No one likes missing a discount–especially your hospital’s accounts payable department. Tasked with creating savings wherever possible, your staff will take advantage of any discount they can. Unfortunately, we often see situations where vendors fail to apply these discounts, potentially costing your group thousands in lost revenue.
Many vendors will offer a cash discount if clients pay an invoice within a certain time period. For example, a vaccine vendor may offer a 2% discount on net-30 terms. Although this sounds straightforward, it’s quite possible for the vendor and the hospital to ignore the discount and not catch the error until it’s too late.
The Audit Group recently conducted a data review for a healthcare client in which we identified and recovered several missed discounts over the last year. As part of our data review, we began by analyzing all the system’s purchasing data, looking for any pricing discrepancies, duplicate payments or contract overcharges.
As we reviewed our client’s vendors, we took note of those that offer cash discounts. Through our extensive experience in healthcare auditing, we also added a few vendors that we know offer (and often miss) discounts.
From there, our team scanned all the purchasing data into spreadsheets that checked it against our benchmark vendors. Was a discount offered? What were the terms? Was the invoice paid on time? Was the discount applied? We built our spreadsheets to answer these questions.
Once we identified instances of unapplied discounts, we checked our data against the invoice to ensure accuracy. Then, we went back to the vendors to request payment for the outstanding discounts.
There are a number of human errors and technology errors that can cause a vendor or a hospital to miss a cash discount. Although a hospital’s in-house team may notice an error here and there, it’s rare that they have the time and resources to catch every error, every time.
Reasons for a missed discount include:
Cash discounts are a common practice for healthcare vendors, so if you catch one missed discount, it likely isn’t the first or the last. Let The Audit Group show you the processes and procedures to catch missed discounts as soon as they occur. Working with hospitals across the country, our team specializes in building processes and procedures that streamline operations and improve cash flow.