Collaborative
Solutions to Improve
Pricing Accuracy
Steve Inacker, President
Hospital Sales and Services, Medical Segment
Cardinal Health
Bill Abrams, President
Distributed Products
Medline Industries, Inc.
Healthcare Supply Chain 2015
Strategic 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.
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
Copyright 2013 Health Industry Distributors Assn.
Who Owns Contracting?
Source: Cardinal Health
Who Owns Provider
Communication?
Email
Sales Rep
Email
Sales Rep
Websites
GPO
Last-Minute Negotiations
Challenge Pricing Accuracy
More than half of contract changes received
less than 30 days before effective date
<15 Days
22%
15 - 30 Days
23%
Retroactive
13%
At Least 45 Days
19%
30 - 45 Days
23%
Source: 2011 HIDA Survey
Copyright 2013 Health Industry Distributors Assn.
Retroactive Pricing Updates
Make Timely Invoicing Difficult
Just how late are retroactive change notices?
6.7%
6.7%
1-7 days retroactive
20%
15-30 days retroactive
66.7%
8-14 days retroactive
>30 days retroactive
Source: 2011 HIDA Survey
Copyright 2013 Health Industry Distributors Assn.
Most Changes Communicated from
Manufacturer to Distributor
Via Excel, Not EDI
Method of change notification
Hard copy
EDI 845
5%
9%
Emailed Excel
spreadsheet
86%
Source: 2011 HIDA Survey
Copyright 2013 Health Industry Distributors Assn.
Pressure on Provider Margins
Drives Greater Focus
Expected revenue decline
among providers
10%
20%
Up to 10%
10-20%
21-30%
70%
Source: McKinsey & Company / HIDA Thought
Leaders Interviews, 2012
Copyright 2013 Health Industry Distributors Assn.
How do we change things?
Make Sure Distributors Get 45-Day
Advance Price Change Notification
 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.
Copyright 2013 Health Industry Distributors Assn.
So Begin Negotiations Early!
 Make sure all parties
understand when contracts
are expiring and get in front of
them.
 Ask manufacturers to “autoextend” existing contracts for
at least 60 days when new
ones start dates are likely to
be delayed.
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 Segment
Cardinal Health
steve.inacker@cardinalhealth.com
Bill Abrams, President
Distributed Products
Medline Industries, Inc.
wjabrams@medline.com