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Healthcare systems can lose funds when potential invoice discrepancies aren’t investigated in a timely manner.
In a recent Accounts Payable recovery audit TAG reviewed invoices spanning three years for a Northeastern U.S. healthcare system. We identified potential overcharges of approximately $71,900 by a large medical products distributor. At the time, some of the potential overcharges were almost four years old.
The distributor refused to research invoices and payments prior to that year, which resulted in significantly fewer potential fund recoveries for the healthcare system. However, the vendor offered a partial settlement for the potential overcharges.
In total, the distributor proposed a payment of $38,000 to the healthcare system to settle the overcharge issue. The healthcare system accepted the settlement and not push for the balance of funds. But, it potentially lost 47% of the overcharges that we identified.
TAG Tips for Handling Invoice Discrepancies
If you’ve run across discrepancies on invoices, be sure your Accounts Payable department follows up with your vendors quickly. To avoid lost funds, follow these tips:
- Don’t pay invoices that disagree with purchase orders until the discrepancies are resolved.
- Confirm Item Master pricing is correct when discrepancies occur between PO and invoice prices. Many times, healthcare system personnel accept vendor invoice prices when they disagree with POs and approve incorrect invoices for payment.
- Create alerts to negotiate new item pricing before contracts expire. Often, overcharges occur because vendors charge higher item pricing (list prices) after contracts end—even as new contracts are being negotiated.
- Investigate the contract status for items that seem to have dropped off contracts. This can identify an agreement in negotiation, or a situation where the items should be on a contract but aren’t.
- Ask vendors to honor prior contract prices and provide credit for items purchased between agreement periods.
At The Audit Group, we help hospitals and complex health systems across the nation to identify financial waste in their Accounts Payable and Supply Chain operations. Get in touch to learn more about how our team can recover lost funds and, more importantly, analyze error root causes and recommend corrective actions to prevent future losses.