Next-Generation Commercial Models Are Redefining Contracting Strategies in MedTech

By Jennifer Conner

Ways of doing business are changing in the healthcare industry, with significant impact on MedTech. Increased risk, rising healthcare costs, and new pricing and payment structures demand new models for commercial relationships.

To name just a few examples:

  • Healthcare providers typically have purchased medical equipment outright. An increasing trend, however, is to lease various types of equipment, using the Device-as-a-Service model.
  • Changes in regulatory policy that favor value-based care are increasingly tying procurement and purchasing decisions to health outcomes.
  • MedTech companies are now splitting risk with buyers under new gain-sharing models and outcome-guarantees.
  • The ongoing shift from inpatient to outpatient care is changing payment rates, putting more financial pressure on MedTech companies.

As with any commercial shift, these changes impact how deals (i.e., contracts) are structured. The new models are driving a shift to longer-term contracts, dynamic pricing terms that are configurable over time, and more intricate relationships with many more partners. Given the regulatory environment around healthcare MedTech companies need to adjust to this new contract complexity while staying on top of the ever-present regulatory and commercial fundamentals that contracts also govern. The upshot of all this change is that MedTech contracts are more challenging to manage and track than ever before.

Given this business context, manual contracting methods are not up to the task. Companies risk setting less-than-optimal terms at the beginning of commercial relationships or missing their margins later on because the terms of the contract aren't being carried out in practice. Worse yet, companies may not even know whether their deals are performing up to par: If your company can't view contract data and terms holistically, it can be difficult to calculate the total profitability of deals over the long term!

All this comes in a business environment marked by extremely tight margins and emerging competition.

MedTech companies need to do more than just keep up with the current challenges. They need to stay out in front of them.

That's where contract intelligence comes in. Contract intelligence is advanced digital contract management that links the entitlements and obligations in any kind of contract to your critical business processes. Contract intelligence ensures that all agreements are in compliance and commitments are upheld, that changing conditions dynamically trigger the appropriate actions, that high-value insights are available in real time, and that new information makes the whole system increasingly smarter and faster.

By transforming unstructured contract information into structured data for integration into other operational systems like CRM, CPQ, and ERP (Invoices, AR), MedTech companies can use it to drive contract terms, configure pricing, set up rebates, and offer the right incentives in every deal. The desired intent of every deal is always properly memorialized in every contract. Later, once the contract is executed, system integration further empowers managers to ensure the intent of the contract is carried out in practice. This includes:

  • product and rebate fulfillment
  • intermediary payments (to GPOs/PBMs)
  • price adherence
  • delivery terms
  • fees for expert engagements

Ultimately, no matter how complex a contract is, contract intelligence delivered by advanced contract lifecycle management (CLM) software makes sure it's executed to bring maximum benefit and deliver maximum profit. On a broader scale, by providing intelligent insights into contract terms, obligations, and risks, and into contractual relationships that span organizations, people, geographies, and regulations, companies can improve negotiations and increase contract performance now and down the road.

Contracts are the engine that drives modern MedTech commercial models. With contract intelligence, MedTech companies can transform their contracts into strategic advantage and stay out in front. To find out more about how Icertis Contract Intelligence is transforming MedTech with its tailored industry solution, download our eBook.