At any large healthcare system, vendor rebates can be difficult to manage. Because they require a multi-step process to track dollars earned, credits issued, and monies paid, rebates cause tracking challenges for Accounts Payable departments.

Rebates Versus Lower Contract Pricing

Oftentimes, vendors use rebates as a key part of their pricing strategy and structure. This tactic makes their pricing more attractive to potential clients. When tracked through Accounts Payable and issued correctly, rebates can help healthcare organizations save some money.

That being said, inconsistent tracking is the primary problem with vendor rebate programs. Some vendors pay rebates via check refunds, while others issue credit memos. Because rebates cause tracking challenges, best practices recommend that you avoid rebates and negotiate for better pricing instead.

Rebates Cause Tracking Challenges for Healthcare Systems

In a recent Discovery Review, The Audit Group found that a healthcare system was eligible to receive a quarterly rebate from Cardiovascular Systems, Inc. Based on their negotiated contract with the vendor, the healthcare organization could receive $308.64 every quarter that 10 items or more were purchased.

However, Accounts Payable was not aware of the rebates included in the vendor’s contract. As a result, the earned credits and rebates were never issued by the vendor. Because of these rebate tracking challenges, the cumulative unpaid rebates totaled $20,670.

TAG’s Tips for Tracking Vendor Rebates

• Negotiate rebates out of contracts in favor of better pricing terms when possible.
• Your Purchasing or Contracting department should monitor rebates by creating and maintaining a Rebates Master List and provide this to the Accounts Payable department.
• Your Rebates Master List should track:
  • Items included in rebate offers
  • Rebate calculations
  • Vendor payment method (refund check or credit memo)
  • Frequency of rebate payments (quarterly, annually, etc.)
  • Rebate received date
• Finance Departments should manage the receipt of rebate checks and credit memos to verify that the healthcare organization is receiving all due rebate funds.

Are you concerned that your organization may be leaving money on the table due to unpaid rebates? The Audit Group specializes in healthcare financial audits, and a simple Discovery Review can help you determine solutions. Get started by contacting Sunshine Prograis at the link below, or read on for more Accounts Payable insights.