Healthcare organizations love their metrics. Patient wait times, medication adherence, readmission rates. You name it, someone’s tracking it. But there’s one area that doesn’t get nearly enough attention, even though it can make or break how services actually get delivered. Contract performance monitoring shapes whether vendors actually come through for patients or just check boxes for compliance. Thomas Stedham spent 13 years at the Alabama Medicaid Agency figuring out exactly how much these metrics matter when you’re managing millions in vendor contracts.
Highlighting Common Contract Monitoring Mistakes
Talk to any healthcare administrator about contract monitoring, and they’ll tell you it’s necessary. What they won’t always tell you is how much difference it makes when you actually do it right. Stedham saw this play out during a multi-year vendor contract renewal, the kind of project where every metric counted. “When done right, monitoring contract metrics doesn’t just keep you compliant. It helps ensure that vendors deliver meaningful results for the people who matter most, the patients,” he says. Here’s the thing, though. Most places treat this as paperwork, something to keep auditors happy rather than a tool that can actually improve how care gets delivered. Stedham’s experience tells a different story.
Define Clear, Measurable KPIs
You can’t manage what you don’t measure, but measuring the wrong things is almost worse than not measuring at all. “The first step is establishing key performance indicators that are directly tied to the contract’s purpose,” he explains. Response times, eligibility error rates, case resolution turnaround. These aren’t just numbers. They tell you whether vendors are actually doing what they’re supposed to do.
Stedham pushes for KPIs that follow the SMART framework: specific, measurable, achievable, relevant, and time-bound. Sounds professional, but it works. His team proved it by cutting prior authorization processing times significantly. “In my work, we reduced prior authorization processing times by 30% simply by tracking cycle times and checking in weekly with the vendor to ensure accuracy and a quick turnaround time,” he notes. Weekly check-ins and clear targets made vendors accountable in ways that quarterly reports never could.
Align Monitoring With Compliance Requirements
Healthcare doesn’t give you room to mess around with regulations. The rules are strict, and breaking them costs more than money. “Regulatory compliance is non-negotiable in healthcare. Your metrics must be aligned with federal and state regulations, especially in Medicaid programs,” he says. HIPAA, CMS guidelines, state requirements. They all need to be baked into how you’re tracking vendor performance. Stedham led a massive project archiving thousands of case files. Most people would see it as a storage problem. He saw it differently. “It wasn’t just about storage, it was about risk mitigation. Performance tracking helped us stay ahead of audits and protect patient data,” he explains. When compliance is built into your metrics from day one, you’re not scrambling when auditors show up.
Build A Feedback Loop Into Contract Reviews
Here’s where things get interesting. Most organizations collect data, write reports, and file them away. Stedham thinks that’s backwards. “Metrics aren’t just about oversight, they’re about partnership,” he says, and he means it. Quarterly reviews, issue logs, service level agreements. They should all feed into making vendors better at what they do. When vendors see you’re using data to help them improve instead of just catching mistakes, the whole relationship changes. You get partners instead of contractors trying to do the bare minimum.
Contract monitoring gets treated as grunt work. Stedham sees something bigger. “Monitoring healthcare contract performance isn’t just paperwork, it’s a stewardship. It’s how we protect public funds, deliver better services, and improve patient outcomes,” he explains. Whether you’re dealing with one vendor or ten, the math stays the same. “Metrics drive accountability, and accountability drives impact.” Organizations that get this right aren’t just satisfying compliance requirements. They’re building systems that make vendors step up and patients get better care. Stedham leaves leaders with one question to chew on: “If you’re in the process of improving your contract monitoring strategies, start by asking: what outcomes are we truly measuring? The answer will guide everything that follows.” Figure that out, and the rest starts falling into place.
Connect with Thomas Stedham on LinkedIn to explore practical strategies for stronger contract performance.
