A Few Facts about Vendor Management Initiatives (VMI)

FACT: VMI Strategies can produce impressive early wins, but tend to lose value quickly.

Claim organizations are dependent on vendors to deliver products, services and solutions that are essential to critical business functions. Subsequently, most claim organizations have invested significant resources in developing vendor management strategies. However, the key to reaping value from the vendor management strategy involves a process that ensures ongoing measurement and continuous improvement. Two studies highlight the pro and con of VM programs.

PRO: Info-Tech reports that found after the initial investment into a VMI is made, the ROI on an effective VMI increases from 3 times to 5 times to 7 times over a relatively short period.

CON: A study by Geller & Company found that without active management of the vendors, 75% of the value of VM savings can disappear within 18 months.

FACT: Complications to operationalizing VMI stem from a lack of alignment.

The problems of maintaining the value from a VMI begin with an overly simplistic view of the project. The idea that management can simply set the goals, choose the vendors, manage the vendors, and consistently meet goals without taking into account the actual "sausage-making" of the various processes involved, set the stage for a lack of organizational alignment.

Failure to align your processes, people and technology is the death nail of many VMI projects. The environment of the claim organization is typically silo-based while vendor management requires a cross-functional commitment. As a result, most VMI's suffer from Top-Down policies that do not take into account there are multiple complex workflows as well as several key stakeholders that are frequently overlooked in planning the VMI. As a result there tends to be a significant lack of alignment between the strategic goals and processes that conflict with the organization's people and technologies.

Exacerbating the problem is that most of the VMI processes occur within a black box. So they are virtually impossible to measure and thus performance simply can't be managed. Since the plans didn't take into account the impact on the various user stakeholders; their commitment to the program is short-lived, as is the attention of management after a few months of putting up with grumbling and non-compliance. Thus, the great value promised by most VMI's is quickly lost.

In addition to the problems created by the above issues, there are two other critical factors that foretell the failure of the VMI. These are:

  1. Accessing meaningful data is almost impossible because the data necessary to manage vendor transactions within the claim system are often non-existent, inaccessible and/or non-transactional. Thus, internal compliance and performance is an on-going issue.

  2. Vendors tend to own the performance data that generate the reports. Their data is, of course, biased to serve their agenda. Hence, it cannot be impartially integrated within the larger context of your company’s overall vendor performance.

The impact of the above factors means that there's really no way to effectively measure nor manage many of the key elements of a successful program. As a result, following through on managing the VMI is complicated and costly; which results in the abandonment of the VMI in an average of 18 months.

The costs of a failed VMI are many, including:

  1. A waste valuable professional time through inefficient and ineffective procedures.

  2. A waste of anticipated savings due to leakage from both internal and external sources.

  3. A weakening of the staff morale due to the effort to promote policy objectives, which in their minds, is little more than paper-pushing activities that take them away from their primary function.

  4. Your company is at increased risk due to lack of compliance with regulatory and business rules, as well as undetected poor vendor performance in responding to your claimants.

FACT: BaseLine offers a low risk, quickly deployable VM technology proven to effectively deliver alignment and automation to the management of complex VMI strategies.

BaseLine’s vendor management technology offers claim organizations a proactive approach to achieving an organization-wide commitment to effective vendor management. BaseLine provides wins to every participating stakeholder.

BaseLine provides a secure cloud-based foundation on which the objectives of every stakeholder are addressed. BaseLine creates a transparent environment that offers the claim organization exceptional fluidity, flexibility and ease of use in managing the flow of referrals. BaseLine’s environment is one which reduces costs and increases the rewards for every stakeholder and enables accountability for performance.

“BaseLine’s VM technology will work within your existing infrastructure as it implements your strategy. It enables all your stakeholders to deliver on their responsibilities and obligations required under your VM strategy without the roadblocks that typically handicap their effectiveness.”

BaseLine is successfully employed by several national, regional and local payers. Our clients have also integrated this technology within the workflows of their third party medical management/UR providers as those vendors play a critical part in the workflows associated with vendor management.

How does it work?

We begin by diagnosing how your work relating to a VMI truly gets done throughout the structure of your company (including your vendors). Then we discuss with your key stakeholders about how they view the current process and where are they feeling the pain in the sausage-making process. Next we consider how we can integrate the corporate goals for VMI with the resolution of the issues raised by the various stakeholders. And then we apply workflow automation and intelligent augmentation technologies to deliver a more effective solution that can provide a win for all the stakeholders and achieve their support for a long-term sustainable and successful program.

BaseLine’s VM technology is capable of delivering a successful and profitable VMI program that delivers processes that enable effective management over the long-term. Along the way, it delivers:

1. Lower costs & improved morale due to smoother more efficient workflows, less administrative work required of staff to process requests; reduced operating capital costs; and lower vendor management noise and costs.

2. Reduced risk & improved compliance with regulatory and business requirements via a secure, HIPAA-compliant, rules-driven, data automation system.

3. Increased claim service quality resulting from delivery of improved scheduling; increased on-time in-full delivery; lower management costs; automated identification & reduction of sources of failed referrals; effective data and document management.

4. Ease to launch new & adjust existing vendor allocations. BaseLine is easy to configure by the program managers without the need to draw on resources from the rest of the organization. This capability makes it possible to easily recognize and reward (or discipline) existing vendors based on performance, and it enables low risk testing of vendors & market innovations.

5. Enhanced visibility into day-to-day transactions via BI Analytics & Dashboards that can motivate vendors to allocate their best resources and expend greater efforts; provide support beyond contractual obligations; willingness to invest for future opportunities.

BaseLine also significantly lowers the cost of referral acquisition for vendors and provides them the opportunity to distinguish their performance given BaseLine’s impartial regular performance tracking. Thus, it is well received and supported virtually all the major national vendors and dozens of local/regional ones.

BaseLine is a win for C-Suite executives, a win for multiple director levels, a win for frontline claim and medical managers, as well as delivering multiple wins for high performance vendors.

Call us to learn more. 818-790-2392

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