Most healthcare administrators think of contract management as an isolated function that involves creating, negotiating, approving, and storing contracts – and then stops once the employment agreement is signed. But bridging the gap between contract terms and payroll will unlock enormous gains – including cost savings from error avoidance and increased efficiency.
That’s why integrating contract management with compensation management is so beneficial for healthcare organizations. Achieving perfect alignment between provider contract terms and payroll requires clarity, continuity, and a clear line of sight between compensation calculation and the original contract.
“The recruitment process and the compensation management process are really two parts of the same process,” says Douglas Miller, a former director of shared services and consultant in provider compensation for Covenant Health Systems. “Their separation imposes a permanent wall that necessitates a tremendous amount of manual effort to validate that what happened over here actually also happened over there.”
That wall creates significant blind spots where full visibility is critical.
For example, correctly handling fair market valuations and calculations for commercial reasonableness require knowledge first of a recruitment offer – but that won’t always be clear when siloed systems and workflows are in place.
As a work-around, provider compensation professionals must make provider-level adjustments in the compensation management system every time a contract is executed or edited. Validating data to ensure contract terms match payroll requires enormous manual intervention to avoid error.
“Separating the functions [of contracting and compensation] doesn’t just mean more work,” says Miller. “It means higher risk of errors.”
That’s a risk not worth taking because compensation errors erode trust, putting the provider relationship in jeopardy.
So, what’s the right solution?
When the two processes are connected on a single platform using smart technology, contracts flow automatically into the compensation module, eliminating the possibility of payroll falling out of alignment with contract terms. Unfortunately, most contract management systems and tools on the market today are little more than document storage platforms – not meant to connect meaningfully with other systems, and not capable of accommodating the complexities and variabilities within provider contracts and provider compensation models.
To find a combined technology solution, look for four key elements:
1: Automation
Automation is the engine that accelerates processes and increases accuracy – which translates to cost savings. A well-known PricewaterhouseCoopers study concluded that organizations could save as much as 2% of total annual costs – a small number that translates to huge savings. Miller explains: “When the relationship between contracts and compensation is virtually automated, we can eliminate the rabbit holes that trip compensation up – because now there’s only one process being managed by two modules.”
2: Configurability
A fully configurable rules engine enables users to design and execute detailed workflows that align with organizational policies and processes for onboarding, renegotiation, compensation, and reporting – and should be designed to handle complex contracts with unlimited permutations and combinations specific to organizational needs, preferences, and contract variations.
3: Healthcare-specialized
A platform for managing contracts and compensation needs to speak the language of healthcare – from accommodating pay elements based on healthcare-specific metrics (like wRVUs or value-based compensation models) to being able to create a medical director contract from a physician contract. To meet your specific needs, it must be designed for the idiosyncrasies and unique requirements of this incredibly distinctive market.
4: Deep integration
Interoperability between the contract and compensation management systems is pivotal. That goes far beyond just two systems – you need to look for a solution capable of integrating with your EMR, HR, legal, recruiting, financial, and payroll systems as well. Combining all related data streams, functionalities, and communication channels is the only path to reducing errors, avoiding manual intervention, and building trust and engagement with providers.
That’s the power of a single platform for provider compensation and contract management.
When you consolidate everything into a centralized, simply intelligent platform, you achieve a single source of truth – which puts you in control of an otherwise unstable and uncertain process. With immediate improvement in data accuracy and workflow efficiency, your organization will see significant time and cost savings, reduced risk, smoother processes, and better decision-making.
Author: Dave Butcher is Chief Growth Officer – Heisenberg II at Hallmark Health Care Solutions,
