Happy AP Appreciation Week to AP Professionals Across the World!

Written By: Tom Flynn, VP of Marketing

We wanted to take this opportunity to acknowledge the Accounts Payable Association, their leader Jamie Radford and his superb team to thank them for hosting and promoting this year’s Accounts Payable Appreciation Week!

It’s important for us to take time to acknowledge the contributions of AP professionals across the globe.  From our vantage at SpendMend, AP is positioned as a critical hub within any organization.  They are situated between many essential groups and are asked to partner with each of these groups on important tasks and workstreams.

AP often reports up to financial leadership in some fashion and in that role, they are tasked with managing and maintaining critical finance goals and controls.  AP must also forge a relationship with sourcing and procurement so the P2P process is seamless.  AP also maintains a large population of employees and are tasked with getting payroll out on time as well as getting expenses paid.  Possibly the largest and most difficult task of an AP department is the onboarding and management of a huge population of suppliers.  In that role AP serves are the final gate keeper on all money before it leaves the organization.
Simply put, AP is asked to do many tasks while interacting with vast arrays of groups and in most of these cases there is zero room for error.  Whenever people refer to AP as the “back office” it is always important for them to understand that “back office” does not mean “background.” It is more accurate to think of the AP “back office” as the “back bone” of an organization because AP is a central pillar in any business.  The last twelve months have demonstrated this reality more than any other time in recent memory.

When global pandemic challenged commerce across the globe, AP departments everywhere rose to the challenge to provide leadership and grit on par with front line healthcare workers. You ensured that bills were paid, that supply chains remained open, and that organizations continued to function under these new adverse conditions.  These were circumstances that most people had never seen before, and for most people, they had never even dreamed of such circumstances.  AP departments everywhere came through in a big way all the while suffering large scale staff reductions and mobilizing their staffs to move out of the office and work from home.

If you are in Accounts Payable in some form or fashion, then please know that this message is absolutely for you.  Thank you for your contributions on a daily, weekly, monthly basis and keep doing the great work that you’re doing. 

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

The Positive Influence of Supply Chain into the Recovery Audit Process

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.