Manual Healthcare Contract Management Costs Providers $157B A Year

June 19, 2019 - Healthcare contract management is still largely manual or non-existent for most providers, revealed a new Black Book survey.

Ninety-six percent of the 1,275 CFO, financial management, and business unit software users evaluating healthcare provider contract management solutions reported having no contract management system, using all manual processes, or having a system that is outdated and inadequate.

Failing to have automated healthcare contract management is costing the provider organizations nearly $157 billion collectively each year, Black Book reported.

“The majority of US health systems are struggling with manual contract tasks and fragmented contract processes,” stated Doug Brown, managing partner of Black Book. But value-based reimbursement is forcing executives and leaders to reconsider healthcare contract management workflows, he said.

The majority of contract managers surveyed (504 out of 522 respondents) indicated that their provider organization needs a healthcare contract management solution by the start of 2020 to “enable a more effective and intelligent transition from traditional fee-for-service to fee-for-value reimbursement.”

Ninety-two percent of all respondents also said developing competitive and complex payer contracts was their top reason for moving contract management system acquisition to the organization’s health IT priority list.

For a majority of respondents (80 percent), improving productivity and managing value-based reimbursement contracts were also factors contributing to the growing need for contract management system acquisition.

Value-based reimbursement is a much more complex finance system compared to fee-for-service. Therefore, provider organizations should be monitoring their payer and vendor contracts more closely to ensure compliance with quality reporting, pay-for-performance, and other requirements. Failing to adhere to the complex contracts could result in missed revenue capture or financial penalties.

“Value-based care reimbursement is forcing financial leaders to implement more comprehensive contract lifecycle management solutions onto one single platform to afford them accelerated, innovative agreements through automated compliance and to drive growth, or in some cases, survival,” Brown said.

Executives and financial leaders are also looking to automate healthcare contract management and making system acquisition a health IT priority to generally boost the bottom line. The top reasons why provider organizations are making healthcare contract management automation a priority included:

• Improving payment accuracy (90 percent)
• Enhancing negotiation strategy (87 percent)
• Estimating net revenue by patient (74 percent)
• Automating contracting tasks (72 percent)
• Minimizing contract risks (70 percent)
• Boosting modeling and term revisions (70 percent)
• Full audit tracking (67 percent)

Vendors are helping provider organizations realize healthcare contract management automation and optimization, the survey added.

In a review of 18 key performance indicators, including innovation and optimization, training and education, and accountability, the Black Book found that consulting firm Kaufman Hall’s Axiom earned top spot among respondents, followed by nThrive, Contract Works, Change Healthcare, PMMC, IntelliContract, and Newgen.

Other healthcare contract management vendors analyzed by Black Book and highly rated by respondents included Contract Logix, Vizient Harris Healthcare, Onbase by Hyland, Ecteon, Contract Safe, Concord, Contract Guardian, and Vie Healthcare.

The healthcare contract management market is slated to significantly grow as provider organizations seek new systems for managing more complex contracts. In fact, a new market report projected the global healthcare contract management market to increase from $755 million in 2019 to $1,763 million by 2024, representing a compound annual growth rate (CAGR) of 18.5 percent during the period.

“With the average hospital margin thinning to less than two percent, and the need for accurate, accessible and actionable information on the cost of care delivery for health system survival, boards and senior executives are concluding that understanding and managing contracts is mission critical,” concluded Brown.