Contract management is one of the essential processes in any organization including healthcare setups. Basically, contract management is defined as the execution and monitoring of a contract for the purpose of maximizing profits and operational efficiency while minimizing risks. Contract management involves tracking all buys against contracts to ensure pricing which was agreed is adhered to, preferred supplies are used, specific terms and conditions are honored and discounts and rebates are received accordingly.

When the contracts are managed effectively, healthcare organizations can save substantial money. One of the problems that have become consistent is that buyers do not remember their contracts or leases automatically renew if they don’t negotiate. Having a contract management system, will eliminate this in that automatic reminder alerts will be sent to buyers in advance so that necessary actions are taken. This will also give time for negotiation to ensure best terms on pricing are reached. This concept is best for those who want to learn how to maintain control of their contracts.

Another best practice of contract management is minimizing of contractual nonperformance. For example when a hospital enters into a contract with a certain vendor, there is risk that the selected vendor could inadvertently fail to follow the terms of the given contract. In case, this risk is not managed effectively and accordingly, and the hospital doesn’t have an appropriate contract management system to identify the pricing error, then the unfortunate results to the health organization spending more. When there is a good mechanism in place, if the contractual obligations are not mate, a quick action can be taken to minimize risks of a vendor not adhering to the agreed contract.

To have best contract management practices, it is also required that hospitals to improve their audit preparations. Effective contract management will ensure that hospitals meet or simply exceed the expectations of its vendors through consistent compliance with their contracts. Having this in place will lead to strong relationships with value-added services, increased revenues, and reduced expenses.

A good contract management system makes it easy to track rebates and ensure that all the savings negotiated in a given sourcing cycle are captured. Also when you are going to adopt a good system, buyers are going to benefit by determining the existence of viable contracts immediately. With a reputed contract management system, all the process will be swift and effective.

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