As we’ve discussed, no purchasing department is immune to human error. During the course of normal operation, a health system is bound to overpay for an item here or there. However, we see all too often cases where these errors add up over time, costing the system thousands in lost revenue. At The Audit Group, we perform detailed pricing reviews to identify areas of overpayment, as well as pricing claims to route those funds back to the hospital.

How TAG Conducts A Pricing Review

To begin a pricing review, our team will receive a data download from the health system: contracts, purchases, process documents and more. As we analyze the data, we’re looking for spikes or other anomalies that may be cause for concern. We’re also benchmarking this pricing data against similar-sized hospitals or against the imported contract price.

Causes for pricing errors include:

• Keying error by vendor
• Keying error by your purchasing department
• Lapse in contract pricing
• Error in AP software
• Failure to load contract pricing in AP system

Recent Study

We recently conducted a pricing review for a dialysis company. As we reviewed the company’s last year of purchasing data, we noticed a significant price jump for several day-to-day items.

The company was paying nearly double for some of its most frequently-used items. We cross-referenced the pricing with the vendor contracts and discovered that the overpayments began one year after the contract’s start date–but the contract was in place for two years. The overpayments continued for nearly a year before our team caught the error.

This pricing error has blame on both sides:

• A keying error from the vendor caused the contract to falsely expire
• The company’s purchasing department should have noticed they were paying nearly double for the same items and reviewed the pricing terms for that vendor.

Our team was able to make our case to the vendor, prove the error and recover nearly $230,000 for our client.

Benefits of Outsourcing Pricing Reviews

Although any hospital could perform an in-house pricing review, most simply don’t have the time or resources. For a typical purchasing department to conduct this type of data review, it would create a slowdown or even standstill in daily operations. That’s why so many clients trust our expert healthcare auditors to review all pricing data and identify opportunities for recovery–without interrupting their day-to-day operations.

A detailed pricing review may have significant implications for your organization’s cash flow, but it may also reveal deeper issues in your organization’s contract processing or accounts payable process. Contact The Audit Group today and learn how our approach drives results to hospitals across the country.