Vendor management: a model for collaboration and quality improvement

The Massachusetts Medicaid agency, also known as the Division of Medical Assistance, has developed a quality-driven approach for managing its managed care suppliers. Such an approach has, as its foundation, principles of continuous quality improvement (CQI). Suppliers participate in an annual process whereby CQI goals are negotiated between the division and its suppliers. The division then works with suppliers to achieve such goals. A cornerstone of the division's approach is the notion that data can highlight an unlimited number of opportunities for improvement and that pursuit of such opportunities will ultimately result in meaningful improvements in the health status of recipients who are served by the division.

The agency's approach involves five key steps: 1) the development of contractual terms and purchasing specifications; 2) the identification of improvement priorities; 3) the negotiation of improvement goals; 4) efforts directed at meeting improvement goals and measurement of success; and 5) collaboration to achieve mutual objectives.

Overall, suppliers report many benefits of collaborative participation in CQI activities with the division. Suppliers have enhanced their understanding of the importance of meeting the needs of the customer and have further accrued benefits resulting from discussions with managed care vendors throughout the site regarding benchmarking of efforts and CQI efforts. Conversely, suppliers are challenged by the need to balance and allocate resources to meet increasing demands, which are not always consistent, from various purchasers, including the division. The division has been challenged in the evolution of its contract management strategy by an uneven level of knowledge among managed care vendors regarding CQI; goal setting and measurement issues; the length of time and level of effort required to develop good relationships with suppliers; and the critical importance of comparable, valid, and timely submission of data.

Over the last three years, the division has seen a dramatic increase in the responsiveness of managed care suppliers to meet its needs as a purchaser. Specifically, this has been expressed through supplier ability to meet mutually negotiated improvement goals. The division is also pleased that it is beginning to achieve some measurable improvements in outcomes of care.