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Collaborative Solutions to Improve Pricing
Accuracy
Steve Inacker, PresidentHospital Sales and Services, Medical Segment
Cardinal Health
Bill Abrams, PresidentDistributed Products
Medline Industries, Inc.
Healthcare Supply Chain 2015Strategic Insights for the Distribution Channel
Approach
McKinsey & Company partnership
In-depth interviews with 40 key provider execs across markets
HIDA Thought Leaders Summit
Copyright 2013 Health Industry Distributors Assn.
Thought Leaders’ Top Recommendations
1. Fix the contracting process
2. Link products and outcomes
3. Implement and champion data standards
4. Partner in standardization / streamlining efforts
5. Enable the home setting
Copyright 2013 Health Industry Distributors Assn.
Copyright 2013 Health Industry Distributors Assn.
Wonder Why Contracting Topped the List?
Pricing problems are a huge source of customer complaints
Time and cost invested in administering complex pricing systems
Complex processes need streamlining
Who Owns Contracting?
Source: Cardinal Health
Who Owns Provider Communication?
GPO
Web
site
sW
ebsi
tes
Sales RepEm
ail Sales Rep
Sales Rep
Last-Minute Negotiations Challenge Pricing Accuracy
Source: 2011 HIDA Survey
15 - 30 Days23% 30 - 45 Days
23%
<15 Days22% At Least 45 Days
19%
Retroactive13%
More than half of contract changes received less than 30 days before effective date
Copyright 2013 Health Industry Distributors Assn.
Retroactive Pricing Updates Make Timely Invoicing Difficult
66.7%
20%
6.7% 6.7%1-7 days retroactive
15-30 days retroactive
8-14 days retroactive
>30 days retroactive
Source: 2011 HIDA Survey
Just how late are retroactive change notices?
Copyright 2013 Health Industry Distributors Assn.
Most Changes Communicated from Manufacturer to Distributor
Via Excel, Not EDI
5%
9%
86%
Hard copy
EDI 845
Emailed Excel spreadsheet
Source: 2011 HIDA Survey
Method of change notification
Copyright 2013 Health Industry Distributors Assn.
Pressure on Provider Margins Drives Greater Focus
Expected revenue decline among providers
70%
Source: McKinsey & Company / HIDA Thought Leaders Interviews, 2012
10-20%
Up to 10%
21-30%
20%
10%
Copyright 2013 Health Industry Distributors Assn.
How do we change things?
Distributors are usually contractually required to give 30-day price change notice to customers.
All parties need time to load pricing.
Insufficient notice results in price mismatches and costly rework.
Make Sure Distributors Get 45-Day Advance Price Change Notification
Copyright 2013 Health Industry Distributors Assn.
Make sure all parties understand when contracts are expiring and get in front of them.
Ask manufacturers to “auto-extend” existing contracts for at least 60 days when new ones start dates are likely to be delayed.
So Begin Negotiations Early!
Copyright 2013 Health Industry Distributors Assn.
Negotiate “Landed” Pricing
Add-on freight charges to distributors cause price mismatches.
Contract for a “delivered” price to ensure price matching.
Copyright 2013 Health Industry Distributors Assn.
Support Industry Standards
Commit to using GS1 standards within your organization.
Push for adoption of GS1 by your manufacturers.
Copyright 2013 Health Industry Distributors Assn.
Desired Results Require Systemic Transformation
Copyright 2013 Health Industry Distributors Assn.
The Old Tools Aren’t Enough
Copyright 2013 Health Industry Distributors Assn.
The times we are in are unpredictable, but these are the times when transformative change can actually happen.
– Healthcare CEO
www.streamlininghealthcare.org
Copyright 2013 Health Industry Distributors Assn.
Steve Inacker, President
Hospital Sales and Services, Medical SegmentCardinal Health
steve.inacker@cardinalhealth.com
Bill Abrams, PresidentDistributed Products
Medline Industries, Inc.wjabrams@medline.com
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