Administrative tasks associated with rebate processing aren’t typically viewed as revenue generators however, when managed effectively, they can provide benefits and contribute to the bottom line. Left overlooked, a business can encounter compliance issues, misallocate time and resources resulting in financial losses. Standardized rebate calculation processes, validation and analytics become necessary for successful practices.
Many organizations start with one product that can be easily managed with manual
processes, however, company growth soon renders effective management of
submission details impossible to efficiently maintain. Understanding gaps that
require remediation helps develop guidelines for process improvements. Maturation
requires small improvements in stages adding forward-thinking and cumulative
value. Scrutiny is key to the progress making verification of rebate submission
details to be a highly recommended practice.
Assessment of contract strategies, number of products, and transactional volumes are required and consider when moving from simpler to more advanced processes. Stages should be evaluated before moving on to determine if it’s financially viable and realistic given existing resources.
Figure 1 depicts a typical maturity curve when developing a standard rebate processing procedure. Standard progression starts with basic “Pay-To-Invoice” methodology, followed by systematically calculated rebates, then achieving optimization with validations to control revenue leakage.
Exploring the transition, it is important to remember each has its distinct advantages and shortfalls and an optimal state will vary by organization. Understanding the entire spectrum will determine when a change is needed.
The pay to invoice methodology is the easiest and least intensive way to meet the terms and conditions set forth in the contract language. Rebate payment, issued without investigation, based on the Pharmacy Benefit Manager or Managed Care Organization’s invoice interpretation and calculation. Compliance and prompt payment are not issues, but accuracy suffers resulting in the largest amount of revenue loss. Manual analysis overcomes this issue but is impractical when dealing with larger amounts of data.
Invoices vary containing only a few easily scrutinized records or several hundred lines of summarized data. The latter shows an analyst cannot determine the accuracy of the invoice if multiple pricing strategies are being used, like base rebates, price protection, market share rebates, and admin fees.
Calculations are needed to translate contract terms. Ongoing maintenance is critical because the precision of not updated calculations deteriorates rapidly. When contract terms are computed, a basis of comparison is established to measure submitted data. By comparing an invoice to an internally calculated standard, analysts determine the correct payment more efficiently.
Metrics are implemented to systematically gauge performance levels when an operational foundation is established. These measurements provide the analytics to support decisions, launch new projects, allocate resources, and provide insights into revenue trends. Routine checks of process efficiency is crucial to ensure that standards are effectively keeping up with new strategies. Pushing aside these checks for other tasks provides detrimental results.
In our next post we will discuss the Optimal Stage and Continuous Improvements.
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