Written By: Rob Heminger, SpendMend President, email@example.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