Fiscal Heroes to the Rescue — YOU Can Make a Difference

SpendMend Team

By: Tim Berkey

We have all seen and heard countless examples of courage from front-line workers and other medical professionals during the Covid-19 pandemic.  As our nation has experienced an unprecedented (in our era) medical challenge, we have found new respect for those who sacrifice themselves so that others may live.  And even while these amazing stories of human compassion give us temporary reprieve during this difficult time, the resulting impact of Covid-19 has created a gaping financial hole that further threatens the fiscal solvency, and in some cases, the mere existence of certain healthcare organizations.

In predictable response to this challenge, healthcare leaders have spent tireless hours making difficult decisions about the best use of time and resources, as well as creating future plans for dramatic expense reduction and revenue enhancement. In rare cases, these plans and their proper execution will be enough to offset up to a 50-percent reduction inpatient revenue since the early stages of the pandemic.  However, in many cases, even the best plans and execution will still render the organization unable to recoup the entirety of previously lost revenue.  For all organizations, there has been much opportunity to lament these harsh fiscal realities, though there are still strategies to consider which may give financial relief during this challenging time.  And like the creativity and drive, we have seen from those “healthcare heroes”, these other fiscal strategies will likely require a fresh way of viewing traditional problems through a non-traditional lens.  They will require a new group of “fiscal heroes”.

If you are reading this and wonder how you can make a contribution, you can be assured that those opportunities are equally within your reach — even as they may require challenging traditional paradigms.  One such notable example includes the recovery of dollars that already belong to a healthcare organization (either in tangible or contractual form).  For example, the examination of AP transactions for “leakage” (aka, “recovery) is a strategy not foreign to most organizations. Though, it is my experience that some organizations may presume that the potential opportunity is either too difficult to uncover, too small to matter, or that, “we already do a good job finding recovery opportunities.”  It may surprise even the most seasoned financial executives to know that recoveries in excess of $500,000 – $1,000,000 are common and do not reflect “poor AP performance”.  What may need to change in this climate is the manner in which the pursuit of such opportunity is evaluated.  I would argue that the pursuit of this “last-mile” opportunity is an absolute requirement.  Related, how many instances typically avail themselves in which your organization can achieve a significant fiscal bump for something that is already contractually protected and for business already transacted?  The speed-to-value aspect of such a strategy is paramount in a post-pandemic period of cash-flow optimization.

If you are an AP Manager/Leader reading this and have not recently engaged a recovery partner (of your own accord or at the direction of your senior financial leaders), you have the opportunity to be a fiscal hero.  You can begin by engaging in a conversation about achieving last-mile recovery dollars through a vendor partner review of your AP transactions.  Perhaps even more importantly, if you are a financial executive reading this you can enhance your fiscal hero status by temporarily suspending the temptation to judge the potential of realizing a significant revenue increase, and instead, embracing any potential opportunity as a platform from which your future performance standards in this department will be based.  It is human nature to both enjoy a financial recovery and lament that a recovery was even available in the first place. A new paradigm might reflect a culture of “amnesty” for even the largest recovery opportunities so that there is literally no chance that staff are hesitant to engage in future, similar pursuits of financial improvement.  And, to be clear, my experience is that most fiscal leaders are already willing to consider that last-mile recovery dollars in an area like AP are commonly a function of the sheer volume of transactions that this important department must touch, as opposed to inferring that the identification of any material recovery dollars represents a failure of existing management or personnel.  Ninety-nine percent (or more) current transaction accuracy will still yield valuable last-mile dollars to the organization.  Are you ready to realize them?

 

About the Author

Tim Berkey is an independent strategy and delivery healthcare consultant who resides with his wife and family in Charlotte, NC.  With nearly three decades of healthcare process improvement and large-scale expense reduction experience at Premier, Inc., he helps healthcare leaders navigate pressing problems in areas such as supply chain management, general process improvement, and large-scale margin improvement.

When not partnering with healthcare organizations, Tim enjoys family time, art, music, and travel.

The Positive Influence of Supply Chain into the Recovery Audit Process

SpendMend Team

Written By: Nash Shook, nshook@spendmend.com

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.

Stop Leakage and Multiply Savings With Actionable Insights From Your Enterprise Spending

SpendMend Team

By: Michael Koory, Regional VP of Sales – Mid America

All health systems have developed and implemented internal controls designed to protect against losing money in the Procure-to-Pay Process. These include departmental controls, system controls, and process controls.

Despite all of your investment and energy toward loss prevention and controls, Financial Leakage still occurs.  Because of these leaks, hospitals spend a great deal of time, money, and effort detecting and recovering these leaks. The entire recovery audit industry was created to be the chief detective and find lost dollars.

Financial Leakage is revenue lost inside enterprise Procure-to-Pay automation, internal handoffs, keypunch errors, multiple entity spending, missed discounts, payment terms, lost opportunities, and staff reductions.

The full impact of Financial Leakage is frequently missed and out of view.  Rarely is the full spectrum viewed across your health system, due to different departments using different aspects of your system controls. Usually AP cannot access the Purchasing information or the Returns module. This is where gaps can occur because of a lack of visibility where traditional approaches don’t work as well.

The problem with this purely detective and control approach is the lost visibility into root cause analysis and the understanding of the systemic issues causing the leaks.  The reality is most businesses do not have a timely, accurate, and holistic view into their enterprise spend data and preventative measures. This void causes the enterprise to engage in a “whack-a-mole” approach to finding the leaks and yet never solving them.

Our horizontal view across your spending ecosystem will reap significant cost recovery as well as contract compliance, benchmarking, and spend optimization opportunities.

Once organizations can see the full picture of their Procure-to-Pay system, the outlier issues become visible for action to be taken. A clear view provides insight and understanding while the hidden seam breaks and leaks are identified and can be sealed. The visibility of the whole is a force multiplier. A typical cost recovery firm will find savings missed and outside of your system because recovery by itself is no longer enough. Only an in-depth continuous analysis will reveal your internal operations and the visibility to the whole issue.

 

Keep an eye out in two weeks when we discuss where recovery meets visibility.