Five Opportunities to Improve Vendor Compliance and Ensure a Positive Return on Your Outsourcing Investments

 In Revenue Cycle Vendor Performance Management

Five Opportunities to Improve Vendor Compliance and Ensure a Positive Return on Your Outsourcing Investments

Vendor performance is a bigger problem than many hospitals know. Research by Healthfuse, the industry’s first “at-risk” vendor performance management company, found that more than half of all early-out, self-pay accounts are not compliant with best practices, SLAs, or government regulations. Their study, which included comprehensive data from more than two billion hospital accounts, found that for accounts placed with vendors:

  • 36.1% of those 31-60 days are never worked
  • 23% of those past 121 days are not worked
  • 19% of those with balances <$250 are not worked

Today, most hospitals rely on their vendors’ own analysis to determine the success of the relationship. Unfortunately, vendors have their own methodologies for reporting results, which vary by vendor and are often skewed in their favor. What can hospitals do to ensure they’re getting the most from their vendor investments?

Following are five opportunities hospitals should consider ensuring vendor compliance:

Increase transparency. Lacking full visibility into your vendor’s accounting system makes it impossible to reconcile statements to your own system. To reconcile accounts, hospitals need to be able to identify all unpaid invoices at a certain date and then match those invoices to documents within their own system. Any invoices that don’t match should be considered vendor errors. Hospitals need to be able to identify the full details of these errors so they can be addressed with the vendor.

Reduce late discoveries. Without proactive monitoring of vendor invoicing, hospitals may miss process and file exchange issues that can reveal non-compliance. The longer the errors go unnoticed, the more significant the impact on cash flow and the hospital’s bottom line. Instead, hospitals need to proactively monitor and report activities all the way down to the account level.

Avoid misdirected invoices. It is quite common to have mix-ups in your accounting system that cause payment to go to the wrong vendor. When this happens, you can end up paying the same invoice twice. Sometimes the problem is on the vendor side as they send duplicate invoices. Either way, if your system doesn’t have a way to identify duplications, or if invoice numbers are inconsistent (e.g., using dashes or spaces), you could be giving away money you’ll never recover.

Identify missed discounts. Hospitals often choose vendors based on their volume discount terms. But how do you know you’re getting the agreed-upon amount? Without vendor reconciliation, you can’t. When it’s time to process invoices, you need to know which payments you’ve made but that your vendor hasn’t received, and whether discounts have been processed. You also need the ability to identify pricing claims or returns that haven’t yet been credited.

Ensure sufficient auditing. Many hospitals have a program for monitoring vendor performance. However, most use only a subset of accounts, which reveals only a sub-set of non-compliance. To get a true picture of vendor performance, hospitals need the ability to audit 100% of accounts. This provides more accurate and actionable insights, which are the cornerstone to effective process improvement.

Insight = ROI

Paying vendors too much. Losing money, you can’t get back. Decreasing cash flow. These are all the result of inefficient vendor reconciliation. Leveraging a vendor reconciliation service can help ensure accounts placed with each vendor were received, returned, and appropriately processed.

Vendor reconciliation not only helps your bottom line. It also helps your vendors improve their own processes. When vendors are performing at optimal performance, you’re more likely to achieve a better return on your outsourcing investment.

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