5 Top Contract Performance Challenges Healthcare Providers Face

Contracts are the lifeblood of modern healthcare operations. Every agreement underpins a relationship or a revenue stream. Yet despite their central role, many view them merely as administrative paperwork. 

The sheer volume alone is staggering: an average hospital manages more than 1,200 local contracts and GPOs. That’s before we even count the myriad agreements with payers, physicians, vendors, suppliers, and allied health professionals. It’s easy to see how this complexity builds quickly. 

Now factor in the extensive diversity of those contracts — ranging from traditional Fee-for-Service (FFS) to intricate Value-Based Care (VBC) models. Each comes with unique terms, obligations, compliance risks, and performance metrics.  

The result? A sprawling, high-stakes contract environment that can either drive strategic advantage or quietly erode value. It’s no surprise that healthcare organizations often struggle to fully manage contract performance, exposing themselves to the risk of leakage in both procurement and revenue. 

So where do the biggest challenges lie?

In this article, we’ll break down the five most critical contract performance challenges facing healthcare providers today—and how GenAI-powered solutions can transform contracts from a liability into a strategic asset.

A Look at the High Stakes of Contract Management Failure

The consequences of contract management challenges can be severe and far-reaching. Healthcare providers lose an estimated $157 billion annually due to inefficiencies in contract management. On top of that, ineffective processes erode contract value by an average of 8.6%.

This financial toll is compounded by the way contract management challenges obstruct strategic initiatives, causing missed opportunities and disruptions in care delivery. 

Challenge 1: Stemming Revenue Leakage from Underpayments and Denials

One of the most pressing issues in healthcare contracting is ensuring proper payment for services rendered. Payer errors are one of the largest contributors to revenue leakage. According to the American Medical Association (AMA), claims processing errors by both public and private payers exceed 19%, leading to underpayments or delayed reimbursements.

On the provider side, many healthcare organizations neglect to regularly review their payer contracts, with 17% of providers never reviewing their contracts and another 16% reviewing them only every two to three years. This leaves them vulnerable to changes in contract terms that benefit payers but harm providers.

A proactive approach to contract performance management—such as tracking payments and reconciling them against the agreed rates—helps mitigate these risks. Leveraging GenAI tools can further assist by identifying discrepancies, analyzing root causes of denials, and recovering underpaid amounts.

For example, a large Midwest health network implemented a contract management system to automate key aspects of their contract lifecycle. Over a seven-year period, they identified over $40 million in underpayments.

This case shows a crucial point: organizations that fail to actively monitor contract performance are almost certainly leaving earned revenue on the table.

Challenge 2: Overcoming Operational Bottlenecks from Manual Processes and Lack of Standardization

Despite the high stakes, many healthcare organizations still manage their complex contract portfolios using outdated, manual methods. Shared drives, email chains, and even physical filing cabinets remain commonplace. These manual processes create operational bottlenecks: they are slow, labor-intensive, prone to human error, and often result in misfiled documents, missed renewal dates, and unaddressed contract terms.

This lack of automation and standardization makes it difficult to track critical obligations or maintain oversight across contracts. Research indicates that 96% of healthcare providers lack modern contract management tools—a staggering number considering the impact on both time and cost.

Take a non-profit skilled nursing provider in Iowa. They faced significant challenges due to manual contract management and physical document storage. By digitizing and centralizing their entire contract portfolio, they created a single, searchable source of truth that could be accessed across the organization, drastically improving vendor management, compliance, and oversight.

This case illustrates how digitization and automation lead to quick wins in eliminating bottlenecks and improving efficiency across organizations. 

Challenge 3: Ensuring Compliance with Stringent Regulatory Mandates

Healthcare contracts are governed by a web of federal and state laws designed to protect patients and ensure fairness. Regulations like HIPAA, the Physician Self-Referral Law (Stark Law), and the Anti-Kickback Statute impose strict guidelines on financial relationships and patient data handling.

Missteps—such as failing to comply with Stark Law exceptions, missing required Business Associate Agreements under HIPAA, or not following specific billing procedures—can lead to severe legal and financial consequences.

Moreover, the frequent mergers and acquisitions (M&As) in healthcare mean providers must continuously integrate legacy contracts into their operations and ensure compliance with up-to-date regulations.

The key to overcoming these challenges is maintaining compliance throughout the contract lifecycle. This includes monitoring for compliance risks, automating compliance tracking, and ensuring that all agreements are updated regularly to reflect regulatory changes.

Challenge 4: Mastering Value-Based Care (VBC) Contract Performance

There is an ongoing fundamental shift today in healthcare payment: the transition from Fee-For-Service (FFS) to Value-Based Care (VBC) allows providers to be reimbursed based on the quality and outcomes of care, rather than the volume of services delivered.

This shift introduces complex performance metrics that providers must meet to ensure reimbursement. However, many healthcare organizations struggle with the significant barriers to VBC success, such as:

• Data & Analytics: VBC requires robust data infrastructure, but fragmented systems and data silos make it hard to track performance effectively.
• Quality Metrics: Providers must report numerous evolving quality metrics, making this process burdensome.
• Financial Risk: VBC requires providers to share financial risk and make upfront investments—creating pressure on budgets.
• Workflow & Culture: Successful VBC requires major cultural shifts and workflow redesigns, which often face resistance from clinicians.
• Administrative Complexity: The complex administrative burden of VBC is overwhelming, particularly for smaller practices.

One example is Hattiesburg Clinic in Mississippi, where AI was leveraged to analyze data, optimize care team functions, and target patient interventions based on identified risks. Similarly, Geisinger Health System used predictive AI models to target chronic disease patients, resulting in over $45 million in annual VBC incentives.

These cases show how AI-driven insights and data analytics can empower healthcare providers to meet the challenges of VBC and significantly improve patient outcomes.

Challenge 5: Achieving Visibility and Actionable Insights for Performance Management

 To effectively manage contract performance, healthcare organizations need complete visibility into all their active contracts. Unfortunately, 62% of healthcare executives report lacking full control over their organization’s contracts. Poor visibility means missed opportunities for contract optimization and the potential for contracts to auto-renew without proper evaluation.

Contracts often reside in silos, disconnected from clinical, financial, and operational systems. This fragmentation makes it difficult to track obligations, compare terms, or make data-driven decisions.

A centralized, AI-powered contract management system is key. By integrating contract data across systems, Execo’s GenAI-powered CLM ensures complete visibility and helps identify risks and opportunities in real-time. With smart data extraction and performance and compliance monitoring, healthcare providers can continuously optimize their contract portfolio.