By  David Hewitt, Senior VP of Sales

If your business is currently using a preventative profit recovery tool to address and reverse financial leakage, it’s important to be aware of its limitations and drawbacks. While marketed as a comprehensive solution, these tools have been found to produce numerous false positives and require a significant amount of manual intervention to research, validate, and correct issues. According to industry research, these tools only identify a small percentage of potential losses, usually between 15-20% of actual losses. Furthermore, the implementation of these tools often requires a considerable amount of internal research and resources, which can offset any potential savings.

One of the primary issues with preventative profit recovery tools is their limited scope. These tools often provide only a narrow review of a hospital’s payments and transactions, which can cause them to overlook key areas of potential loss, especially when dealing with contracts that require manual sampling of contracted items and terms, as well as vendor statements which must be collected from hundreds (if not thousands) of disparate locations outside the hospital. As a result, preventative tools will provide some insight, but they do not shed any light on dark data, nor do they offer a comprehensive understanding of financial leakage throughout the entire Procure-to-Pay process.

Further, the high incidence of false positives in payment prevention technology means that these tools require a significant amount of manual research and manipulation to review and validate the issues identified. According to Andreas Weiskam, partner at Sapphire Ventures and investor in the Profit Recovery space, “Up to 60% of claims generated by preventative software could represent false positives.” This can result in additional costs and time spent resolving issues, which can ultimately offset any potential savings. Even if your controls are dialed down, you may still experience a modest 25% false positives and will still require hours of manual effort and research you simply cannot afford – and again, that is only in pursuit of a partial solution.

To address these concerns, companies should remain on the tried-and-true methodology of contracting with an expert recovery audit firm that can provide a more comprehensive solution for profit recovery. These expert firms can leverage all the same (or very similar) algorithmic technology you would have otherwise plugged into your system to identify and recover lost funds quickly and efficiently. In addition, these expert practitioners can also utilize a range of strategies and tools to address financial leakage across the entire Procure-to-Pay process.

With a deep bench of experts at their disposal, hospitals can rest assure they are receiving the most accurate and comprehensive view of their financial records, as well as prompt and thorough recovery of lost funds. Add to that, many recovery audit firms actively generate tangible recommendations for real-time and forward-thinking improvements that will demonstrably prevent errors from ever happening again. Payables prevention and screening technology does not do this.

Industry experts also echo these concerns regarding the limitations of preventative profit recovery tools. According to Rob DeVincent, VP of Product Marketing at Corcentric, “Organizations need to have the right people, processes, and technology in place to address these issues proactively.” Similarly, Tom Bohn, CEO emeritus of the Institute of Accounts Payable Professionals, notes that “Preventative measures can help, but without the right people and processes, the lasting benefits of these tools will be limited.”

In summary, hospitals should be aware of the limitations of preventative profit recovery tools and consider investing in a proper recovery audit firm to fully address and reverse financial leakage across the entire Procure-to-Pay process. By taking a more nuanced approach to profit recovery, hospitals can minimize losses, maximize savings and save time and resources. As Dan Andrea, Director of Research at Gartner, advises, “Organizations should work to balance tools and solutions with strong processes, people, and governance in order to truly optimize recovery efforts.”