Webinar Recap: 5 Hidden Ways That COVID-19 is Impacting Your Business

SpendMend Team

Written By: Rob Heminger, SpendMend President, rheminger@spendmend.com

Yesterday I hosted a webinar entitled, “The five hidden reasons why COVID-19 is hurting your Procure-to-Pay (P2P) process.”

I used the presentation to reveal several hidden areas throughout the P2P cycle where U.S. hospitals are losing significant hard and soft dollars. I was motivated to deliver this webinar because of the unique visibility I gain through the work that I do on a daily basis.

The SpendMend team oversees many cost cycle recovery initiatives at nearly 100 top U.S. health systems.  We manage and review hundreds of billions of dollars in hospital spend.  By leveraging our in-depth data and analysis, we uncovered and outlined several trouble spots that seem to be hiding in plain sight.  Our goal was (and is) to create as much visibility as possible and to help P2P professionals throughout the healthcare industry to take notice of and to address these issues.

Specifically, for this webinar, I compared and contrasted trends I was seeing in client data that I had received in the last few weeks versus what I had noticed in the data from January of this year.  Basically, I just looked at data from right now versus from the period right before the COVID-19 pandemic took over our economy – and the difference was night and day. 

From the vendor data, I noticed that suppliers were being onboarded at an alarming pace.  The incidence of duplicate or related vendors being set up in the hospital system’s shot up 86% over the typical baseline. These suppliers records are 2.9 times more likely to include invalid or missing tax identification numbers.  As the “rush” to service COVID-19 related demands became a priority, vendor due-diligence and compliance decreased starkly.  And all this is occurring at a time when the strained commercial conditions of the market are giving rise to higher likelihood of fraud.  In fact, Google reported last month a spike of over 24M daily spam messages related to the novel coronavirus.

Related to the behavior of vendors, I saw (in our client data) a drop from 28% down to 13% in response to a basic “request for data.”  Which begs the question… “Why are so many vendors ignoring common data requests?”  I also recognized where the percentage of zero-balance statements submitted from vendors had increased 44% over the typical baseline numbers that we are accustomed to seeing.  This is a clear indication that vendors are either withholding information or they’re reconciling their accounts without the hospital’s input.  I also saw an unprecedented increase in messages from vendors that outright stated they would be applying open credits and cleaning up their accounts.

The strange vendor activity described in the above paragraph is supported in a U.S. Chamber of Commerce report from June 3, 2020 which asserted that 20% of companies had already gone out of business; 57% were worried they would have to go out of business and 44% of companies were feeling uncomfortable about their cash flow position.  So, it’s not a surprise that vendors are suppressing credit information or reconciling their accounts on their own. (Please note, you can reverse this trend and SpendMend has several strategies to help you recapture those otherwise lost credits).

From the transactional data, I noticed some even more alarming statistics that spoke directly to an increase in payment errors and a decrease in internal processing compliance.  Specifically, I saw where – in only three months – there was a 28% increase in the incidence of duplicate payments and a 29% increase in the volume of off contract spend.  Just consider how drastic those volumes are and this is just the beginning…  Conservatively, these numbers already translate into million-dollar losses at most U.S. hospitals.  As these numbers spike, internal investigation and resolution is on a downward trend.

Truly, the examples listed above are only a sample of the content we shared in the webinar – which was only a small portion of what we’re seeing in the clients’ data.  And as shocking as a lot of those trends may seem, I have to admit that I am not entirely surprised.  I’ve understood for a while that the P2P cycle in a large healthcare network is often disjointed and as a result very elusive dark datasets can emerge in the many gaps that widen between departments and locations.

I’ve also come to learn that presence of dark data is even more pronounced in the healthcare industry because of a series of pressure points that I refer to as the “Three C’s.”  Change, Complexity and Compliance.  You can learn more about that concept here: https://www.linkedin.com/feed/update/urn:li:activity:6625783662342479872

All is not lost, however.  With the realization that these hidden reasons exist, we can continue to inspect the trends and analysis and begin to formulate strategies to reverse the trends and put U.S. hospitals back on a path of cost-savings and profit recovery.

