By: David Hewitt, Regional Vice President of Sales – Northeast

When I was told by marketing that I had to write a blog, my first instinct was “…you must think of an excuse, this wasn’t in my job description… I’m Way Too Busy!”

If you’re like me, when told you must do something, you’re on the defensive. The reality is the things that we purposefully try not to do, are the things we need the most. A dentist appointment, annual physical, budget planning… When you think of your example, it most likely is an activity that is done infrequently and without major consequence.

An AP audit can be looked at in the same light. The most common response I get from clients is “I don’t have time” or “I’m too busy”. The reality is we are all too busy, which is the exact reason why an annual historical review is no longer effective. WE can’t worry about incorrect transactions that happened a year ago, when we need to focus on the transactions that are being processed today.

THE WHAT

Organizations across the care continuum are feeling the pressure on their bottom line. While cost control initiatives are commonplace today, organizations are seeking incremental improvement as opposed to transformative gains.

Healthcare expenditures account for nearly 18% of America’s Gross Domestic Product (GDP), with $1 trillion – estimated wasted spending each year in the healthcare due to factors such as inefficiencies, redundancies, fraud and abuse.

On average, SpendMend can identify approximately 0.04 – 0.07% in erroneous payments in a historical audit. For most healthcare systems this equates to $800k-3M in cash recoveries. Some are satisfied with this and continue to perpetual lookback process of the historical audit every 2-3 years.

THE SO WHAT

While the concept of analytics is not new to healthcare, the scope has been rapidly changing over the past few years. The focus has shifted to not only looking at your historical data and trends, but also bringing in our 20+ years in the industry experience, knowing the supplier’s taxonomy as well as their tendencies to apply and suppress credits. The ability to uncover what we call, “dark data”, provides insight into the cause of erroneous payment. This insight creates new opportunities to leverage data to improve efficiency and trim costs.

As health systems continue to be acquisitive in the market place, data is seen as the byproduct of the multiple IT systems and a barrier instead of an enabler due to the lack of easy, repeatable access to high reliability information. Our ability to scrub, filter, and normalize the data, provides a new level of spend visibility for executive leadership. Transforming the data into insights and deploying those insights to drive business optimization and better decision making.

“Data is the most strategic asset an organization has, and yet most people treat it like a by-product of their EMR or financial system,” Ms. Foster says. “Health systems that invest in their data and embrace their data are on the path to long-term viability.”

Murphy, Brook. “The next step in data analytics: Getting from historical to actionable analytics.” Becker’s Health IT and CIO Report, Relay Health, 17 Sept. 2017.

THE NOW WHAT

Imagine a world, where you are looking at KPIs and metrics where the action occurred 12 – 24 months ago. While they might be interesting facts, they are too far behind the next transaction to add real value.

Let’s take a real-life example… I love basketball and am just getting the chance to start coaching my kids. When we watch a game and film each kid, the ability to have them watch themselves and identify what skills need to be fixed or worked on is critical to their progress and success at the next game. If we hold those films/discussion and show them 12 months after the game occurred, the reality is the skills posed today are no longer the skills they needed to focus on 12 months ago. New habits, changes in their environment and personal growth, make the recommendations null and void.

We must apply this same thinking to the AP audit process. The closer we can get to the current day transaction, the more impactful we can be and make change together as a partnership, providing real time coaching to the process.

The findings will not be as large, and really transition from a “finding” to an “insight” – allowing us to adapt real time; changing from keeping score to changing the game.

Visibility Matters. Why just recover Capital and leave all the insights hidden?

SpendMend’s commitment would not only answer the What (recoveries), but also provide a view into the So What (root cause, system configuration or circumvented control) and most importantly the Now What (how do we fix or mend going forward). Goal being, move from something that is repeatable (recovery) to something that is sustainable (visibility).

Introduction to Cost Cycle Management

Reimbursement constraints continue to put pressure on Health Systems throughout the country. Consequently, more and more efforts are focused on creating an efficient well-organized Cost Cycle Management process. Ensuring every bit of revenue captured can make a difference when considering bottom-line margins.

While a sound Revenue Cycle Management approach is definitely “best practice” and necessary, SpendMend has recently noticed Health Systems applying this same approach towards Cost Cycle as well. Cost Cycle Management gives visibility to the costs associated with conducting business and securing the necessary products and services to support the Health System on a day-to-day basis.

An important facet associated with Cost Cycle Management is the containment of Financial Leakage.

The Reality is financial Leakage occurs in every organization. Even though organizations invest considerably in preventative controls (to prevent financial leakage), it still exists. Due to the unique challenges within the Healthcare Industry, Financial Leakage is more prevalent than in any other industry:

Complexity – Departments tend to function independently with different systems and procedures that are not easily transparent, and many times structured to support the clinical needs. (i.e. Surgery, Supply, Pharmacy, etc.)

Compliance – while investment in processes/procedures is sound, a Health System still relies on individuals to comply with those processes. Lack of compliance will harm the data used to contain Financial Leakage.

Change – one of the most consistent attributes in today’s Healthcare Industry is “Change”. Merging with other Health Systems, upgrading or even changing ERP systems, restructuring departments, and changing GPO providers are just a few examples. Many of these changes are also happening with a demanding vendor base as well.

When considering the bottom line margin at the typical Health system, every dollar not contained within the Cost Cycle has a huge impact and can correlate to 50 – 75 times its weight in new revenue.

Here are some compelling stats from our 2017 audits:

For every $1 billion in hospital spending, the recovery equals over $1 million.

Every $1 million recovered is equal to more than the profits of $75 million in Patient Billings

In 2017, we recovered over $100 million for our clients, or the equivalent of over $7.5 billion in Patient Billings

As attention grows towards prevention and containment within Cost Cycle Management, organizations are discovering that the issues causing Financial Leakage are not transparent but rather “Dark”. By uncovering the “dark data” embedded in the process, organizations are beginning to gain full Spend Visibility. Only when full visibility is accomplished can an organization approach a sound Cost Cycle Management process.

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