Why VIE Healthcare® Invoice ROI™ Technology is Innovation in Data Analytics

This article was written by Lisa Miller.

As healthcare costs rise, we explain why VIE Healthcare® Invoice ROI™ technology is innovation in data analytics.

US spend per capita on healthcare exceeded $10,000 in 2017 and healthcare consumption now represents 17.2% of the country’s GDP. With future increases predicted, the onus is on hospitals and healthcare institutions to deliver greater margin improvements and take control of spiralling healthcare costs.

“‘As a general principle…about one third (of hospitals) have margins that are above zero, probably about one-third of hospitals are pretty close to zero…. and about one-third are running in the red,” explains Gary Young, Director of the Center for Health Policy and Healthcare Research at Northeastern University.

Purchased services spend is one of the most overlooked opportunities to drive margin improvement and reduce spending. The issue is that the majority of hospitals struggle to monitor and manage the high volume of supplier contracts, let alone evaluate them.

At VIE Healthcare® our extensive frontline expertise has enabled us to develop and utilize a proven process to identify, analyze and deliver significant cost savings in hospital purchased services.

We have now transformed this proven strategy into a technological process and patented the process as our Invoice ROI™.

Invoice ROI™ is an automated process developed by VIE Healthcare® to manage your purchased services spend.

Invoice ROI™ offers invoice reconciliation, contract optimization, business intelligence and an analytics platform with real-time contract reconciliation and benchmarking performance provided on a monthly basis for outsourced services.

The Untapped Cost Savings in Purchased Services Spend

Purchased services spend can comprise as much as 40-50% of a hospital’s non-labor spend. Click To Tweet

Purchased services spend can comprise as much as 40-50% of a hospital’s non-labor spend. These costs cover areas such as dietary, housekeeping and waste management. For example, in our experience, most hospitals don’t have an accurate understanding of this significant portion of their budget, yet it can represent millions of dollars in potential annual savings.

Gaining clarity of your purchased services spend can improve patient care and satisfaction as well as drive efficiencies and margin improvement.

Invoice ROI™ empowers your hospital to track these costs in real time and compare them to historical data to deliver actionable intelligence. Full visibility of that data enables us to understand your hospital’s spend history and can be used to make significant cost savings, improve your margins, track purchased services spend and monitor ongoing performance.

Invoice to Contract Reconciliation

Traditionally, benchmarking is used to evaluate how a hospital is performing compared to its competition in order to identify improvement. In our experience, hospitals move to benchmarking, optimization and variation before carrying out an essential line item analysis, often missing significant opportunities for cost savings.

Our unique approach always begins with reconciliation, examining each agreement and carrying out a deep dive into the past 12 to 18 months of your invoicing data.

This line item reconciliation reveals the potential hidden costs contained in your invoices which are often the result of pricing errors and off-contract spend that your hospital might not be aware exist. It also allows our experts to identify trends in utilization that can further increase your costs.

Prior to the launch of our Invoice ROI™ technology, this task was carried out manually. All line item data was entered accurately onto spreadsheets.

Line item analysis is the most critical part of the entire process and is essential to drive significant savings. The results we achieve through line item analysis cannot be achieved with Accounts Payable (AP) spend.

While AP can be categorized in a shorter timeframe, it provides only directional, high-level category information that lacks the detail and analysis essential to drive improvements in your purchased services spend.

These invoiced line item details are also generally not available in hospital material management systems. In these cases, agreement structures are often complex and, consist of different tier pricing, particularly when dealing with multiple vendors.

6 Major Categories for Purchased Services Spend

At VIE Healthcare®, we have found it most effective to work with six major categories of purchased services spend for the purpose of reconciliation. These are as follows:

  • Clinical.
  • Finance/Support.
  • Finance/HR/HIM.
  • Biomed/Service/Maintenance.
  • IT/Telecom/Telehealth.
  • Administrative.

These six areas represent a high-value potential for cost savings opportunities but also present challenges to hospitals attempting to reconcile monthly invoices to vendor agreements. Not only are these savings huge and easily achieved, but they also have no negative effect on the operation of the hospital.

Invoice Optimization

Most hospitals believe they are “stuck” with their purchased service agreement provided by their vendor and accept a 3%-5% price increase each year without question. The truth is, that closely scrutinizing your purchased services agreements and renegotiating market competitive rates will reap significant savings for your hospital.

