requests, and assisting in the selection of products that meet both clinical and financial objectives. Price discrepancies that lead to invoice exceptions can cause delayed payments. Because My Exchange enables discrepancies to be handled in a more proactive manner, accounts payable staff can process payments faster, which often reduces days sales outstanding (DSO) for suppliers. By reducing errors and addressing discrepancies earlier in the purchasing process, BJC HealthCare has shortened the time and effort it takes to pay suppliers. Another healthcare system using GHX says it has reduced invoice discrepancies by 50 percent by correcting errors between POs and POAs up front, while an additional integrated delivery hospital network has reduced the amount of time spent researching invoice discrepancies by 66 percent. 3

4 My Exchange solutions can help users identify mismatched prices at the time a PO is placed by a provider, but the large amount of errors means day-to-day management is still difficult. Other GHX solutions can help by reducing the number of orders with pricing discrepancies. GHX Collaboration Portal Several GPOs are leveraging GHX Collaboration Portal to support the letter of commitment (LOC) and pricing authorization process between manufacturers and providers. With this solution, GPO members can more quickly and reliably access contract savings and leverage four-way collaboration that aligns contract participants to help reduce errors, drive greater transparency and improve price accuracy. GHX measurements show that HealthTrust Purchasing Group (HPG) has reduced invoice exception rates by 50 percent since deploying Collaboration Portal during the first quarter of Collaboration Portal is the healthcare industry s only four-way collaborative platform, enabling parties to a contract to agree on key terms and conditions, quickly generate an electronic LOC (eloc), have the contract integrated with a distributor on the same day it is executed, and activate new pricing with providers and manufacturers in less than a week. Without the platform, it can take from 60 to 120 days to synchronize contract data. On the same day a LOC is authorized or a new contract is executed, a pre-notification 845 membership eligibility file, which includes manufacturer and GPO account numbers and GPO contract identification numbers, is sent from Collaboration Portal to authorized distributors. This reduces inaccurate POs, disputed invoices and chargeback discrepancies. For those distributors unable to process EDI, Collaboration Portal can output files in a CSV format rather than an EDI 845. The platform updates CCXpert daily with price activation changes and enables providers to generate an electronic contract (EDI 832) for automatic price updates into their MMIS. GHX Single Channel 845 The GHX Single Channel 845 solution helps manufacturers manage the process of sending contract price notifications to distributors. The EDI 845 includes a contract ID, manufacturer product codes, price, and start and end dates. Manufacturers can generate the EDI 845 with updated pricing in their preferred format (EDI, CSV, XML), and distributors can receive it in their preferred format (EDI, CSV, etc.). Price notification files are sent to GHX as a single channel EDI 845 for dissemination whenever the manufacturer changes the price or when there is a change in a provider s eligibility for that price. Manufacturers send separate EDI 845s for each of their distributors to GHX, and GHX maps the file into the preferred format. Each distributor receives their pricing files from multiple suppliers in the same format, making it easy to upload the files into their contract management and/or ERP systems. The approach is truly a win-win because it eliminates the need to manipulate inconsistent file formats from various suppliers. For manufacturers and distributors connected to the GHX Exchange and able to support an EDI or XML 845, updated pricing can automatically flow out of the manufacturer s ERP or contract management system and into their distributors respective internal systems, where the contract price is automatically updated. Manufacturers not on the GHX Exchange can use the GHX Price Gateway Portal solution to upload price authorizations in a CSV file format rather than manual nonstandard spreadsheet updates. GHX normalizes the data so that it is compatible with distributors automated processes, and distributors can receive price updates from multiple manufacturers. Users are required to conform to the Price Gateway Flat File specification to upload data. To help manage customer cross references within the EDI 845, there are several different types of account identifiers that can be included and passed to distributors as appropriate: Manufacturer Account ID: Account ID used by the manufacturer of products on the contract GPO Account ID: Account ID used by the GPO, if pricing is part of a GPO contract Distributor Account ID: Account ID used by an authorized distributor GLN: GLN defined by GS1 HIN: HIN defined by HIBCC Authorized Distributor Identifier: ID for the distributor with which the contract information is being shared; used by GHX for account number based routing The Vision for GHX Single Channel 832 Faced with reform and increasing pressure to reduce delivery costs, the healthcare industry needs to find a better solution 4

5 for sending pricing updates to providers and applying them to their systems. Currently, implementing revised contract pricing across a hospital system takes considerable time and effort. And if pricing is not correct, providers have to deal with misalignment issues that waste time and effort in chasing down correct prices and reconciling errors. As with the Single Channel 845 solution, manufacturers and distributors not on the GHX Exchange will be able to leverage the Price Gateway portal solution. It will enable providers to receive price updates in a CSV file format from multiple manufacturers and distributors rather than receiving manual, nonstandard spreadsheet updates via . GHX is working on several solutions to ease the process of disseminating price changes to providers, including the Collaboration Portal solution for GPO pricing and the Single Channel 832 solution for all other pricing. Collaboration Portal provides updated GPO pricing through CCXpert for several of the major GPOs. To support the dissemination of other contract information (i.e., independent agreements, special pricing, etc.) for manufacturers and delivered price for distributors, GHX has plans to offer single channel EDI 832. The vision for GHX Single Channel 832 is that it will enable manufacturers and distributors to send their EDI 832s to GHX, where they will be mapped into the preferred format for their providers. Each provider will receive their pricing files in the same format, making it easier for them to upload the files into their contract management and/or MMIS systems because they won t have to manipulate files prior to uploading them. For manufacturers and distributors connected to the GHX Exchange, updated pricing will automatically flow out of their ERP or contract management system and into their providers designated system (i.e., GHX CCXpert, NuVia or MMIS). A critical component of the solution will be the inclusion of customer and part cross reference information from both the manufacturer and distributor so that contract data can be loaded automatically. Conclusion Solving the pricing alignment issues in healthcare is challenging because of the limitations of MMIS and ERP systems, integration issues, internal process change management issues, inconsistent facility definitions and non-standard data formats. In addition, the overwhelming volume of data and the rate of change places a huge manual data maintenance burden across the supply chain. Since trading partners struggle to keep up with the changes, they are plagued by inaccurate, outdated and erroneous pricing data that leads to a high number of pricing reconciliation issues. In response to these pricing management difficulties, GHX has developed an initial suite of Pricing Alignment Solutions that can help reduce pricing exceptions and has a vision for future offerings that will help trading partners share pricing changes in a more timely and transparent manner. As an industry, we need to take the difficulty out of the existing contract management processes by leveraging solutions that improve the timeliness and accuracy of updates and support best practices identified across trading partners. 1 DeJohn, P. Standards in motion. Materials Management in Healthcare 17 (July 2008) W. Century Drive Louisville, CO USA YOUR.GHX 2014 Global Healthcare Exchange, LLC. All rights reserved. GHX is a trademark of Global Healthcare Exchange, LLC. 5