The Next Phase of Vendor Management
Adjudication Services Group's Innovative Proactive Approach
Managing vendors is nothing new. It is something which businesses in almost every space have to deal with. The means in how they approach managing the relationships with their service providers vary from organization to organization. Many have internal departments or personnel that are assigned the task, other larger corporations or municipalities delegate the task to their procurement or contract management teams or another alternative utilized by some organizations is to outsource the responsibility in part or whole to a vendor management firm.
Regardless of the manner in which an organization elects to oversee their service providers there is one constant, one commonality between each and every program. Regardless of size, business model or reporting methodologies, every vendor management program currently relies on purely retrospective data.
So what, how else do we expect them to know if their service providers are meeting the expectations set forth by the industry? How would we know if they are adhering to specific service level guidelines established by the organization with whom they are contracted? You must review their performance data, right? Well, we would agree to an extent that historical performance is absolutely a factor in determining if a service provider is living up to the expectations of their contracts or the standards of the industry alone. However, there is an inherent flaw with today’s process, its data and the overall concept of “vendor management” today.
Vendor Management today in any of its forms is dependent on the review of completed services provided to their client. Where does that data come from? How do they get it? Who gets it? What do they do with it? Although there are some variations the general outline remains as follows:
1. Retrospective Data Obtained (from company system or from vendor)
2. Review of completed data against metrics
3. Reporting of findings with corrective action required
4. Go back to step 1 next cycle
Service providers, especially for larger organizations may fulfill hundreds if not thousands or tens of thousands of requests from their clients. The review of that amount of data represents a task that would require numerous employees and countless hours to review and report on. It is neither practical nor economical for organizations to do so. Therefore, they approach this by establishing a standard period of time for which they would review completed service requests. Organizations who actively monitor most often do this on a quarterly basis, although there are some (not many) that attempt to do so monthly (they are faced with other issues we will touch on later). For the moment, let’s focus on quarterly reviewers. As noted, dealing with multiple service providers, and even over the three month period in the quarter can represent more services than can be effectively reviewed. That is why even companies who require their vendors to enter in specific metrics pertaining to their service, such as start dates, end dates, and milestone metrics in between, utilize random samples over the determined period of time.
The issue with random samples is they may or may not catch deficiencies in performance or outliers which could significantly impact your overall program metrics. Leaving program managers to have to invest additional time combing through to locate individual service anomalies which have adversely affected their performance. But let’s give it the benefit of the doubt and assume that they have the ability to capture these outliers and bring them to the attention of the service provider. The reality is, that outlier or those samples may not be indicative of the performance the vendor is providing today. Now let’s go back to our monthly reviewers. These organizations almost always rely 100% on reporting from the vendor themselves.
In any controlled review environment, data provided by the subject is rarely reliable. Not to say that the service provider is “lying” but over the course of my career there have been plenty of service providers who have been liberal with their application of perception. For example, one on of the biggest is the debate between “business days” versus “calendar days” when looking at turn-around or meeting of deadlines. There are many examples of that type of interpretation that goes into reports provided from a service provider to their client regarding their own performance. Too many organizations today rely on “self-reporting” to determine if their service providers are fulfilling their obligations. This process by nature calls into question the validity or accuracy of their findings.
So barring the integrity or accuracy of the data being reviewed, what is it that organizations do with this data? Dependent on the structure of the program, there are several things that are done today with the data they receive from their reviews. Most programs will take the problematic services and reach out to the vendor asking for an explanation or reason as to why the service was not in line with the expectations (this could pertain to outcomes, cost, or any service metric). The majority of the time, there is an acceptable explanation provided to the client that negates the issue. Now, aside from blatant neglect or a significantly inexplicable screw up, from my experience in both reviewing and submitting these reports, there is always an explanation. The explanation usually satisfies the audit and they move on. The problem again lies in the random nature of the sample set and the time period, as by the nature of the review, it is virtually impossible to determine if this is representative of a pattern or a specific deficiency which needs to be addressed. In the end, the vendor receives their report card and walks away with either a good job pat on the back or a let’s bring that score up for next time. These reviews will go on for the term of the contracts and unless some tremendous infraction resulting in significant revenue loss, consistent sub par performance is more often than not missed, conversely excellent quality work can be overlooked or not given the appropriate accolade or recognition it warrants.
Management by definition is “the process of dealing with or controlling things or people” while the definition for “Reactive” is “showing a response to stimulus.”, “acting in response to a situation rather than creating or controlling it.” Regardless, of the source of data and who is reviewing it, the process for all vendor and program management today is one hundred percent reactive. Organizations today are only able to adjust their course AFTER something has occurred. This is problematic for organizations that rely on their service providers to perform up to their expectations and is compounded in situations where that organization is itself providing a services for another company, as they are left being the one ultimately responsible for their service providers short coming.
Early in my career I was told by the President of the company I worked for that she appreciated people who were able to correct problems. However, she truly valued those that could prevent them from occurring in the first place. By definition the processes in place today in reviewing vendor performance do not qualify as “management”. Vendor Auditing, Vendor Reporting, Vendor Liaisons perhaps, but certainly not management.
