How improved supply price accuracy can save money

Discrepancies in costs are rife throughout the purchasing system, adding expense for providers, manufacturers, distributors and group purchasing organizations.


One of the most dynamic issues facing today’s healthcare supply chain is the price accuracy of critical supplies that hospitals and health systems need to run their organizations.

Like a desert’s shifting sands, product prices are constantly in flux. In any given month, price changes impact between 10,000 to 20,000 available products. This dynamic pricing structure can make purchasing transactions cumbersome if all parties (manufacturers, distributors, group purchasing organizations and healthcare providers) are not dealing with the same price data.

A simple human error such as failing to update a price change on a distributor website can create confusion and errors, and ultimately lead to delays in completing transactions. Price discrepancies are also expensive, costing healthcare providers alone in excess of $92 million annually to process these exceptions.

This price accuracy situation is in diametrical opposition to the supply chain’s opportunity to strip waste and inefficiency out of the system so the industry can remain on focused on providing outstanding levels of patient care.

Price accuracy is one of the most labor-intensive and error-prone issues healthcare organizations face. Every player in the healthcare supply chain believes its pricing data represents the truth, but too often, these prices exist in silos. While pricing data from a manufacturer or distributor may reflect a product’s current price, it may not take into consideration a healthcare system’s negotiated contract or specific discounts available.

In fact, contract price misalignment is a root cause of many price discrepancy issues. For instance, the majority of hospitals purchase its supplies from a distributor. Distributors, in turn, receive its pricing information from manufacturers. If a healthcare organization negotiates a purchasing contract directly with a manufacturer, that pricing information typically takes 45 to 60 days to be updated and reflected in the distributor’s pricing.

Too many organizations have managed this complex pricing process with outdated manual approaches like fax and email—that’s a sure-fire recipe for miscommunication and delays in contract activations. This results in contracting staff spending hours trying to determine contract start dates and whether a specific organization is entitled to a certain price on a certain date.

Multiply that by hundreds of thousands of pages of pricing data, and it’s easy to see the scale of the inefficiencies at the heart of healthcare price accuracy.

While there’s no magic genie coming to the rescue to solve the price discrepancy issue, the power of technology is increasingly driving collaboration among a trusted community of manufacturers, distributors, group purchasing organizations and hospitals to enable these trading partners to spot price discrepancy issues early in the purchase order process.

Even better, an automated supply chain will know how pricing changes impact specific healthcare organizations based on its buying contracts and can alert those providers in advance of any price changes taking effect, so it can make purchase decisions accordingly.

Cloud-based technology is helping to break down information silos and create an integrated environment that enables all trading partners to communicate and align contract and pricing information electronically in real time. Through a common technology platform that automates the contract management process and synchronizes pricing data, supply chain partners are collectively driving out inefficiencies and costs.

When all trading partners work together to align pricing, and everyone is working with a single version of the pricing truth, the industry can make huge strides in eliminating the pricing obstacles standing in the way of smooth and efficient transactions in the healthcare supply chain.

Solving price alignment is critical for the healthcare industry. Through the power of technology and an automated supply chain, the industry is addressing the issues around price alignment, including challenges related to customer identification, communication among parties and timely loading of accurate pricing for all constituents. In reducing price discrepancies, healthcare has an opportunity for the entire supply chain to work together to reduce price misalignment.

All four parties in the healthcare supply chain are beginning to show a real willingness to work together, thanks to the power of technology to bring greater transparency and standards that can help eliminate waste and costs.

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