Rebate Management in Healthcare | E. 90

Hospitals are under continued pressure to reduce costs and deliver better care. CoFounders of Rebate Insight, Tony Garcia and Jonas Langvad, explain the benefits of rebate management to Jim Cagliostro. 

 

Episode Introduction 

 

Tony & Jonas explain why 100% of rebates go straight to the bottom line, share the 3 Ms of rebate management, and highlight how Rebate Insight’s SaaS solution is increasing hospital rebates by 26% or more. They also explain how ‘’dark data’’ blurs visibility into rebate management and celebrate being part of SpendMend. 

 

Show Topics

 

• Rebate management should be a priority in healthcare

• Manual processes make it difficult to track rebates

• The 3 M’s of rebate management

• Dark data and the pain points of rebate management

• Benefits of Software-as-a-Service (SAAS)

• The value of SpendMend

 

 

02:29 Rebate management should be a priority in healthcare

Tony said in times of financial pressure, rebates go straight to the bottom line to boost margins. 

‘’I think I'll start a little bit at the high level, to get to the 10,000-foot level for hospitals. The financial performance of a hospital is always important, and I think we've had a few interesting years in the past here, coming out of, first of all, covid introduced a lot of additional costs for hospitals, labor shortages, and product shortages for sure that spiked prices. Then after that, we've seen a great deal of inflation and products increasing dramatically in price, so that's really impacted hospitals in a big way. I think right now, just the financial situation, everyone's looking to see what can be done to reduce cost, stay competitive. When it comes to rebates, rebate management, it's historically been one of those areas that maybe hasn't been looked at that closely because it is a little bit of a complex area to manage. I think what ends up happening is when you think about, if hospitals are looking for areas to save money in, to reduce costs, they can have different initiatives. On the revenue side, if you end up increasing revenue by let's say a few million, only about 2% to 4% of that ends up going to the bottom line, because that's usually the margin of a hospital. It's very low-margin on the revenue side. However, if you're able to increase rebates on the cost side, 100% of that is going to go to the bottom line. You have a huge upside potential if you're able to manage rebates well and increase those rebates.’’

 

05:53 Manual processes make it difficult to track rebates

Jonas explained the benefits of automation in rebate management. 

‘’I come with 25 years of healthcare experience. I've been a director at a health system in Southern California, and this is how this was all created. It was so difficult to track rebates, and the benefit of tracking them and knowing what is owed and what the vendor should be paying you and if you're going to meet your market share was so important and critical, but it was just too hard because the process has always been manual. Historically to this day, we've had many discussions with very large IDNs, some of the largest IDNs in the nation, and also on the lower end with smaller hospitals, and they all have the same issue. They're all using a manual process. They all have teams of staff that do different things, so it's always been difficult to track rebates. I think now, historically, we created this software that automates that process, where you're not having to go to a spreadsheet every other day, where it's giving you notifications in real time. You're always aware of what's going on in your contracts, where your market share, where your spend is, and just giving you a lot of insight into rebates and making sure that the vendors are paying you out, paying you on time, and also that you're meeting their commitment through the agreement as well. It really helps the materials team handle all that.’’

 

08:02 The 3 M’s of rebate management

Tony explained the importance of monitoring, managing, and maximizing and how Rebate Insight helps hospitals to achieve all three.  

‘’Looking at this product and taking all the different information that you receive, we found that by monitoring, managing, and maximizing ... those are our three M's. Those really, if you were to see the demo or if you were to see the dashboard, it really kicks in, and you're able to ... under the whole monitoring is monitoring what your health system's doing. How are you handling every contract that goes into Rebate Insight, giving you at a high level all the information you need, and then going into the managing piece where it's more detailed specific to each agreement. Then going into the maximizing, where you're able to go in and if it is fifteen days, five days before your quarter ends or your annual commitment ends and you have to make a decision, you're able to do this all through the software, in real time, in a point-click SaaS product. You're able to effectively go into this product and make decisions or see where you currently stand, all in real time.’’

 

11:11 Dark data and the pain points of rebate management

Tony said hospitals share many common pain points.