Borrowing heavily from my discussions with key clients – I ended the presentation with a couple of tested ideas and projects that hospitals are using to improve their situation and to greatly reduce the loss of hard dollars.

For more information on this topic and for tips on how to address the hidden issues that are hurting P2P cycles in healthcare – view a free download of our webinar here: https://register.gotowebinar.com/recording/3138529960732615938

Change, Complexity and Compliance in a Pandemic

SpendMend Team

Written By: Michael Koory, Regional Vice President of Sales – Mid America

Does anyone else want to start 2020 all over again? Roll back the time and start over?

Take a minute and think back to your 2020 planning session. Were you were making plans for managing a global pandemic?

Despite our planning and all our controls, a large unexpected force came and rocked everything. It is said, “The only thing you should count on is uncertainty and the only constant is change.” Healthcare workers know this perhaps better than anyone.

“Change” is truly a “constant” in the healthcare industry.

At SpendMend, we began investigating the issues and forces that hinder efforts to preserve controls and drive operational improvements. Over our 25 years, we have identified three primary pressure points exerting forces that all systems must endure – Change, Complexity, and Compliance. We named them the 3 Cs. Now, a fourth one has shown up and demonstrated the power of the 3Cs. As we seem to be moving down the backside of the flattened curve, it is an opportune time to review the 3 Cs again and how COVID-19 amplified them in 2020.

 

Change 

One uniquely human characteristic is our ability to withstand a massive shift or impact on our plans. Often, we play no role in causing the issues that affect us. We take the hit.

You have heard the saying; Life is 10% what happens to you and 90% how you respond, but how do you react to something as massive as Covid-19? You start by making a damage assessment. You gather information, review your goals, and start planning again.

Over the past few months, “change” has demonstrated its power. It cannot be contained. We can only take the hit, take stock of what is left, and move forward again. The only other option is to quit, and in the healthcare industry, we don’t quit. We are committed to saving lives and improving the well-being of patients. Our mission never changes.

Other industries can pivot; they can change product offerings or move into new platforms. But in healthcare, there is no other pursuit outside of saving and improving lives. We must remain vigilant in protecting life.

In healthcare, when a significant force changes the landscape, we must double down on our mission and brace for the impact. In the face of change, we must continue operations as usual, which has a high impact on our staff’s health and our ability to support revenue-generating activities such as elective surgeries. Change affects healthcare under normal circumstances, COVID-19, and the “new normal” has increased this reality by a magnitude.

 

 Complexity 

As if health systems leadership and operations were not complicated enough, mixing a significant relocation of staff offsite to work from home adds to the complexity. Our large-scale rapid experiment of working from home tested many IT systems ability and many leader’s patience over the past few months. By now, we have chuckled at the viral videos of spouses, children, and pets wandering into the background of our team meetings. While these episodes have been good for a group laugh and to relieve some of the stress caused by change, they are also all previews for our new normal.

When teams were deployed to a remote working environment, IT security was tested. As we begin our return to work, the partners you choose must have high levels of data security and the flexibility to adapt and even thrive in complex environments. I was proud of the work the SpendMend IT team did to ensure client data security while deploying our 150-person team, seemingly overnight. We left the confines of our building to our dining room tables, bedrooms, and home offices without missing a beat. We were not alone in this move. Across the United States and around the world, administrative teams not directly involved in patient care moved to remote work.

IT teams all over needed to manage the complexity of a dispersed workforce. The amazing part is, the vast majority did it without missing a beat. These moves protected employees while also protecting data and finances of the many health systems in the USA.

One of the biggest fears discussed regarding remote work, “How do we check on the team? How do we keep on schedule?” Visibility is key to human interactions. We want to see each other. We want to see what is happening in our workplace, families, and community. Complexity is difficult to manage because humans are involved, and we need to see each other and have control over our environment.

 

Compliance 

Typically, any healthcare organization is burdened by managing compliance with a host of internal and external regulations. The same burden applies to process and system controls. A couple of the most prominent players spring to mind: HIPAA, HCQIA, HRRP, and Medicare. Indeed, the list goes on and seems ever-expanding. And now COVID19 and the Federal Government have dropped the CARES ACT right in our lap.

