Go Ahead, Have Your Cake and Eat it Too!

Written By Chelsea Violette and Matt Parker

Compliance is the foundation of a successful 340B program and, rightfully so, is the primary focus for most 340B covered entities. Often, this focus consumes most available staff and resources, leaving terms like optimization and augmentation not only feeling nebulous and out of reach, but also as though focusing on optimization compromises or puts compliant processes at risk. What many don’t realize is that compliance and optimization are not opposing forces, but rather companions that work in a symbiotic relationship; you can indeed have a compliant 340B program and ensure you are capturing all potential savings available to you! When a 340B program is operating as it should, it is more likely to be operating compliantly and in a manner that optimizes savings to the organization. Conveniently, much of the information that is used to assess compliance of a 340B program can be used to identify missed opportunities, making it even easier to have your cake and eat it too. Commonly over-looked opportunities that may be buried in compliance analyses include improper wholesaler pricing, NDC and/or CDM mapping, drug waste management, and retail pharmacy prescription capture.

Let’s take a deeper dive into some of these areas; maybe you’ll find something new to investigate for your organization!

What is a Price Parity Analysis? An analysis of prices paid for a given pharmaceutical across multiple accounts of the same account type (GPO, 340B, even WAC) and within the same class of trade (COT), over a specified period of time. The intent of the analysis is to ensure that all invoices for a given pharmaceutical are the same when purchased on the same account type within the same class of trade. This can be helpful for both 340B covered entities and non-340B organizations.

What is a Price Spike Analysis? An analysis of prices paid for a given pharmaceutical within a single account type over a specified period of time. This is also helpful for both 340B covered entities and non-340B organizations.

What is a Utilization and Purchase Analysis? An analysis of 340B (and GPO when applicable) eligible drug administrations and corresponding purchases across 340B, GPO, and WAC accounts. Anomalies can represent opportunities such as un- or mis-mapped accumulator settings, inaccurate accumulator multipliers, missing utilization data, untapped orphan drug voluntary 340B-like pricing, incorrect contract loads, missing waste documentation, and improper manual purchasing practices.

Why are these analytical tools important? Due the complexity of pharmaceutical pricing and the size and process of data exchange between manufacturers and wholesalers pricing errors can occur. These errors may go unnoticed and impact the bottom-line performance of your pharmacy if internal controls are not in place to identify pricing discrepancies.

Who should be performing these analyses? We recommend that anyone who is purchasing pharmaceuticals from a wholesale distributor or third-party trading partner have a process in place to verify the prices paid on every invoice. If you have a network of pharmacies (ie Health System or IDN) with multiple accounts with the same account type and class of trade a Price Parity Analysis is the analytic of choice, otherwise, a Price Spike Analysis is appropriate when only a single account is available.

We also recommend that anyone managing a 340B program in a fashion where both 340B and non-340B drugs are purchased review their purchasing patterns, in light of their utilization records, to ensure they are not purchasing any 340B drugs without supporting utilization documentation and that they are not purchasing any drugs on a non-340B account unnecessarily.

When should these analyses be performed? Timing is key. For pricing analyses, our experience is that the older a pricing error is, the less likely you will be able to have the price corrected. In a perfect world every invoice would be verified in real time, however, that’s not really feasible for most pharmacies. We recommend that all prices paid be verified as part of a monthly review at minimum.

Analyses of utilizations and purchases are a little more entity-specific and are likely to look different depending on the type and size of the entity and the inventory mechanism used. A large DSH or RRC hospital using a TPA to manage a virtual inventory may need to conduct this analysis monthly, while a smaller CAH or a grantee site may only need to conduct an analysis quarterly to capture any opportunity from pricing or clinical practice changes.

Now go eat your cake and make sure you’re capturing all of the 340B savings you are entitled to! If you’d like help looking for these opportunities, let us know and one of our optimization strategists would be happy to take a deeper dive into your data. You can also join us for our next webinar, Road Map to HRSA Audit Readiness Series: Time for a Tune Up: Making the Most of Your 340B Program on December 14th from 3:00 – 4:00 EST. Click here to register!

Don’t Be Fooled… By Medical Device Non-Compliance!

Written By: Joe Heminger, Business Development Manager

It’s April first and it’s hard enough to get through the day without some prankster trying to pull a fast on you. The last thing you want to do is fool yourself, but in our latest review of U.S. Health Systems, we have learned that that’s exactly what so many healthcare professionals are doing when it comes to managing their medical device healthcare credits.

The following list represents the TOP 3 ways in which professionals in and around the medical device warranty credit process are choosing to FOOL themselves time and time again:

  1.  You don’t closely monitor the warranty credit process because you believe your vendor has it all covered. Too often, hospital O.R. staff has relied upon the vendor to manage the device return and credit process, resulting in gaps and non-compliance. The vendor means well, but they are not the ones with real dollars at stake and they simply don’t have the same incentive to manage the process correctly. Hospitals must have an internal process to return and track the explant back to the vendor, and ensure the resulting credit is tracked, allocated and coded correctly.
  2.  You chose NOT to bring in a third-party independent auditor to check your procedure because you believe you’re doing OK on your own. The truth is, you don’t know what you don’t know. These gaps in compliance can be critical to your hospital and will determine what action the OIG takes. One small gap in compliance can cost your hospital tremendously. The most important measure you can take is to have an external, independent compliance audit of the last 4 years as the OIG found that hospitals do not conduct internal audits have gaps in compliance.
  3. You think the stakes are low and it is just a simple matter if paying back unreturned Medicare credits. There is so much more at stake than you might imagine. The OIG is targeting all U.S. Hospitals in their latest audit. If/when they find proof of an improper payment, they will claw back the amount of the payment, plus a penalty equal to three times the amount of the payment, plus an additional fine of $11,463 up to $22,927 per each infraction. And what’s worse is that hospitals that are shown to have made several egregious errors may be placed on an excluded list and prevented from taking future Medicare reimbursements. And even worse, in cases where deliberate fraud is detected, a Health System executive may be forced to serve jail time.

So please don’t fool yourself! It really isn’t so easy to track every single medical device credit on your own. Too much can go wrong from removal to coding compliance, and far too much is at stake.
Talk to SpendMend about simple strategies you can use to ensure historical and future compliance, no foolin’!

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

Written By: Rob Heminger, SpendMend President,

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:

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:

Change, Complexity and Compliance in a Pandemic

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.



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.



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.



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.



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 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.