Contract Lifecycle Management: What you don't do will cost you

Cheryl Gregory (cgregory@berrydunn.com) is Senior Manager, Compliance and Credentialing, and Markes Wilson (markes.wilson@berrydunn.com) is Senior Consultant at BerryDunn, Portland, ME. Wilson is also cofounder and advisor for CLM solution Healthy Contracts, produced by Business Data Applications Inc., Exeter, NH.

It may be surprising to learn that companies lose more than 9% of their revenue annually to poor contract management.[1] For larger organizations, the percentage quickly climbs to 15%. According to Definitive Healthcare data, the average net patient revenue at US hospitals is $334.5 million,[2] which means most hospital systems are, conservatively speaking, bleeding approximately $30–$50 million each year. Poor contract management also costs organizations in noncompliance. No organization can receive Medicare or Medicaid, or other federal healthcare program payments without a contract in place. Contracts are designed to specifically address adherence to regulations such as Stark Law, Anti-Kickback Statute, and the False Claims Act. Violations reflect nonadherence to both the law and the contractual agreement. Therefore, tighter organizational oversight and accountability of the contract prevents institutions from contributing to the annual billion-dollar fines—$2.2 in fiscal year 2020, as reported by the Department of Justice.[3]

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