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Strategy, compliance and analysis of the contracts lifecycle.
Citation preview
Contracts Lifecycle Management Strategy-Compliance-Analysis
January 24, 2013
Presenters:
CONFIDENTIAL
Steven Medina, Vice President Managed Markets Service, Covance Market Access Services Inc.
Joseph Coppola, Director Deloitte Consulting - Contracting Strategy and Revenue Optimization Practice Leader
Introductions
Steven Medina Vice President,
Managed Markets Service Covance Market Access Services Inc.
Joseph Coppola Director,
Deloitte Consulting - Contracting Strategy and Revenue Optimization Practice Leader
2 Proprietary & Confidential
Agenda
3
Introductions
Market Dynamics
Common Observations
Why Now for an Alternative Operating Model
What You Need from an Alternative Operating Model
New Model
Benefits
Industry Forces such as these are Influencing the Need for Change….
Nearly 90% of all retail prescriptions are covered by 3rd
party payers…both private and public sectors
On average, 15-25% of gross sales is paid to Payers in
the form of rebates
Shrinking budgets and resources – mantra – ‘do more
with less’
Rapidly increasing generic competition
Continued cost-shifting to patients – co-pays rising
4 Proprietary & Confidential
These industry forces are causing companies to focus on opportunities
beyond Financial and Regulatory Risk Mitigation…
1. Contracting
Strategy
Formulation
3. Contract T&C Compliance
Management
4. Performance Monitoring &
Analysis
2. Contract Creation
Contract ROI / Effectiveness
More Impactful Customer Interactions
Risk Mitigation
Financial
Contract Compliance
Visibility
Regulatory Compliance
Sarbanes-Oxley
Gov’t Price Calculations & Reporting
Operational Efficiency
Speed
Productivity
Scalability
TCO
5 Proprietary & Confidential
Sample Value Propositions Opportunity
Low Est. High Est. Basis
Cost Reduction/Avoidance
Reduction of invalid chargeback claims 0.5% 11.0% Chargeback Claims
Reduction of incorrectly calculated admin fees 0.5% 5.0% Admin. Fees
Reduction of invalid rebate claims 1.0% 12.0% MCO Rebates
Reduction of Contracts Admin. operating costs 8.0% 27.0% Dept. Costs
Avoidance of BP exposure and risk NA NA Medicaid Rebates
Revenue Enhancements:
Improved Pricing & Contracting ROI 0.5% 5.0% MCO Rebates
Improved targeting of the 'right customers' 0.6% 7.5% Total Sales
Quicker response to bid and contract requests 1.0% 4.0% Contract Sales
NA = not available; dependent upon company interpretation of Medicaid Legislation.
NA = not available; dependent upon company interpretation
of Medicaid Legislation.
Source: project experience, software vendors, and trade literature.
Benefits of Contract Management Automation (Aberdeen benchmarks based on more than 300 companies): IMPROVEMENT AREA PERFORMANCE IMPACT Compliance management Improve compliance 55% Rebate/discount mgmt. Improve 25 - 30% Contract renewal rates Improve 25% Revenues Improve 1 - 2% Contracting cycles Cut contracting cycles in half Admin costs Reduce 25 - 30%
Looking to Realize Incremental Benefits Such as These…
6 Proprietary & Confidential
Common Observations
What We Typically Find…Processes, Policies, and Systems
►Manually Intensive Processes
►Lenient Contract T&C
Compliance Policies
►Information Constraints
Reliability and Accuracy
Accessibility
Time Consuming
►Limited Workflow Automation
►Inflexible Systems
►Limited Validation of Contract
Claims Data
►Inadequate Management of Master Data
Membership, Eligibility, and Plan Affiliations
Market Baskets
Formulary Status
Templates/Clauses
7 Proprietary & Confidential
Common Observations
What We Typically Find…Organization
►Customer Segment or Product Team Silos
►Poor Cross Team Collaboration/ Communications
►Inefficient Process Execution
“Everyone does Everything”
Roles/Responsibilities Not Clearly
Defined
►Inconsistent Support for Internal/External Customers
►Sub Optimal Use of Resources
►“Bombarded” with Ad Hoc Information Requests
E.g., Legal Requests
8 Proprietary & Confidential
►Knowledge ‘walking out the door’ as people leave
Resource are dedicated to
customer segment and/or product
teams and not shared across
teams
Why are Companies Considering Alternative Operating Models for CLM?
