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Automation: The Key to Maximizing MedTech Revenue During Global Disruptions

by Kyle Forcier , Senior Director, Life Sciences Product Marketing. Model N September 7, 2020

Someday this pandemic will be behind us. Yet, unfortunately, business and society must become prepared for the next pandemic or disaster that will precipitate major disruptions in the supply chain, because the next disruptive event is a matter of when—not “if.”

The medical technology industry must immediately address supply chain disruptions associated with the current pandemic, while looking towards the future. The ideal future state is an environment where global medtech companies can and will leverage automation to minimize disruptions, as well as mitigate their effects when they do occur.

This more ideal future will be guided by five key principles that illustrate how firms can minimize the impact of supply chain disruptions via automation and integrated systems. These approaches include techniques to gain real-time visibility into pricing; contract commitments and contract performance; ways to improve contract compliance; and the systems required to accurately process rebates, chargebacks and tiered pricing discounts.

Addressing these supply chain disruptions by leveraging both automation and data analytics will help medtech companies tackle the increasingly important issue of revenue leakage. They will thus be empowered to capture and retain more revenue, positioning them for greater stability that will help guarantee their ability to innovate and remain financially viable, even in the most uncertain times.

Here are the top five benefits of adopting a technology solution to automate revenue management.

1. Accurately Process Rebates, Chargebacks and Tiered Pricing Discounts

Operational efficiency is critical today. Entering information manually and pulling reports from spreadsheets is a time-consuming process prone to errors. By automating rebate, chargeback and discount computations, you can verify and feel confident in the results.

Accountability is an important benefit of automation. You can easily point to how the system calculates the numbers based on rules and filters. If there are pricing questions or discrepancies, you have a record of transactions. An auditable system allows you to defend a price to a customer, because you can easily produce a complete record as backup.

On the customer relationship side, timely, accurate payments improve dealings between the provider, group purchasing organization (GPO), integrated delivery network (IDN), and manufacturer. When the sales team negotiates more business, the last thing it needs is a price disagreement, which is distracting and disruptive.

2. Gain Real-Time Visibility into Pricing

Setting proper expectations on pricing, whether it’s working directly with providers or through distributors, requires accuracy to establish trust. If a buyer expects an item to cost $100 but gets invoiced for $300, you’ll have some explaining (and negotiating) to do—and that happens all the time in this industry.

The more visibility those with access to pricing have, the smoother the transactions. Utilizing an electronic data interchange (EDI) and technology that delivers the EDI to the right places is a requirement today.

The dissemination of that pricing data can be automated. For instance, a price catalog (EDI 832) and price authorization/acknowledgement status (EDI 845) files can be generated and sent automatically downstream to keep the supply chain informed of the most current pricing.

3. Understand Performance against Contract Commitments

Another area where visibility is crucial is in the progress against contract commitments. Usually a provider promises to buy a certain quantity at a better price. Without familiarity with the details of that commitment and how the provider is tracking to it, there’s a risk of missing the obligation. If that happens, contractually the provider won’t qualify for the price break the next period.

Intelligence in this area is crucial for maintaining relationships. Ideally, providers would have access to the same data manufacturers track against, but when that’s not possible, a deal management tool can keep the provider informed through the sales team.

This benefit extends to rebates. If a commitment is missed, rather than being faced with higher prices, the provider misses out on an expected rebate that does not materialize. When providers sign up for a rebate agreement, they’re usually making plans on products and services based on the money they expect back. When that doesn’t happen, especially when the miss comes as a surprise, it can adversely impact future spend.

4. Improve Contract and Regulatory Compliance

Automation can help ensure that you are executing on the terms of your agreements. For example, a contract with a GPO can stipulate an administration fee be paid within 30 days of the end of the month or you’re charged a penalty. You don’t want to incur late fees because you didn’t meet contracting terms.

On the regulatory side, the consequences of non-compliant practices are much more costly. The U.S. Department of Veterans Affairs (VA) Federal Supply Schedule (FSS) regulates medical supplies to VA hospitals, the Department of Defense (DOD), and other government agencies, and there are specific rules in place when managing against FSS. If the companies in the program don’t comply with FSS rules and regulations, large fines can be imposed, and the potential exists to lose the ability to contract through the federal government.

5. Eliminate Silos across People, Processes and Technologies

Medical transactions span many different departments—a simple accrual report can involve information technology (IT), finance, contract and rebate teams that typically don’t work together. Often the report is passed around via email, which doesn’t facilitate collaboration. Breaking down silos between organizational functions and unifying data into a centralized system with a single view helps create a more collaborative process. With the different groups working together, IT creates the reporting tools for accurate accruals to finance, and the contract and rebate teams confirm the correct rates are entered into the system.

Automation can help mitigate supply chain disruption, as well as address the larger revenue leakage problem. This will position medtech companies for greater stability that will help guarantee their ability to innovate and remain financially viable, even in the most uncertain times.

This podcast was originally published on MedTech Intelligence.
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