A mid-sized healthcare payer organization was 3-years into a 6-year commitment with their online benefit platform provider. The ever-present need to cut costs led them to take a deeper look at the products and services included in the agreement and renegotiate if needed.
Objective
Conduct an analysis of the return on investment (ROI) from the current benefit platform agreement and renegotiate to cut costs and improve services/terms.
Approach
After an in-depth ROI analysis, it was clear that, without renegotiating the existing deal to achieve material cost reduction, the Client was not going to see a positive ROI from any of the products or services during the 6-year term of the benefit platform subscription. The team analyzed the original contract documents, as well as the cost of each product/service. The analysis showed the Client was paying much more for the products and services than the industry average, and the agreements that had been signed were well below the standard for the industry, in terms of the amount of risk apportioned to the Client. Seprio began renegotiating the agreements to better protect the Client’s priorities, using the compiled ROI documents as support. A long-term relationship between the Client and this vendor was simply not viable unless the current terms and costs were improved, and this was used as leverage in negotiations. The vendor eventually agreed to reduce costs and agree on more favorable terms. The team achieved a 42% decrease in monthly cost while improving the risk allocation between the vendor and Client. Overall, the cost savings for the 3+ years remaining in the term exceeded $1.9 million.
Results
Overall savings of $1.9 million for the remainder of the term dramatically improved the Client’s ROI from these products and services. In addition, a series of amendments to the existing agreement and SOWs greatly improved the commercial terms. These included:
- Changing the 6-year subscription term license to a perpetual license (removing the necessity to pay additional license fees when the term expires).
- A much broader license grant allowing greater flexibility in the use of the products.
- Eliminating products that were unused with no plans to begin use.
- Decreasing or eliminating certain fees related to growth or increased usage.
- Capping the amount that the fees can increase between terms.