At first glance, the CARES ACT does a great deal to help healthcare organizations and to offset the unexpected expenses and profit losses associated with COVID-19. But upon further inspection, the processes, personnel, and expertise that must be developed internally to remain compliant are significant. Compliance means applying resources toward the Cares act instead of another endeavor.

The truth is, our best efforts at controls still have gaps due to human interactions, and the two other previously mentioned Cs. To remain operationally sound, we need a significant amount of trust and a method to come around and validate. A sound system check keeps everyone involved up to speed and able to operate in their lanes. Teamwork thrives, and people are at their best when everything is running in compliance.

 

Conclusion 

COVID19 has impacted our country, community, and the world. However, we are beginning to move past the most significant portion and get somewhat back to life as usual. Only it won’t be typical for a while. The pandemic demonstrates the power of Change, Complexity, and Compliance.

We are experiencing the 3 Cs and their impact on our lives. We see the need for truthful and actionable information. We can learn from any situation, bad or good, if we can garner information and insight from the experience.

We are learning that flexibility, coupled with security, is a useful characteristic of operational success. When deployed with visibility and information, it becomes a method and system for withstanding the impact of forces like Change, Complexity, and Compliance.

The More Things Change, The More Things Stay The Same

SpendMend Team

Written By: Nicole Thompson, Director of Business Development, nthompson@spendmend.com

When I started in the recovery audit industry as an intern at an industry leader, I was shuttling disks and drives to the data processor’s office and picking up bankers boxes of printed client reports. Pulling invoices meant rolled up sleeves and long lists of invoices, a few days at Iron Mountain and hours on end at the copy machine. As I began calling vendors to follow up on questions about statements, I had to look up contact information on a CD-Rom or call 411. Duplicates were the result of faxed invoices, returns, etc.  After interning I was hired on as an Account Executive. My next role challenged me to build a business development team. From there, I built yet another team and led the implementation of not one, but two CRMs. Now, I’m privileged to be working with simply the best team in the Healthcare Recovery Audit Industry.

CHANGE

Companies were changing. They were moving from legacy homegrown systems and paper invoices to first generation ERP systems like JDEdwards and imaging systems that promised freedom from file cabinets.

Organizations with people entering invoices at locations across the nation and around the world created regional or global AP shared service centers, gravitating toward the goals of cost savings, best practices and oversight.

There goes the recovery audit industry. Not so fast.

Inaccurate information on any of the many touch points of the procure-to-pay cycle, typos, returns, credits not forwarded to AP, new staff training and turnover were just some of the causes of overpayments found by post-payment auditors.

COMPLEXITY

As organizations became more complex, so did ERP systems and their resulting implementations. A once simple 6 month implementation was now a 5-year global rollout with all other projects on hold. With all hands on deck, day-to-day tasks like researching invoices that didn’t match the PO often didn’t get staffs’ full time and attention. Returns? Fugaddaboudit.

Offshoring and outsourcing were the buzzwords of the time, again, keeping everyone busy with change management, training, and conversion. These shared services centers promised to audit their own work.

What could possibly go wrong?

These system changes meant invoices paid in multiple systems, new and inexperienced staff, inadequate training and controls meant the promise of 100% accuracy went out the window.

COMPLIANCE

SOX, data privacy and an ever-growing list of government regulations meant even more issues managing and complying with multiple reporting and governance requirements, all while maintaining or even reducing headcount.

Digital information coming into and leaving organizations reduced paper and manual processes, but “information at your fingertips” was falling far short of the promises made when data in distinct systems had no way of talking to each other. Creating order out of chaos became a pipe dream.

20+ years later, a few (ahem) gray hairs, teams built and countless clients later (no correlation), procure-to-pay, supply chain, sourcing – we all look very different on the outside – but on the inside, change, complexity and compliance are the only constants. Supply chain, purchasing and accounts payable professionals manage all of this with ease. It’s their normal.

As Mary Poppins said so well, more than 99% of what they do is “practically perfect in every way.” But when you’re dealing with millions and billions in spend, that small percentage of errors can really add up. For public companies, those dollars can go back to the bottom line. For privately held organizations, you can reinvest into growth. For healthcare organizations, that means funding even better patient care.

