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Analysis

Manual Contract Management Costs Providers $157B Annually

By Jack O'Brien  
   June 14, 2019

A survey of CFOs found that the shift to value-based care modeling is fueling demand for comprehensive contract management tools.

Nearly all health system and hospital organizations do not have a manual contract management system or use one that is "outdated and inadequate," according to a Black Book Research survey released Thursday evening. 

Ninety-six percent of surveyed provider organizations reported having an insufficient contract management system or lacking one entirely, which Black Book estimates as costing health systems $157 billion annually.

The study also indicated that the shift towards value-based care (VBC) modeling is a major force pushing CFOs to look for comprehensive contract management tools.

Related: Managing Exposure in Risk-Based Contracts

Doug Brown, managing partner of Black Book, said in a statement that hospital finance leaders are pursuing single platform contract management solutions in order to accelerate growth but also for "survival."

"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," Brown said in a statement.

Related: Success Strategies for Managing Risk-Based Contracts

In a separate survey conducted by Black Book, 96% of health system contract managers reported that their respective organizations required a contract management solution by Q1 2020 in order to facilitate the move from fee-for-service to VBC reimbursement.

When asked what is fueling contract management system acquisition for health systems, respondents stated that developing competitive payer contracts, improving payment accuracy, and improving negotiations were the top factors.

Improving productivity in managing VBC contracts, estimating net revenue by patient, and automating contracting tasks also garnered over 70% of votes. 

Related: Parkland Health Inks Contract with Management Consultant

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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