Is Your Healthcare System Giving Away the Pharm?
Over the past few years, we’ve noticed a growing trend among our AP recovery audit clients, both large and small. Hidden among the duplicate payments, supplier returns, item pricing and other categories of overpayments, is an increasing number of discrepancies related to pharmaceutical (pharma) procurement. It’s no wonder.
Managing Pharma Procurement is a Complex Process.
According to the Peterson-KFF Health System Tracker, healthcare spending is projected to reach $5.3 trillion in 2025, driven in part by higher spending on pharma. And as spending increases, managing pharma procurement is becoming more complicated and challenging than ever. From matching invoices to purchase orders and maintaining consistent item pricing, to ensuring credits are issued correctly, there’s a lot to manage. And that doesn’t even take into consideration the sheer number of pharmaceuticals purchased on a regular and seasonal basis, often shipped to multiple locations across the country. If not detected, pharma procurement and the resulting AP discrepancies can result in millions of dollars in lost revenue.
Some hospital systems choose a primary pharma distributor for most of their needs and then purchase specific medications or vaccines from different suppliers when necessary. Others work with a variety of distributors. Regardless of how a hospital system procures its pharma products, orders are generally submitted directly through the supplier using the supplier’s system, often with more than one department doing the ordering.
While a small number of our clients use purchase orders, the lengthy final invoice or statement rarely matches the original order—due to a variety of reasons including substitutions, returns, backorders and more. These matching errors can be time-consuming and costly to correct. As a result many health systems depend on their pharma distributors, trusting that through the ordering system the distributor will ensure invoices are accurate, and capture and rectify any discrepancies.
Don't Give Away the Pharm.
At a time when controlling costs and maximizing revenue capture are key to your organization’s financial health, it’s up to each hospital system to proactively monitor and review pharma procurement processes, invoices and pricing. This is where an annual Accounts Payable Recovery Audit comes in. A periodic AP recovery audit can mitigate the risk of financial loss and help ensure that your health system is not overpaying for pharma. By reviewing invoicing and uncovering incorrect pricing, overpayments, duplicate payments and any credits, rebates and incentives owed that might be overlooked by a distributor, an AP recovery audit can help recover lost funds, maximize revenue and improve your health system’s bottom line.
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