Model N Solutions

Revenue Management Defined

Optimizing net revenue and profits in an increasingly competitive and regulated industry is top of mind for life science executives. However, until now the management tools at their disposal have been few: manual processes, spreadsheets, or point solutions that address only part of the revenue life cycle. As result, the business processes associated with revenue exhibit major gaps created by departmental boundaries, inadequate systems and the scarcity of timely and accurate information. Furthermore — these gaps in managing revenue are the fundamental sources of revenue leakage and regulatory compliance risk.

Revenue Management unifies all the people involved in the planning and execution of the revenue life cycle around common data and applications, and aligns their efforts across shared business processes. The Model N solution is an integrated approach to managing the end-to-end life cycle of revenue, and is made up of a suite of applications that address pricing, contract development and administration, trade incentives management and calculation and payment of government reimbursements.

Based upon surveys of life science manufacturers, adoption of revenue management best practices and technology can recapture in the range of 2-4% of revenues lost from manual pricing, compliance and settlements processes. In addition, with the growing convergence of commercial and government business models brought on by programs such as Medicare, Model N Revenue Management provides a uniquely integrated platform for regulatory compliance.

Model N's Revenue Management suite is designed to be modular – NOT monolithic. Individual applications address specific aspects of the Revenue Management life cycle and can be deployed stand-alone to address particular company issues. With this approach, the traditional gaps in the Revenue Management process are bridged through shared data, processes and a comprehensive set of controls for minimizing lost revenue and regulatory non-compliance.

Pricing plans and policies are created and published to sales, and enforced through offer development and contract creation processes. Contract approvals are automated and recorded; contract information is online and triggers performance monitoring and settlement payments applications. Customer, contract, membership, and performance data is available in real time. Complex price resolutions across multiple contracts are done for ERP systems. Direct and indirect sales data is validated and cleansed and used to confirm incentive payments, which are routed for approvals and fed to ERP systems.

Information collected along the process on products, customers, and programs is available for use in improving pricing and sales strategies. With process aligned, roles defined, approvals and actions documented, the system becomes the core for regulatory compliance for the revenue life cycle. Rules, alerts and notifications can be configured to monitor process and take preventative steps to stop non-compliant transactions or behaviors. In addition, Model N also has specific applications such as government pricing and Medicaid Claims processing to address government pricing requirements.

How Revenue Management Enhances Existing CRM and ERP Systems

Revenue Management is emerging as an essential application category that is complementary to a company's existing enterprise applications. For example, while CRM systems typically comprise all customer-related processes from contact to contract, they lack critical information necessary to optimize the offer development process and prevent price erosion and revenue leakage. Revenue Management can provide that essential pricing, incentive, product, and contract performance information; for example, customer history and single-customer visibility across multiple product lines or business units.

With access to software applications for Revenue Management, salespeople can gain several advantages. First, they can gather better pricing information with which to generate more profitable offers. The automation of work flow and approvals that the system provides enables them to respond to customers more quickly. And being able to see more easily the historical performance of a customer relative to contractual commitments helps salespeople to maximize the value of each contract.

ERP systems, for their part, are said to manage the entire order-to-cash process; however, they really manage only the process stages from order to collection of cash. To get to net revenue (cash in pocket), a manufacturer needs to first reconcile settlement payments from incentive and rebate programs with business partners and customers. Gaps involving settlements processing, incentives validations, contract and program eligibility, price resolution, and improvements in net-price visibility remain to be resolved.

Revenue Management applications complement an ERP system by providing support at two critical points in the order-to-cash cycle. The first is at the time of order, when the Revenue Management system can provide accurate pricing across multiple overlapping contracts. The second form of support is the validation and processing of distribution partners' and customers' settlement claims in order to give an accurate indication of net revenue in a timely fashion. A spreadsheet is not suited to fill the strategic gap that exists between the major enterprise applications of CRM and ERP, although that is how most organizations try to manage the critical business processes that constitute Revenue Management.