Case Study: Compliance Contracts – Payment on Canceled Contract

Client Snapshot
Region Southeast
Headquarters Tennessee
Employees 3000
Beds 255
Patient Revenue $1.3 Billion

Payment on Canceled Contract
A payment on a canceled contract refers to a situation where a payment is made to a vendor or service provider for goods or services outlined in a contractual agreement that is subsequently terminated or canceled before completion. In such cases, the payment may have been made before the cancellation was communicated or processed, resulting in an overpayment or erroneous payment situation.


Premier Cost Recovery engaged with a multi-billion dollar regional healthcare system that had not conducted an accounts payable recovery audit in over four years. The healthcare system faced challenges in managing their vendor payments and compliance of contracts efficiently which resulted in overpayments and lost funds in the procurement to payment cycle.


During the vendor payment and contract compliance review where we analyze vendor payments to ensure compliance of contracts, PCR’s analyst discovered a significant payment made for software services. Suspecting irregularities, the analyst requested a statement from the vendor to validate the account status. Upon examination, the analyst noticed a $400,000 credit sitting on the vendor’s account.

Further investigation revealed that the payment was for an invoice that the vendor had canceled after issuing it to the healthcare system. However, the payment had been made before the healthcare system was notified of the cancellation, as the services were ultimately canceled. Consequently, the amount remained open on the vendor’s statement.

Our auditors immediately initiated discussions with the vendor to rectify the situation. Through negotiation and collaboration with the vendor, PCR uncovered crucial details surrounding the canceled invoice and the erroneous payment made by the healthcare system. Additionally, we ensured compliance of contracts, verifying that all terms and conditions were being adhered to, which was critical in resolving the discrepancies and preventing future issues.

PCR successfully advocated for a refund check from the vendor, aiming to rectify the erroneous payment and restore financial integrity to the healthcare system’s accounts payable process.

Our team worked remotely, significantly reducing the impact on the AP department’s daily workflow, to analyze the accounting data uploaded to our servers and access the client’s imaging system to review copies of all vendor invoices. We also coordinated directly with vendors, further reducing time demands on the client’s AP department.

In our final audit report, our recommendations included:

  • Upon the adjustment or renewal of contracts, it is essential to monitor vendors to ensure that credits are accurately issued and applied.
  • Regularly review vendor statements to identify and address any outstanding credits.


During the course of our accounts payable recovery audit, we recovered over $3,600 per staffed bed, including the payment on the canceled contract, that would otherwise have been lost.

benefits of working with pcr

  1. PCR recovered over $3,600 per staffed bed, in total funds recovered, during our accounts payable recovery audit.
  2. The client spent an average of just 15 minutes per week reviewing recoveries through our easy-to-use, transparent, real-time Claims Management Portal.
  3. The process was managed professionally between PCR and each vendor to ensure the well-established vendor relationships remained intact.

The accounts payable recovery audit completed by Premier Cost Recovery delivered tangible value to the healthcare system. By identifying and rectifying payments on canceled contracts, as well as uncovering all areas of overpayments, PCR not only ensured compliance with contracts but also recovered substantial funds and enhanced the healthcare system’s financial governance and operational resilience.


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