‘’Some of the common pain points are we don't know what is owed to us. We don't have any expertise and rebate insight. We work kind of siloed. We don't know what AP is receiving. Checks are going everywhere. We're receiving credit memos that people are not aware of. There's just a lot of that what I say is like dark data out there, and no visibility for the health system as a whole. One thing we found while we were creating this is how many people are involved and how many people should be in the process of rebate tracking that are not, just because you have someone like the director negotiating agreements, putting rebates in place, but you have, on the other side, AP that is receiving the checks, or maybe the vendors are bringing the checks to the director. Just a lot of mismanagement of also where checks are. A lot of times checks are lost, so there's nothing really that connects everybody. That's what's so great about Rebate Insight. It's all built in that platform where AP has a module, where directors can have access to that dashboard, and then the materials team has access as well.’’

 

13:56 4 Benefits of Software-as-a-Service (SAAS)

Jonas said Rebate Insight can help to support renegotiating contract terms with suppliers. 

‘’Really, I think when we think about value is we think about it almost in different buckets, right? We think about I should say it goes under financial leakage, is you make sure you receive what you're owed. That's a big piece. Second is if you can speed up the actual payment, receive it earlier, then you can gain some value from having that cash on hand. Then third, what we think about is if you can maximize your existing agreements, you have opportunities at a given time throughout the year where you might be able to go to a higher tier because you're so close. You spend a little bit more money to get a bigger benefit. Then finally, when you have a tool like this ... and I think Tony can speak to this as well ... is you get that visibility into all your agreements. That enables you to just have discussion with suppliers and vendors and say, "Why don't we renegotiate our terms? Give me a little bit higher rebate," which when you can track it, that's a huge benefit for the health system and you're going to see that financial return.’’

 

19:22 The value of SpendMend

Tony and Jonas agreed that being with SpendMend feels more like a partnership.  

‘’At first, there's always a little hesitation of selling your creation, right, but the value that SpendMend brings to the table with their 30 years experience in the health system, it has just been so great for at least speaking for myself, and I know Jonas will talk a little bit of this as well. I mean, when you really partner with ... and that's what it really feels like. It doesn't feel like, "Hey, you got bought out and that's it." No, it really feels like we partnered with SpendMend, and it just really opens up a lot of doors for us. Again, with that experience, being able to go to certain leaders in the organization and able to have a sales team, a marketing team, is huge. Those all have been great benefits, and super excited and really almost privileged to have that opportunity.’’

 

Connect with Lisa Miller on LinkedIn

Connect with Jim Cagliostro on LinkedIn

Connect with Tony Garcia on LinkedIn

Connect with Jonas Langvad on LinkedIn

Check out VIE Healthcare and SpendMend 

 

You’ll also hear: 

 

Understanding rebates: ‘’For those not familiar with rebates, right, it's basically a supplier that offers you an incentive on a contract. If you buy X number of products, they'll give you let's say 5% back on a rebate. Usually there's some criteria tied to it, but that's sort of the starting point there.’’ 

The benefits of Rebate Insight’s SaaS tool: ‘’… we're seeing how systems that are using Rebate Insight increase their rebates by 26% or more by using the tool.’’

How Rebate Insight transforms rebate management: ‘’It’s subscription-based, cloud-based, which makes it very easy to sign up for, implement. There are no expensive servers …it pulls together all the data from different sources… It really gives you that real-time view of this is where you stand today. You can monitor all your rebates, all your contracts this way, all your compliance.‘’

Rebate Insight tracks trends and tiers for hospitals: ‘’Rebate Insight tracks your trends. You could go back and look at the quarter and say, "Wow, my trend for last quarter was tier two, but we're still signed on tier one. Oh, this quarter is tier two as well. The vendors don't tell you that. The vendors rarely come back and say, "Hey, you've been achieving tier two, go ahead and click on it because now your price is dropping 20%."

 

What To Do Next:

 

1. Subscribe to The Economics of Healthcare and receive a special report on 15 Effective Cost Savings Strategies.

 

2. There are three ways to work with VIE Healthcare:

 

• Benchmark a vendor contract – either an existing contract or a new agreement.

• We can support your team with their cost savings initiatives to add resources and expertise. We set a bold cost savings goal and work together to achieve it. 

• VIE can perform a cost savings opportunity assessment. We dig deep into all of your spend and uncover unique areas of cost savings. 

3. If you are interested in learning more, the quickest way to get your questions answered is to speak with Lisa Miller at [email protected] or directly at 732-319-5700.