Controlling Costs Without Cutting People: How CLM Helps Healthcare

Across the healthcare sector, organizations are making difficult decisions—reducing headcount and cutting programs to offset shrinking margins. But behind these layoffs lies a larger story: escalating financial pressures.

Reimbursement challenges are hitting hard. Medicare’s reduced physician fee schedule and Medicaid redeterminations are cutting into revenue streams, while payers increasingly deny or delay payments. The Centers for Medicare & Medicaid Services (CMS) has also tightened oversight on Medicaid state-directed payments, while new policy changes could reduce Medicaid spending by as much as 14% over the next decade.

At the same time, operating costs are rising—from labor and staffing to drug prices and supply chain expenses.

The pressure has already led to widespread cuts with layoffs reported at health systems across the country as they cite significant financial shortfalls. These headlines underscore a common reality—health systems are caught between rising costs and lower reimbursements, with little room to maneuver.

A silver lining is that, with an eye on maintaining excellent patient care, healthcare organizations are redoubling efforts to find administrative efficiencies so they can recapture margin and shore up front-line support.

Finding Cost Efficiencies with an AI-Powered Contract Management System

At one leading healthcare system, for example, the supply chain team has embarked on an ambitious digital transformation to find new savings and efficiencies in its procurement processes.

It has rolled out a procedural analytics tool that standardized the supply costs associated with procedures, which in one case has realized savings of $700 per procedure, with an overall expected impact of $8 million.

One provider has deployed a contract lifecycle management (CLM) system that is expected to generate $11.6 million in savings.

More significantly, the team has deployed a contract lifecycle management (CLM) system that is expected to generate $11.6 million in savings “through rebate optimization and enhanced service credit realization,” according to a recent report by Healthcare Purchasing News.

This use case underscores the huge impact smarter contract management can have. AI-powered contract management solutions for healthcare providers help them:

• Capture missed revenue by identifying underpayments and ensuring payer contracts are enforced.
• Optimize supplier spend through consolidated vendor agreements and stronger negotiation leverage.
• Safeguard compliance in programs like 340B, reducing audit risk and preserving savings.
• Streamline operations by automating manual contract processes and accelerating cycle times.

Protecting Margins and People by Unlocking the Hidden Value in Contracts

Study after study has demonstrated the direct impact better contract management has on margins. In a recent World Commerce & Contracting report sponsored by Icertis, organizations are missing out on 5% of the margin their contracts entitle them to due to mismanagement.

Organizations that embed financial insight into contract strategy and execution outperform their peers by 5.4% of contract value.

Unsurprisingly, the report found organizations that embed financial insight into contract strategy and execution outperform their peers by 5.4% of contract value.

In healthcare, where payer contracts define reimbursement terms and supplier contracts dictate procurement costs, the opportunity presented by better management of agreements cannot be overstated.

Instead of cutting frontline staff, healthcare providers can protect margins by tackling hidden inefficiencies in the contracting process. Contracts aren’t just legal documents—they’re a roadmap to financial sustainability.

In today’s environment, every missed term, every delayed agreement, and every compliance gap translates into dollars lost. CLM turns those risks into opportunities for savings, helping healthcare organizations navigate change without sacrificing people.