Contracting organizations are faced with challenges such as:
Increased workloads with limited resources; static headcount
Many cycles being spent on low-value, repetitive, administrative activities such as Rx
claims validation, membership maintenance, etc.
Limited ability to develop resources and focus them on more value-added work
e.g., customer-facing tasks, analytics, etc.
By utilizing an alternative operating model, the following can be realized:
Avoidance of hiring additional people while workload continues to increase
Flexibility and scalability of service levels that are driven by the demands of the
business
Ability to transition employees with advanced skills from executing administrative
activities to more valued-added work
Accounting for services as an ‘expense item’ vs. capital expenditure (headcount)
9 Proprietary & Confidential
Candidate Processes to Consider …
Data
Management
Reporting &
Analytics
Rebate
Forecasting
Performance
Analytics
Membership
Maintenance
Operational
Reporting
Rebate
Processing
Eligibility
Maintenance
Chargeback
Claims
Processing
Contract
Setup
Payment
Processing
Product
Maintenance
Market Basket
Maintenance
Customer
Maintenance
Chargeback
Forecasting
Rx Claims
Data
Validation
Government
Pricing
Contract
Archiving
Compliance
Mgmt &
Administration
Typical Desired Level of Ownership
Low
H
igh
Mediu
m
Medicaid
Claims
Processing
Leve
l o
f A
dm
inis
trati
ve
Ac
tivit
y
Good candidate processes are those that typically require a lower level of ‘ownership’
and are discrete and highly administrative by nature
10 Proprietary & Confidential
Low High Medium
Copyright © 2013 Deloitte Development LLC. All rights reserved.
11
Why is there a need for an Alternative Operating Model for Contracts Lifecycle Management
Visibility into
Contract
Performance
Government
Audits
Limited System
Functionality Shrinking
Budgets
Missed Financial Opportunity
Revenue Leakage (overpaid: Medicaid rebates ~1-4.5%, Managed care rebates ~1-5.5%, Chargeback claims error: ~1-4%,) Cost saving by leveraging economy of scale partnerships ~ 12% - 21% Cost avoidances by leveraging a subscription based solutions ~ 22% to 43% (avoiding and implementation) Potential revenue growth by creating contract criteria and evaluate contracts ~ 2% - 4% Return on assets by not over allocating funds for rebates and chargebacks but investing it.
12 Proprietary & Confidential
Marching Orders
13 Proprietary & Confidential
Grow the Business
Driving the need for more Complex Contracts
Need for Great System Functionality
Manually Managing Contracts
Visibility into Contract Performance and Accruals
Ensuring Compliance to reduce penalties
Reduce Cost
Reduction in Staff and Resource Availability
Technology Investments need to gain the Functionality
Increased cost of doing Business
Missed Financial Opportunity
What You Need from an Alternative Operating Model
Industry Insights with a stable budget that provide better financial awareness
Driving business value, optimizing performance, and increasing efficiencies
Better Visibility into Contract Performance and Accrual Allocations
Partner that will invests in developing capabilities for the industry needs
Virtual Team Capability
Expand your base team with trained professionals
Adaptable, flexible, and agile to ramp staff up and down as demand dictates
Connecting client’s operational capabilities to its business aspirations
A Full Revenue Management and Recognition
Technical Solution
Access to software without having the increasing
cost of implementation or upgrades to keep up with
an ever changing industry
Get just what you need, grow as you go
Proprietary & Confidential
SURVEY
15 Proprietary & Confidential
16 Proprietary & Confidential
New Model
Invests in industry
With a client-centric approach and a commitment to offering clients the best people, processes,
and systems today and in the future. An investment into a training platform that ensures it’s
entire staff (junior to senior level) must progress through various levels of expertise so they are
optimally versed on all aspects of industry challenges and solutions. Because of the complexity
of today’s contracts and the rapid pace of change, clients want to work with an expert to bring
about insight to the business and processes necessary for making sound decisions
With budget challenges and potential impact to revenue, clients
need to work with a partner that can help them drive value,
performance, and providing flexible collaboration with clients
processes, technologies, and vendors. With minimal up-front
investment and long term predictable budget for the services
they need.
Client-focused solutions that provide selective solutions
to address their challenges.
Committed to operational and service excellence.
