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

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

Three Reasons Why Healthcare Companies Are Draining Cash!

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.