An argument could be made that the most dangerous business losses are the ones you don't even realize you're incurring—like a slow leak you don't notice until your ship has already taken on too much water.
This means that the key to maximizing ROI is identifying, stopping, and preventing those leaks.
This reality can be particularly acute in GPO contract administration. While these contracts incentivize purchasing behavior across the healthcare ecosystem, many manufacturers still use Excel, combined with tedious workarounds and manual searches, to process chargebacks and rebates.
Given the daunting complexity of these contracts in the healthcare supply chain and the challenges of tracking and reconciling sales data, this largely manual process exhausts the time and talents of skilled team members. The gaps also mean that manufacturers may not be aware of cases where discrepancies are causing them to lose money on each unit sold for a particular item.
In situations like these, the devil is in the details.
Imagine a case where a manufacturer tells the distributor that the base price for a specific item is $5. The GPO’s contract says physicians get $1 off for a discounted price of $4. If all goes smoothly, when it’s time to true up, the distributor will seek a rebate of $1 for each of the items sold to physicians since the distributor initially paid $5 for each item.
Suppose the distributor has an error in their system that indicates that they paid $5.50 per item, so they request $1.50. Sometimes, the manufacturer will never identify the discrepancy and simply pay based on the chargeback request and information provided; this means significant financial losses over time. In cases where the manufacturer does identify the pricing data gap, a poorly defined and manually executed dispute process complicates the relationship between the manufacturer and distributor.
Based on how these agreements are typically defined, if the discrepancy can’t be reconciled, the manufacturer may have to pay what the distributor asked for—even though the manufacturer is now losing money on each item sold.
When this scenario is multiplied across catalogs of items, it isn’t hard to see how these losses – caused by discrepancies across channel partner systems – can quickly amount to hundreds of thousands of dollars for manufacturers.
The problem isn’t limited to outdated legacy tools like Excel and Google spreadsheets. Even best-in-class ERP systems are not designed to manage the intricacies and complexities of rebate and chargeback calculations for manufacturers and distributors serving the healthcare supply chain.
That’s why to master this problem truly, subject matter expertise and purpose-built solutions are needed. Fortunately, they’re available, and their ROI is clear.
The right technology can automate contract administration and eliminate errors, discrepancies, and disputes:
Here’s how this translates into quantifiable ROI for manufacturers:
Manufacturers are missing a piece in their tech stack. They rely on systems that optimize warehouse, inventory, financial, and purchase and sales order management.
ProfitOptics has developed a platform to fill the gap left by these systems, which aren’t designed for the complexities of healthcare contract administration.
Learn more about our solution: Solving the Chargeback Challenge for Manufacturers and Distributors in Healthcare Contract Administration.
ProfitOptics has almost two decades of experience helping healthcare clients unlock opportunities for efficiency and value. We recognize the increasing pressures of integrating advanced technologies while ensuring data security and compliance in a highly regulated environment.
We built a system that makes contract admin for rebate and chargeback management more efficient and effective for distributors, manufacturers, and GPOs. Contact our experts to learn how ProfitOptics can help you achieve greater ROI through more efficient contract administration.