With a strategic and service-based culture that drives operational consistency and
repeatable by using a set of products that contain primary, custodial, and governing
processes that represent a core set of best practices.
Contract & Strategy Pricing
Managed Markets Brand Strategy
Contracting and Pricing Strategy
Market Sensitivity Evaluation
Planning & Development
Managed Market Forecasting
Formulary Approach
Contract Offer Management
Account Management Optimization
Contract Authoring & Drafting
Offer Development
Evaluation & Performance
Track contract performance by contract
Evaluate accruals for Rebates and Chargebacks and forecast.
Reports on findings.
“What happen”
Determine cause of the findings. “Why did it happen”
Technology & Software
Managed C
are
Hospital / G
PO
Reta
il
Govern
ment
Valid
ation a
nd
S
cru
bbin
g
Rebate
s
Cha
rge
ba
cks
Cla
ims
Settle
ments
Go
ve
rnm
en
t P
rog
ram
s
Co
mp
lia
nc
e M
an
ag
em
en
t
Claims Adjudication
Contract Management Contract Administration
17
Managed Markets Services Differentiation Framework
Distributor
Process
Commercial
Utilization
Rebate
Chargebacks
Accrual
Tracking
for Rebates
and
Chargebacks
Government
Compliance
Admin Fees
&
Sales Based
Rebates
Membership &
Eligibility Government
Pricing
Government
Rebates Contract
Compliance
Contract Load &
Maintenance
Contract
Management
Contract
Administration
Government
Programs
Evaluation &
Performance
Compliance
Management
Contract
Performance
18 Proprietary & Confidential
Managed Markets Services
Provide operational services
resources to Perform clients
processes on their systems
Covance system to provide
solutions to our clients on a
subscription basis and enable our
client’s resources to use the
system according to their needs.
Provide operational services to
client utilizing Covance‘s system
and resources
Provide staff support to Participate
as needed to support clients
process on their systems
Flexible Delivery Model
19 Proprietary & Confidential
Benefits
20 Proprietary & Confidential
Intangible Benefits
Strong Partnership
Trained professionals
Scalability
Economies of Scale
Peace of Mind
Tangible and intangible benefits.
Tangible Benefits
Revenue Growth
Cost Saving
Cost Avoidance
Return on Assets
Manufacturer‘s Focus
Cost Avoidance Cost Saving Revenue Growth
Return on Assets
Increased cost of
doing Business
Revenue
Leakage
Cost Pressures
Shrinking
Budgets
Regulatory
Pressures
Complex
Contracts
Reduced
Resource
Availability
Technology
Investments
Ensuring
Contract
Compliance
Government
Audits
Increasingly scrutiny by
auditors and regulators
Limited System
Functionality Methodology
Manually
managing
Contracts
Loss of Content
Knowledge
Accrual Forecast
Visibility into
Accruals
Communication
across managed
markets
Visibility into
Contract
Performance
Strategic
Governance
21 Proprietary & Confidential
Benefits
1. Savings compared to Implementation & Ongoing Support of 43-49%
2. Savings compared to Current State Operational Model of 17-26%
Reduce
implementation
staff expense
Reduce hardware
expense
Reduce resources
for business and
IT processes
Reduce software
expense
Reduce ongoing
maintenance &
support costs
Reduce ongoing
maintenance &
support costs
Eliminate system
upgrade & patch
fees
Reduce resources
for business and
IT processes
22 Proprietary & Confidential
Benefits
SURVEY
Question: Please select your most
critical concern regarding this
alternative operating model?
1. Loss of Control
2. Quality of Services
3. Staff/team Morale
4. Regulatory Risk
5. Costs
23 Proprietary & Confidential
24
Collaboration
Models
Gain clear understanding of
company/department goals and
objectives
Obtain a comprehensive view of
current operating environment
Create a gap assessment of goals
and objectives against current
environment
Identify areas for improvement
Develop budgets to implement
measurable solutions
Create specific action plans for
implementing change and closing
gaps
Consider a readiness assessment to:
25
26
www.covance.com/marketaccess
Contact our presenters:
Steven Medina Vice President
Managed Markets Services
Covance Market Access Services
Ph: (609) 273-7973
Email: [email protected]
Joseph Coppola Director
Deloitte Consulting - Contracting Strategy and
Revenue Optimization Practice Leader
Phone: (215) 275-6979
Email: [email protected]