The Positive Influence of Supply Chain into the Recovery Audit Process

Written By: Nash Shook,

Tucked away in woodsy, western North Carolina, I grew up in a progressive but small-town healthcare household.  My mother was a CRNA in our local hospital. My dad was the Supply Chain Director at the hospital in the next town over. I spent the summer of my Freshman year in high school working as a clerk for my Dad shuttling supplies and putting away inventory. Little did I know then that I would stay the course and pursue a career through various supply chain leadership roles.

When I was in college, to pass time while doing laundry, my roommate, Greg and I took up juggling tennis balls against a black painted wall in the basement of our dorm. Looking back, juggling is considered a perquisite skill I have always tethered to supply chain leaders. There are too many important duties to balance, each requiring intermittent attention to advance the progress and yet, always needing some level of management involvement.

The supply chain leaders I interact with represent the most strategic clients to our firm and come from large health systems. Central to their success is their ability to balance the day to day challenges as well as giving vision to how they lead areas of logistics, procurement, finance, operations, patient care and other support departments.  here are large annual saving targets, attending to critical product shortages, creating sourcing and delivery efficiencies in high-cost, high demand departments, developing staff for growth and staying ahead of expansion needs.  But what is their influence and interest in the exhaust of a recovery audit?

Recovery audits are normally directed toward and lead by the Accounts Payable leadership, and rightfully so due to the extensive review of systems internal and external around the P2P process. For supply chain leaders, recovery audits are not in their top 10 lists, but their involvement has demonstrated they can have a positive impact to their organization.

There are tremendous downstream efficiencies for supply chain, especially since supply chain provides coordination of the P2P across all departments. In most every engagement, we find that compliance (really, a lack thereof) to utilizing the return to vendor module will generate at least a third of the recoveries we find. Many times, that compliance is harder to correct without supply chain’s involvement. Recovery audits for accounts payable as you can imagine has a different exhaust. Why is that different?

I believe it’s twofold. The audit firm’s deliverable has historically been more geared to address AP-oriented issues: preventing duplicate payments, efficiencies around invoice processing, gaps in processes and aligning systems so records are reconciled properly.  There’s so much AP-speak going on, the insights that are of value to supply chain get lost in translation.

It’s also because Supply Chain needs are around building progressive value around cost reduction and process efficiencies, so their focus can be at times more to the business imperatives of the health system: keeping up with growth demands, pursuing large savings goals, developing a clinical value analysis approach to product management, etc.

For supply chain, recovery audits dig deep within products returned and whether or not the credit is properly documented. As mentioned earlier, returns not deducted is one of the top three findings within recovery audits, many times the highest.

Several supply chain executives have indicated to me that product returns are policy driven regardless of which department is issuing the return, so no sole department bears oversight.  However, supply chain leaders want to ensure they support and encourage ways to increase adoption and compliance to the process.

Recovery audits provide a layer or root cause to highlights this lack of adoption:

  • Which hospitals in your system are not utilizing the ERP to chart returns?
  • What departments have the lowest level of compliance?
  • Are vendors being asked to manage returns?
  • What does non-compliance to system-based returns costs the health system?

There’s another diamond in the rough benefit I’ve not mentioned and that’s the contribution that recovery audits provide in operational improvements.

It was referenced earlier that much attention is given to the recovery dollars captured and returned. It is a critical reason behind conducting an audit but unto itself, it’s a starting and stopping point. It’s finite, it stands alone and is merely transactional.

Shouldn’t the real value to the health system be understanding the drivers behind the financial leakage to begin with?

We say all the time that every health system has leakage, but to what degree and to what benefit is having a financial operating system if regular maintenance isn’t performed and if diagnostic measures that detect problems aren’t corrected? Recovery audits that provide detailed root cause analysis can enable leaders across the financial and supply chain areas to know what needs to be done to prevent costly process gaps from growing beyond acceptable levels.

Healthcare Finance & Accounts Payable Leadership Spotlight: Patty Carrel

Name: Patty Carrel

Area of Expertise: AP, Leadership, People Management, Automation, Process Optimization, Financial Technology Solutions

Patty Carrel has worked for some of the largest and most recognizable brands in healthcare for over 30 years.  In her tenure she has been responsible for accounts payable, payroll, accounting and financial reporting, recovery auditing and much more.  She has managed environments with many locations while overseeing staffs of over 75 people.  At her high-water mark, her teams processed over 170,000 invoices a month which is an enormous volume by any standard.

“It didn’t come easy and it didn’t happen overnight.” Patty assured us with full humility.

To construct a process that could manage such a volume, Patty has had to educate herself over the years and work tirelessly.  As she learned to optimize her process, she then began to place more emphasis and effort on building out her technology and automation.  This has been a specialty of hers for the last several decades.  But more than her accomplishments in process, operations and automation, Patty’s most impressive accomplishment, to date, seems to be her focus and dedication on supporting her team.

I caught up with Patty a couple weeks ago and she was gracious enough to join our spotlight and answer a couple questions

Q: Can you tell me a little about what drives you?  What are you passionate about?

A: I’m passionate about driving continual process improvement.  This has always been important to me. Early on when I drove the first initiative to consolidate accounts payable there were a lot of opportunities.  Eventually we got to a point where we had everything highly automated, but every year we still sit down and come up with quite a few ways to improve efficiency.

Q: In your 30-year career do you think you’ve done it all?

A:  No! There is always something more to do.  When I approach a job function or an internal procedure, I am always committed to finding new efficiencies through process and automation. I am passionate about driving this level of continued improvement.

Q: Can you think of something, a project, that you are most proud of? 

A: Well, actually…  when you ask me the question like that, that probably has nothing to do with process or automation.  I’m happy with the work I’ve done, but I’m most proud of the relationships I build and the teams I have been a part of.  I’m always interested in promoting the perception of accounts payable throughout the larger organization and I always want to make sure all of my teams are fulfilled and happy and that they are proud to come to work.

Q: That’s excellent, I’m sure they appreciate it.  

A: It’s just something that’s always been very important to me, and something I’ve worked a lot on.

Q: Those were all the questions I had Patty.  Thanks for giving us a quick glimpse and for joining our Leadership Spotlight!

A: My pleasure.