Contract management = cost management
Cost containment is one of the most difficult issues in the health care industry. This article presents a case study of one relatively small HMO that contained costs through the strategy of contract management. Neighborhood Health Plan (NHP) is a Massachusetts HMO which has about 40,000 members, three-fourths of whom are on Medicaid. In 1995, NHP established the Hospital Contracting Project team to better select and manage hospital contracts. The team developed the Provider Service Matrix as a tool for balancing the need to provide high-quality patient care with the financial health requirements of the organization. Lessons learned from the project include recommendations to represent key skills on the project team, set realistic deadlines, and secure support from top management.