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Published: May 22, 2023

Why a Contract Isn’t Enough: Adjudication and Monitoring of Operating Expenses

You did it! You just signed a contract for one of your major operating expenses for your long-term care community – and you are actually happy with the results. After all that work and negotiation, you’re ready to sit back and put things on autopilot for the next few years while the contract plays out. But is that costing you?

The reality is that signing a contract isn't the end.

Instead, it’s more of a pivot point when your attention turns to making sure the contract is executed accurately and continues to be in your best interest throughout the duration of its term.

Between the rising costs of pharmaceuticals, medical supplies, and equipment and the technological advances, referring to the healthcare landscape as constantly evolving is an understatement. Managing expenses can feel like playing a game of whack-a-mole. Now more than ever, it's important to review the terms of your contracts and how you are actually billed.

Are You Sure You’re Getting the Negotiated Savings?

Even if you think you’ve negotiated a good contract, you don’t really know if you’re getting the savings. That’s not to say these companies are corrupt or out to get you. Remember that there are many factors at play - every contract is unique, there can be thousands of line items, and human error is a part of life.

Without all the data, you simply cannot be sure that your contracts are being executed as you intended. This puts you in a very bad spot to negotiate or stand up for your organization. You need monitoring and adjudication.

What are Adjudication and Monitoring?

Adjudication and monitoring play similar roles, but they are not the exact same thing.

Monitoring is an after-the-fact review process. It occurs once charges have already been made or invoices sent. While it may happen in real-time, it more often takes place at regularly scheduled intervals (e.g., weekly, monthly, quarterly, etc).

Adjudication is a legal term that refers to the process of resolving a dispute or deciding a case. For the purposes of this conversation, it is a specific type of monitoring, most often used in the case of pharmacy expenses.

How Does Pharmacy Adjudication Impact the Bottom Line?

Pharmacy costs can feel like a black hole for long-term care organizations. You know you’re probably being charged more than you should be, but your monthly invoices aren’t exactly intuitive. That’s where adjudication comes in.

Pharmacy adjudication involves reviewing drug orders and ensuring that the right drug is being administered to the right patient at the right price, in compliance with the contract.

At HMS, this process happens in real-time, which means that our team will flag any discrepancies and work with the pharmacy to address them immediately. Some of the most common issues include orders for medications not on the formulary, or using a brand name instead of a generic.

While this process is important with private insurance companies, it is absolutely necessary with Medicare. The reimbursement rates for medications through Part A are unrelated to what you actually paid for the medication, necessitating a robust adjudication process to protect your margins. Our team works closely with our clients to establish a comprehensive adjudication process that covers all aspects of pharmacy management, including formulary compliance, drug utilization review, and medication reconciliation.

We have a deep understanding of the long-term care industry and the various contracts available, which enables us to negotiate more effectively. We ensure the contract is adhered to and the organization is getting the best possible value for their money.

Monitoring Price Creep and Supply Chain Issues

Even with a well-negotiated contract in place, it's essential to monitor expenses to ensure that the organization is getting the best possible value for money. Our team goes beyond contract adherence and works to identify cost-saving opportunities.

Price creep occurs when the price of goods or services increases slowly over time, leading to a gradual increase in expenses. This can be particularly challenging to manage in an inflationary environment, where costs are rising across the board.

Our team is dedicated to combating price creep by actively reviewing expenses and identifying any areas where cost savings can be achieved. We also work with our clients to establish clear cost-saving targets and regularly review progress against these targets.

For example, if we notice that the cost of a particular medical supply has increased significantly, we'll investigate to see if it's due to price creep or supply chain issues. We'll then work with the supplier to negotiate a better price or find a more cost-effective alternative.

Contract (Re-)Negotiation

It happens to even the most seasoned professionals who “should” know better: an accidental automatic contract renewal. If you miss the cancellation deadline on your contract, you’ll automatically get the renewal – and lose your leverage and bargaining power.

Contracts for long-term care communities can range significantly in length, and it can be hard to keep track of all the different dates and timelines. Sometimes there is a cancellation window for your contract, where you cannot make changes before or after certain dates. However, sometimes you can actually cancel the contract immediately after signing. You still uphold the terms and duration of the contract, but it will not renew, giving you time to re-assess and re-negotiate.

At HMS, we work with our clients to ensure their contracts are set up well, accurately upheld, and re-negotiated or renewed appropriately. Remember, we only get paid when you save, so you won’t find a partner more motivated to find cost savings than us.

Managing the major operating expenses for your community requires a proactive and comprehensive approach. At HMS, we fight to improve margins for long-term care organizations. The result? Peace of mind and more cash on hand to invest back into your residents.

Ready to move forward? Schedule a call with our team or email us at getstarted@hmspecialists.com.

WE ONLY MAKE MONEY WHEN YOU SAVE MONEY
HMS works with long-term senior care organizations to review and negotiate expenses to lower costs, increase purchasing power, monitor continued savings, and improve margins. The result? Peace of mind and more cash on hand to invest in your residents.
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