Why is this the way it is? The answer is simple. Because when these organizations were founded the magnitude and diversity in service providers did not exist. They performed many of the actions themselves. But as time evolved, services for efficiency, cost or legality were outsourced more and more. Yet, an effective method for "management" of these services did not evolve with the industry. So to date, everyone has tried to catch up and do the best they can with the resources allocated to them to do so. But today’s market and clients are more in tune with their programs, their outcomes and their performance expectations. There needs to be a change.
The Proactive Vendor Management Model
The reason no one proactively manages service providers today frankly, is because they are not able to. They lack the tools to monitor service providers actively one referral at a time. The technology they utilize was not designed to do so. The manpower currently invested in the current process is blinding and the ROI of investing additional resources into the process makes for an easy denial from the number crunchers. Organizations make do and try to gain some semblance of control with stringent Service Level Agreements and strict penalties for non-compliance but as we reviewed, these are only as effective as the auditing methods being utilized. How then, do we change from a reactive to proactive model.
This was the question we asked ourselves in 2013. How can we help organizations to accomplish three main goals:
Gain true control and visibility of their vendor programs
Increase efficiencies for organizations that are utilizing multiple service providers
Improve bottom line and program outcomes
We began interviewing industry professionals about what their pain points were. Inquiring with professionals in multiple spaces including healthcare, legal and claims. We began development of a concept which garnished a lot of interest at the time but our initial focus was less on the management of these services as much as it was on the consolidation of them. In doing so, we recognized that much like Eastern versus Western medicine we needed to take a holistic approach to the solution and stop trying to address the individual symptom. We took all of the data, and insight received from our esteemed industry colleagues and sources and developed a complete and proactive solution we called The ASG Model offering organizations for the first time the means to implement a proactive vendor management solution.
Using our experience and the input of multiple industry professionals we developed a software which enables organizations to attain the three main goals we set out to meet in 2013 and more. Adjudication Services Group Ancillary Referral Database or A.S.G.A.R.D. fulfills all of an organizations needs:
Day to Day Users
Submit referrals for any and all services in A.S.G.A.R.D.
Track and/or Update requests
Upload Documents for any/all vendors only once
Communicate with all vendors via A.S.G.A.R.D. or ASG
Evaluate your experience per referral contributing real time
Program / Risk Managers
Monitor overall vendor performance real time
Enforce SLA Rules and Requirements in A.S.G.A.R.D.
Centralize Communications and Payments
Monitor Vendor Spend and Claim Costs
The technology that Adjudication Services Group has created truly empowers organizations with 100% control over their vendor programs. It reduces the amount of time daily claim professionals spend in requesting and communicating with multiple vendors thus increasing the amount of time they have to focus on claimants. A.S.G.A.R.D.’s suite of management tools and data provide unprecedented transparency and control over program performance.
Despite all of the above there are still some inherent problems in the way our industry works today. One of them being the trend of working only with large national companies. Picture it…New York…1990 and every service provider organizations utilized were small to mid-sized local or regional companies. These companies focused immensely on customer service and quality. They were profitable for their owners and most of them had longevity. There were no tremendous insurance requirements, technology was light years away from where we are today and venture capitalists…what were they?
Today, the regional players have been all but absorbed by large conglomerates. The focus on quality and service has shifted to a focus on EBITA and units and organizations “believe” that they are protected by these long term contracts and Service Level Agreements. But as we have reviewed, there is a lot of room for interpretation there.
What does that have to do with proactive management? Nothing and yet, everything. Organizations in every space contract with service providers and they are tied in to 2-3 year agreements, sometimes for exclusivity and one commonality for each of these contracts (I know from having written some of them myself) is the ability to remedy issues prior to termination. Now, this is not necessarily a bad thing, when applied as intended. However, this has become a means for some service providers engaged in long term contracts to push the proverbial envelop in many areas. Organizations feel trapped until the next contract period at which time they must engage in a lengthy and burdensome procurement cycle.
We believe that true control should come with the ability to choose. That is why we created the ASG Network. This is an online network of ancillary providers who have been pre-screened by ASG. Each participating vendor is reviewed in areas of Service, Technology & Security, Solvency and Client Feedback. ASG issues each vendor a Tier and Rating we refer to as their ASG ScoreTM which is visible to any organization utilizing ASGARD. The objective is to give organizations the freedom of choice and ability to work with vendors who are providing quality services without obligating the organization to extended contractual terms. By eliminating the restrictive nature of the long term vendor contract, organizations have the control to work with quality service providers in their respective areas across the country. The ASG Model empowers organizations with the Freedom of Choice and the ability to use it.
The most impressive part of The ASG Model is that it does not dictate what organizations must do with their vendors or who their vendors must be. The ASG Model simply provides organizations with the means to increase efficiencies, improve transparency and obtain better outcomes on their programs. They can use their current vendors and truly rate their performance and enforce compliance while having the option to try other service providers and rate the experiences to make informed and empowered proactive decisions on their programs.
That is the power of true management. Adjudication Services Group has invested significantly in the development of its technology and is proud to offer some exclusive tools to help make day to day claims life that much easier.
To learn more about Adjudication Services Group, The ASG Model or how to become a Certified Vendor Partner, visit our site at www.asgnational.com or call us at (631) 358-5823.