You Can’t Manage What You Can’t MeasureEvaluate your healthcare contract management program with these KPIs.
You Can’t Manage What You Can’t Measure
Evaluate your healthcare contract management program with these KPIs.
How can you measure your healthcare organization’s contract management performance? Contracts directly impact revenue and prevent financial, legal, and compliance risk, so it’s essential that your contracts are properly executed and managed. Use these Key Performance Indicators (KPIs) to assess your contracting processes and identify areas for improvement:
Length of Contract Lifecycle (Number of Days from Contract Initiation to Signature)
How quickly are your contracts being executed? In healthcare, as in most industries, contracting delays result in lost revenue. When provider agreements take too long and delay provider onboarding, healthcare organizations lose hundreds of thousands of dollars per month. Provider agreements, with their compliance requirements and complexities, can take time to execute. Being able to track how long it takes for a contract to progress from initiation to review, approval, and signature allows you to determine an acceptable cycle time from contract initiation to signature for different contract types.
Duration of Contracts in the Queue
“It’s stuck in Legal” is a standard response to inquiries about a contract’s status. Is that really true? Contracts do often wind up getting stuck in someone’s inbox—whether it’s an email inbox or a physical inbox for hard copies. Transparent contracting processes allow you to track the location/status of a contract and identify backlogs and bottlenecks by understanding the following:
- Which departments are taking too long with drafts and edits?
- How long is your approval process taking?
- Are some reviewers slower than others?
- How long has the contract been approved and just waiting for final signature?
By using contract lifecycle management software to identify bottlenecks in the contracting process, you can take steps to improve your processes and workflow. Workflow automation tells you where a contract is and notifies you of impending deadlines so you can make sure to get the required approval(s) in time.
Deviations from Pre-Approved Contract Language
Legal teams carefully craft contract clauses to minimize risk. When employees fail to include the appropriate clause or modify it too much—whether intentionally or by accident—your organization may be at risk for compliance violations. To prevent this risk, take advantage of contract templates and clause libraries included in contract lifecycle management software. Then track deviations from those pre-approved clauses and templates. Contract analytics (part of contract lifecycle management software) scans contracts for key clauses, allowing you to take corrective action as needed.
Percentage of Evergreen and Auto-renewal Contracts
Contracts may include evergreen or auto-renewal clauses. Evergreen contracts, which continue indefinitely until the contract is canceled, differ from auto-renewal contracts, which renew automatically only a specific number of times. Both evergreen and auto-renewal contracts can be costly when the terms are unfavorable, or when you no longer require a particular service. In the case of a merger or acquisition, you may wind up with duplicate services. If the hospitals joining your health system are in the same geographic area, you won’t need multiple waste management contracts. Contract analytics identifies redundant contracts and pricing that is higher than benchmarks, helping you determine which contracts should be canceled or should not be auto-renewed.
To manage evergreen and auto-renewal contracts, use your contract management software to classify them—so you can easily track them and generate reports, track critical dates, and set automated, recurring alerts to review those contracts before the renewal date. Review your contract portfolio to determine the percentage of all contracts that are evergreen and identify the departments (and contract types) that produce the most evergreen contracts. If your legal department is concerned about evergreen contracts, this analysis will indicate where you should start renegotiating contracts.
Contract lifecycle management software with automated workflows and contract analytics makes it easy to measure and improve contract management performance.
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