October 19, 2023
Six Insights from the HFMA Conference And Benefits of Supplier Payment Recovery for Healthcare
From June 25 – 28, 2023, Chip Reid, Vice President of Global Audit Sales at apexanalytix attended the Healthcare Financial Management Association Annual Conference in Nashville, TN. He came away with the ultimate opinion that Healthcare organizations can benefit from recovery audits, specifically in transactions involving hospital payments to suppliers.
We asked Chip questions about the conference and his impressions about how healthcare organizations are currently positioned with respect to P2P operations, controls, and their supply chain issues and opportunities. His insights follow.
What were the main themes at the conference from the financial leaders who presented?
Hospital CFOs have an extremely difficult job: revenue is unpredictable, the reimbursement model is unpredictable, and cost pressures from increasing costs/inflation and workforce shortages are impacting margins.
Industry-related issues they face are:
- Unpredictable revenue. Hospital revenue can be highly unpredictable due to various factors, including changes in patient volume, shifts in the healthcare landscape, and fluctuations in demand for services. Economic downturns or public health crises, like the COVID-19 pandemic, can significantly impact revenue streams.
- Complex reimbursement systems. It is subject to constant changes and regulatory adjustments. Hospital CFOs must navigate complex reimbursement systems, including Medicare, Medicaid, private insurance, and government programs. These models can change frequently, affecting revenue projections and financial planning.
- Regulatory compliance. Hospitals must adhere to numerous regulatory and compliance requirements at federal, state, and local levels. Non-compliance can result in financial penalties, further adding to the CFO’s responsibilities.
- Risk management. Hospitals face financial risks related to patient outcomes, malpractice claims, and other unforeseen events. CFOs must assess and mitigate these risks to protect the organization’s financial health.
- Increasing costs, inflation, and workforce shortages. The rising costs of medical supplies, pharmaceuticals, and labor can erode profit margins. Managing these cost pressures while maintaining quality patient care is a continuous challenge.
- Data and analytics. Hospital CFOs are increasingly relying on data analytics and financial modeling to make informed decisions. Analyzing data to identify cost-saving opportunities, optimize resource allocation, and improve revenue cycle management is essential but complex.
How can third-party recovery audit services help address these issues? What are the tangible benefits?
Cost recovery is one of several financial transformation strategies healthcare organizations can use, leveraging data analytics to identify value and cost leakage opportunities across AP and the entire healthcare supply chain. Anytime a hospital is facing margin pressures, an AP recovery audit can play an important role by identifying and recovering overpayments to suppliers.
Let’s start with a description of the service. AP recovery audits involve a detailed examination of payments and other financial transactions to identify overpayments such as duplicate payments, pricing errors, and other discrepancies related to supplier invoices and payments. Data analytics plays a crucial role in this process by:
- Analyzing large volumes of transactional data to spot irregularities and anomalies.
- Identifying patterns of overcharges or payment errors.
- Automating the audit process to improve efficiency and accuracy.
- Generating insights into supplier compliance to contract terms.
Areas of review include:
- Supplier statement or vendor statement review, in which suppliers are engaged to identify and recover client funds found on suppliers’ books, but unknown to the client.
- Duplicate and erroneous payments, where invoice and payment data is analyzed to identify and recover duplicate payments and payments made in error.
- Debit balance recovery, in which suppliers with debit balances on clients’ books are engaged to recover funds.
- Uncashed check review, where uncashed checks that don’t require escheatment to government authorities are identified.
- Unclaimed property review, where state, local, and other unclaimed property databases are reviewed to recover unclaimed amounts (that have been escheated by other parties) due to clients’ operating entities.
- Contract compliance review, in which contract provisions and related transactions are compared for non-compliance and recovery opportunities.
- Sales and use tax review, a detailed analysis of transactions that include sales tax and use tax returns to identify and recover overpayments based on complex tax rules of taxing jurisdictions.
Specific benefits include:
- Immediate Cash Impact: Unlike some cost-saving initiatives that may require significant time and resources to implement, an AP recovery audit can often yield quick and tangible results. Recovering overpayments provides a direct boost to the hospital’s cash flow and bottom line, which is especially beneficial during times of financial strain. Best of all, only minimal hospital administrative resources are required.
- Identifying Systemic Issues: The audit process can uncover systemic issues in the hospital’s purchasing and accounts payable procedures, such as invoice processing errors or contract management shortcomings. Identifying and addressing these issues can lead to long-term process improvements that prevent future overpayments.
- Supplier Relations: Engaging in an AP recovery audit doesn’t necessarily strain relationships with suppliers. In many cases, overpayments are unintentional, and suppliers may be willing to work with hospitals to rectify the situation. Effective communication during the recovery process can help maintain positive vendor relationships.
- Continuous Improvement: Hospitals can use the insights gained from AP recovery audits to implement more robust controls and processes in their accounts payable operations. This focus on continuous improvement can lead to ongoing cost savings and financial stability.
- Compliance and Governance: Ensuring compliance with contracts and agreements is essential for hospitals. A recovery audit can help hospitals identify areas where they may not be fully compliant with supplier contracts and take corrective action.
In summary, an AP recovery audit is a valuable tool that can provide immediate financial relief to hospitals facing margin pressures. It helps identify and recover overpayments, improve efficiency, and enhance financial governance. By addressing these financial inefficiencies, hospitals can better manage their costs, maintain financial stability, and navigate challenging economic periods more effectively.
To learn more about how your organization can benefit from a recovery audit, schedule a call with us.