Am I glad the days of pulling invoices at Iron Mountain are over? YES!

But the days of helping companies recover overpayments continue. As long as change, complexity and compliance are part of business, recovery auditing will be as well.

ILLUMINATION

So where do I see recovery auditing progressing?  The devil is in the details, and you have to dig into the details to find the real root cause of every single overpayment.

What happened? Why? How do you fix it?

Only by shining a light on your dark data can you achieve true visibility and uncover the answers to these questions.  And only by implementing the recommendations offered by the experts performing your audit, can you optimize your processes, controls and ultimately your department. You’ll be able to actually prevent those errors from happening in the future.

Change, complexity and compliance ensure that this illumination loop is infinite. We’ll be learning and growing and improving together for years to come.

Medical Device Warranty Credits & Regulatory Requirements…Is Your Hospital at Risk?

SpendMend Team

Written By: Alan J. Brander, CSO at SpendMend, abrander@spendmend.com

Medical Device warranty tracking and credit payments have become a focal point for the Centers for Medicare & Medicaid Services (CMS), as evidenced by several new requirements in past last ten years. Hospital compliance of those rules are being closely scrutinized by the Office of Inspector General (OIG) through the Office of Audit Services (OAS).

The reason for this focus is twofold:

  • The US Government is the largest single purchaser of implantable medical devices in the world.  Spending approximately $35B dollars per year. In the period between 2012 -2014, Medicare paid $30B for cardiac devices alone.
  • Recent audits show that hospitals have done a poor job of self-regulation and reporting. A NY Times article from May 4, 2017, quoted the Department of Health and Human Services (HHS) OIG audit report; a NY area hospital was required to repay $14M dollars due to overpayments. Audits like this have fueled CMS, which recently announced it plans to recoup $1 Billion in improper payments by 2020 through wide spread audits, according to a new rule that hit the federal register on November 1, 2018.  CMS has also stated that they intend to recoup a subsequent $381 Million in improper payments (at minimum) every year beyond their 2020 goal.

The last 10 years have seen a huge increase in surgically implanted devices designed to decrease morbidity, mortality, and improve patient lifestyle. These devices remain in the patient after the conclusion of the procedure for one or more of the following reasons: organ support (i.e. pacemakers), limb or joint replacement (i.e. hips, knees), or automation of monitoring and therapy delivery (neural stimulators or medication pumps). Many of these devices are high tech and may include batteries and computer chips which can fail, malfunction, or have early battery depletion. Even low-tech devices like hips or knees can fail or be recalled. Manufactures of these devices stand behind their product and provide either free replacement cost or partial money back.

The hospital is required to pursue either a no cost replacement or available credits if the device is under warranty. This is determined by returning the explanted device back to the manufacture for testing. The manufacturer then assesses the cause of the device failure then sends credits as applicable. The hospital is supposed to report the credits they receive and if the amount is greater > 50% of the device cost. The hospital is legally responsible to return those monies to the payor of the original procedure. This is known at the 50% Rule. A second rule, known as the Prudent Buyer Standard states that a hospital owes the warranty money to the payor, even if they do not send the explant for review or if they do not recover the funds.

Regardless of intention, failure to refund the payor for Medicare overpayments puts hospitals in violation of the False Claims Act and will prove an extremely costly mistake.  In 2019 the U.S. government increased the penalties to a per violation charge of $11,463 plus 3X the amount of the violation in question – to a maximum of $22,927 plus 3X the amount of the violation in question.  The determination of how and why a violation would trigger a minimum versus a maximum violation was not reported in the update.

To put this is more relatable terms, in a recent use case at a SpendMend client, a Southeastern regional healthcare system with only 1 location and 256 Beds incurred fines of nearly $2 Million.

This seems straight forward…right?  Let’s summarize, if an implantable device is recalled, malfunctions, or fails: send the device back to the manufacture.  The manufacturer will determine the cause of failure and issue a credit if the device qualifies. If the hospital receives a replacement or a credit, which they are to keep, unless it is equal or greater than 50% of the device cost. If the 50% Rule applies, then they must send those monies back to who paid for it. If hospitals do not follow these processes, they will be forced to pay significant penalties and fines.  The OIG is reporting that hospitals are not only failing to properly report, but also, they go so far as to say that hospitals lack the internal procedure and control to manage this process.

