Acuity co-founder and CEO details how medtech innovators are missing out on substantial revenue opportunities while incurring administrative costs from disjointed contract management.

Michael Monovoukas, CEO and Founder

March 15, 2024

6 Min Read
Michael Monovoukas
Image courtesy of AcuityMD

Traditionally, medtech companies rely on manual and tedious methods to manage contracts, such as documents, email, PDFs, or Excel spreadsheets. These homegrown contract workflows are inefficient and disconnected, making it extremely difficult to quickly analyze data, prioritize opportunities, and share accurate insights across functions and business lines. As a result, sales teams often have limited or outdated knowledge of contracts, pricing, and rebate structures for their local accounts.

Adding to today’s contract management mayhem is an increasingly complex healthcare ecosystem of Integrated Delivery Networks (IDNs), Regional Purchasing Coalitions (RPCs), and Group Purchasing Organizations (GPOs) — a situation expected to get complex as IDNs are projected to grow at a CAGR of 9.1% from 2024 to 2031. Each of these groups influence purchasing and pricing decisions for individual hospitals and surgery centers but medtech companies lack centralized visibility across these groups. Commercial teams have too many blind spots which not only exposes companies to penalty fees for incorrect pricing but also often results in revenue left on the table. Tack on the administrative cost of maintaining contracts and the expense of contract management compounds dramatically over time.

Medtech leaders are feeling the burn. According to ZS Associates, “the primary obstacle to building effective GPO contracts for medtech suppliers is the mountain of data they face that seems equal parts daunting and incomplete.”

Leaders need to bring together current market data, evolving provider groups, price incentives, and disjointed internal systems to improve critical contracting decisions.

The pain: Where it hurts most

Results from the Revenue Management Excellence Survey, an industry survey designed to help medtech companies benchmark their performance, shows that on average, contract sales account for nearly 70% of company revenue. Some medtech companies earn 80% to 90% of their revenue through contract sales. GPOs and IDNs leverage group purchasing power to negotiate volume-based discounts from medtech companies. These groups either share discounts with members, or benefit from lower pricing across their facilities, which might include hospitals, clinics, surgery centers, and ambulatory centers.

After a contract is signed, the manufacturer must calculate and administer the discount or rebate owed to the provider. But because members change frequently, it’s difficult for companies to keep up and know what to charge. Maintaining accurate pricing with dynamic group membership and multiple active contracts leads to pricing discrepancies that prevent manufacturers from realizing the value of the contract. Using homegrown systems to determine what rebate or discount to apply to each member often results in wasted time and resources, price miscalculations, and revenue leakage. In fact, according to Salesforce, the medtech industry lost approximately $20 billion in potential revenue due to poorly managed contracts in 2021 — and the problem is worse today.

Contracting revenue loss may take the form of the following:

  • Chargebacks and fees

  • Overpaying administrative fees

  • Excessive rebates

  • Pricing and billing discrepancies due to mergers, acquisitions, or GPO membership changes

The thorns: No cross-functional or enterprise-wide visibility

One of the biggest thorns in medtech’s side is the lack of visibility sales teams on the ground have into contract members, and the impact that can have on driving revenue. Since the team that negotiates and manages contracts often isn’t the same as the team that sells medtech products, there can be misalignment; sales reps may not realize that some of their target facilities are under a contract and end up not factoring that into deal planning and prioritization — or they can miss the opportunity entirely.

“A major challenge in medtech is not having a bird’s eye view of all local and national contract data across the organization in one place,” said Alex McLachlan, director of sales at Intellijoint, a developer of surgical navigation solutions for total hip and knee joint replacements. “This is becoming a big issue as hospital systems continue to consolidate at an increased pace. The lack of full visibility to contract data has led to missed opportunities, wasted time, miscommunication, and redundant negotiations.”

McLachlan gave an example of a massive hospital system associated with dozens of regional facilities. Intellijoint’s product was approved at one facility, which took close to a full year to negotiate, but due to a lack of visibility, sales reps in different regions did not realize the approval was applicable across the entire hospital system. With a central contract operationalization process and system in place, they would have quickly discovered they didn’t have to negotiate each facility individually and would have leveraged an existing contract to save time and grow sales.

“Initially, we were underutilizing our existing contract with this particular hospital system since our team wasn’t fully aware of the umbrella approval process that covered all of its care facilities,” McLachlan said. “Once we realized this oversight, we were able to identify and pursue opportunities under the approved contract, which significantly shortened the timeline to additional revenue recognition.”

Without shared repositories for critical contract metadata and workflows across teams, leaders are exposed to revenue management errors, ranging from rebate miscalculations to the ROI of their contracting strategy. While medtech leaders see the value and competitive advantage of centralized contract management, many are missing the opportunity to improve by still relying on outdated processes rather than using data-driven technology. In fact, nearly one-third of medtech companies still do not yet have a digital strategy, according to new research from the Deloitte Center for Health Solutions, leaving 33% of companies to struggle with manual processes.

The fix: Centralized oversight and automated alerts

Medtech leaders can extricate themselves from these contract management silos and reclaim their revenue opportunities by providing commercial teams with a shared repository bridging contracting teams and their field teams. In doing so, they can capture untapped opportunity whitespace and avoid price discrepancies. 

When medtech companies manage contracts holistically with a shared digital repository, sales teams can view network opportunities, uncover key insights and analytics, conceptualize new product bundles, and collaborate more efficiently across the organization. Contract and pricing teams increase their operational excellence and develop the systems that support charging the correct, contracted price. Leaders that adopt best-in-class digital solutions are likely to benefit significantly from evolved revenue management and growth.

The quest to streamline the contract management, including price activation and rebate workflows, may be furthered by promising trends in Artificial Intelligence (AI) technology. Companies can leverage AI-powered tools to confirm network information, execute price checks, track contract metadata, and keep up with rapidly changing rosters. Furthermore, Large Language Models (LLMs) can extract meaningful data from paper-based contracts more efficiently than manual processes used today.

Investing in the right contract management systems upfront will equip commercial teams to better manage their hard-won contracts, build trust with customers, pursue better deals through negotiations, control losses, and save massive amounts of time and energy. Correctly deploying contracts enables both manufacturers and providers to deliver better healthcare outcomes to patients, by accelerating the availability and adoption of the latest innovations in medtech.

About the Author

Michael Monovoukas is the co-founder and CEO of AcuityMD. Prior to launching AcuityMD, he was a medtech entrepreneur. He also held a leadership role at PatientPing, a leading provider of care coordination software. Michael started his career as a management consultant at Bain & Company, where he advised leading life sciences companies on growth and commercial strategy. Michael received his M.B.A. from Harvard Business School and his B.A. in Public Policy and Finance from Princeton University. He can be reached at [email protected].

About the Author(s)

Michael Monovoukas

CEO and Founder, AcuityMD

Michael Monovoukas is the co-founder and CEO of AcuityMD. Before launching AcuityMD, he was a Medtech entrepreneur. He also held a leadership role at PatientPing, a leading provider of Care Coordination software. Michael started his career as a management consultant at Bain & Company, advising life sciences companies on growth and commercial strategy. Michael received his M.B.A. from Harvard Business School and his B.A. in Public Policy and Finance from Princeton University, where he was Captain of the Varsity Swimming and Diving Team. He can be reached at [email protected].

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