Out of sight, out of mind. If your hospital or health system has a prepaid lease or maintenance contract, changes to these agreements can be overlooked. These agreements do expire, and they may be modified from time to time.

To avoid prepaid contract overpayments, it’s important that your organization has a process in place for monitoring and alerting your Accounts Payable department of changes. If there is no process in place, contract overpayments can cause your organization to lose funds.

Cancelling Maintenance Contracts Can Have an Effect

Here at The Audit Group, we recently worked with a health system that canceled a prepaid hardware maintenance contract with Carefusion. However, because there was no process in place to alert Accounts Payable that this contract was prepaid, the health system was unaware that credit was due for the portion of the canceled contract that had already been paid.

During our Discovery Review, TAG identified and recovered seven claims for the health system, totaling more than $85,000. These recovered funds were available for immediate use by the health system.

Find our Supply Chain Solutions Guide here.

TAG’s Tips to Avoid Prepaid Contract Overpayments

Don’t let your organization leave money on the table from lease or maintenance overpayments. Follow our tips below to improve your processes for monitoring prepaid contracts:

• Keep a master list of service contracts and extended agreements available to your Supply Chain department.
• Review your service contracts quarterly for compliance.
• Schedule quarterly contract review meetings with your Supply Chain department and departments that have the most (or the largest) maintenance agreements in place.
• Verify that all service contracts being paid are active and that no prepaid contract has been cancelled since the last review. If a prepaid contract has been cancelled, ensure that Accounts Payable has been alerted, and contact the vendor to resolve any discrepancies.

Find additional tips for your hospital contracts manager here.

Could your organization use a contract clean up? The Audit Group is here to help. Give us a call to learn how our Discovery Review can help your organization identify room for improvement and find ways to recover lost funds.