Healthcare Trade-In Allowances
| Client Snapshot | |
|---|---|
| Region | Midwest |
| Employees | 28,000 |
| Beds | 300 |
| Patient Revenue | $7.3 Billion |
Healthcare Trade-In Allowances Trade-in allowances in healthcare refer to agreements where a vendor offers a credit or discount toward the purchase of new medical equipment, supplies, or technology in exchange for returning or "trading in" outdated, unused, or older equipment. These allowances are often detailed in purchase agreements for high-value capital purchases, such as surgical robots, imaging devices, or laboratory equipment. By tracking and applying these credits accurately, healthcare systems can significantly offset costs. However, due to complex invoicing and payment processes, these allowances may go unclaimed, resulting in financial losses. A proactive approach ensures these credits are identified, validated, and recovered efficiently.
problem
Identifying Missed Opportunities in Trade-In Allowances
A regional healthcare system headquartered in the Midwest, with 12 facilities, recently consolidated all invoice processing to a single location. This system, which employs 28,000 individuals and manages 3,000 staffed beds, generates $7.3 billion in annual patient revenue. However, this consolidation introduced processing errors, prompting management to engage Premier Cost Recovery (PCR) for an accounts payable recovery audit. The healthcare system had not undergone such an audit in over three years, making it a prime opportunity to uncover overpayments, particularly in trade-in allowances. The finance team appreciated PCR’s data-driven approach and prior successful collaboration.
results
Significant Recoveries from Trade-In Allowances
PCR’s audit uncovered $254,650 in recoveries related to trade-in allowances, accounting for 14% of the total $1,867,304 recovered during the project. A notable discovery involved a $1 million surgical robot purchase, which included a $225,000 trade-in allowance omitted from the vendor’s final payment records. PCR identified this discrepancy nearly two years after installation and worked with the vendor to secure the credit. This recovery highlighted the importance of monitoring trade-in allowances.
The project, completed in four months, revealed that the client lacked a centralized invoice scanning system, complicating validation processes. By leveraging available supply chain data and maintaining vendor communication, PCR overcame these challenges. This approach allowed the healthcare system’s AP staff to focus on their workflow with minimal disruption.
audit report recommendations
- Ensure Supply Chain and Receiving consistently utilize ERP software to track returns, including:
- Original purchase order number
- Return Goods Authorization (RGA) number
- Price and quantity of items
- Shipment method and tracking numbers
- Periodically compare supplier returns with payment history to verify credits.
- Regularly note and verify trade-in allowances, rebates, and other incentives in Supply Chain and communicate them to AP.
- Monitor vendor statements for credits as rebate periods approach.
- Review capital purchase orders thoroughly to confirm all incentives are captured.
- Maintain and periodically update vendor payment terms in the ERP system.
benefits of working with pcr
- PCR recovered $1.8M in total recoveries, with over $250K recovered for missed trade-in allowances.
- PCR’s efforts resolved recurring vendor overpayments and ensured discounts were correctly applied.
- AP and supply chain teams now collaborate more effectively on trade-in allowances and product returns, reducing missed credits.
- Vendors offering trade-in allowances are now closely monitored to prevent future oversights.
PCR’s comprehensive approach to identifying missed trade-in allowances provided immediate financial benefits and positioned the healthcare system for improved AP and supply chain practices moving forward.
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