The complexity of the explant process, vendor return requirements, and the lag time of 3-6 months to get a determination, is the root cause of many of these errors. There are several hospital departments involved: clinical, pathology, supply chain, compliance, hospital finance, patient billing, and coding. Each has a part, but rarely does anyone own it. Manufactures have several hoops to go through as well as documentation you must provide before they to proceed with testing. The hospital gets a credit check several months after the device has been sent. The Patient Billing department has no idea a credit was received and rarely told to revise a bill and return a credit.

Here are some suggestions to decrease your risk.

  • Find a third-party firm that provides tracking and oversite. The tracking is only as good as your staff’s charting. The oversite and auditing are important to catch what is missed.
  • Globally, develop a system wide policy to guide which devices to return, and a procedure that clearly outlines each departments responsibility.
  • Define an owner or champion of the process.
  • Develop a report that provides a minimum data set to aid in returns. Consider putting a flag in the EMR when an eligible device is explanted. Make sure device description and serial number is a required field.  Do not let your Vendor reps retrieve and initiate the process, or if they do make sure there is a tracking sign off by supply chain to record the relevant data like patient name, encounter number and device serial number in the ERP system.
  • Make sure that the RMA and return kit is obtained from the vendor, accurately filled out and returned with in the 30 to 45-day window.
  • To aid in the return create a specific form and process, ideally managed by supply chain. With every return always ask for a product analysis and report to be returned to the hospital.
  • Consider OCR technology to scan and track credit memos. Make sure your policy and procedure include consistent notification of Patient Accounts of any credit > to 50%.

Three Reasons Why Healthcare Companies Are Draining Cash!

SpendMend Team

Written By: Rob Heminger, President, rheminger@spendmend.com

In today’s complex business landscape, large organizations suffer costly operational lapses and significant financial leakage on a daily basis. The matter is particularly challenging in the healthcare industry and persists because hospitals and health systems face three major factors which create a challenging environment for healthcare professionals.

Our experience at SpendMend has revealed the impact of these three factors are particularly pronounced throughout the P2P cycle where a host of professionals throughout the finance, procurement, sourcing, and supply chain departments are under constant strain.

The three major factors and some of their sub-elements are listed below:

  1. Change:  Hospitals and Healthcare Systems face constant change regarding staff, management, software systems and even all the way down to which locations are in or out of their network in a given year.  It’s never-ending. Common changes include:
    • Hospital Mergers & Acquisitions
    • Upgrading /Changing ERP Systems, EHR’s
    • Restructuring Departments
    • Changing GPO Providers
    • Vendor Mergers
  2. Complexity: Departments tend to function independently and must navigate through a host of competing global rules and local exceptions including:
    • Silo Approach
    • Complex Partners (GPO’s & Vendors)
    • Complex, Non-Integrated Systems
    • Healthcare Regulation
  3. Compliance: In addition to a host of complex and high-stress job tasks, healthcare associates are expected to comply with internal controls and external regulations such as:
    • Return Module Utilization
    • Multiple Approval Points
    • Data Entry Procedures
    • Purchase Order Utilization

When we inspect these three factors and their prevalence in the healthcare industry, in particular, we see quickly that professionals throughout all corners of the P2P cycle are being forced to manage through constantly changing complex environments in an unending pursuit to remain compliant with controls and regulations. As a result, healthcare organizations lose millions of dollars annually due to factors well beyond their control.

Organizations hoping to get a handle on their operational lapses and financial leakage need to consider a three-pronged mindset to ensure that they are addressing each of these issues and creating resolutions to shore up risk and loss.

Have you stopped to think about your own environment and considered the impact of these factors on you company’s productivity?  At minimum you should be opening up water cooler conversations with your co-workers to get their perspectives on the level to which change, complexity, and the pursuit of compliance is impacting your organization.

Any company looking to further diagnose their environment we encourage you to tap into the SpendMend network. We would be happy to put you in touch with our community of clients, partners, and consultants who have deep experience in assessing healthcare environments and helping companies to determine where they may be suffering from common and not-so-common problems.