It makes a tremendous difference to the overall impact on your hospital. With accurate, enterprise-wide purchased services spending data, health systems can easily view spending trends and identify potentially rogue vendors.

When eliminated or renegotiated, cost savings of 5-10% are easily achievable, but imagine the impact of a 15% expense reduction on a $40 million purchased service spend. That is $6 million.

Imagine the impact of a 15% reduction on a $50 million purchased service spend. That is $6 million. Click To Tweet

The work performed by VIE Healthcare® enhances the systematic collection, interpretation, and analysis of multiple invoices searching for the following:

  • Trends.
  • Purchase patterns.
  • Outliers.
  • Variations.
  • Quality.
  • Utilization improvement opportunities.

This enables a pro-active monthly management of the outsourced and purchased service spend for our clients.

When we review a purchased services agreement, we examine the invoices and review the contract. Invoices are then matched to contracts in order to understand utilization and reimbursement. If possible, we then benchmark and go to a very granular level. If price alone is examined, it will not be optimized.

Benchmarking Intelligence

Data analytics solutions reveal hidden insights in the field of healthcare and this is particularly true of purchased services spend. Our Invoice ROI™ technology enables hospitals to examine and reconcile invoice data, reveal trends and be able to benchmark while providing real-time reconciliation and optimization insights.

Invoice ROI™ from VIE Healthcare® enables your hospital to examine & reconcile invoice data, reveal trends & benchmark, while providing real-time reconciliation & optimization insights. Click To Tweet

With an in-depth examination of hospital spend, Invoice ROI™ combines line details with other data inputs that identify trends, variations, quality and utilization improvement opportunities for pro-active monthly management of outsourced purchased services spend.

Invoice ROI™ technology from VIE Healthcare® enables your hospital’s supply chain team to build a funnel of cost-saving projects and successfully execute those savings on their own.

This line item analysis equips your hospital with an efficient method of monitoring and tracking your purchased services spend. Your negotiating position with vendors is thereby strengthened, while long-term supplier relationships can be established with confidence.

Our unique Invoice ROI™ overcomes the challenges faced by hospitals in line item analysis of purchased services invoices. These issues include:

Volume of data: Every month hospitals are faced with hundreds to thousands of line items on invoices which require review for multiple vendors.

Lack of detail: Summary invoices are often provided, lacking the supporting detail which is essential to comprehend and analyze your purchased services spend. In our experience, different line items can often be trapped within the invoices themselves.

A shift in invoicing: Purchased services invoices are unique, presenting a significant challenge compared to invoices received for traditional stock items. This shift in the way services are invoiced requires trust between the hospital and their suppliers.

Complexity: Due to the complexity of charges and the way in which services are invoiced, a high potential for billing errors exists. These errors are often overlooked because the price increase may only fluctuate by 10% compared to the previous month. Far too often, this increase is absorbed often without question.

Reviewing spend on a 12-month basis

Another common issue is reviewing spend on a 12-month basis.  A review of 12 months may show that $75,000 was spent, but a line item analysis would reveal that the previous three months had been trending up 30%. This detailed information affords the ability to accurately project and control future costs.

Hospitals and health systems are coming under greater scrutiny as they face increasing pressures to deliver high-quality patient care while staying financially viable. When a purchased service is correctly benchmarked, appropriately contracted and effectively managed, a hospital can realize meaningful savings that can be passed on and used to improve patient care.

Tips to Improve Your Hospital Utilization Process for Lucrative Cost Savings (Part 3)

This article was written by Lisa Miller.

We’re concluding our series on improving your hospital utilization process. If you haven’t already, be sure to read part one and part two.

Take Stock of Your Pharmaceuticals

Biologics extend to pharmaceuticals, although most drugs are chemically synthesized. In either case, it’s been our experience that most drug doses are just thrown away. Although pharmaceuticals are probably the most audited of all, with outside and internal agencies constantly tracking financials, compliance and operations, line-by-line audits of utilization are not common practice.

You’ll need to spend a significant amount of time analyzing your hospital’s utilization data. Click To Tweet

Inspect Outpatient Testing Interpretation

Sometimes outpatient testing results are entered incorrectly into a medical records system, which means the wrong price was charged to the insurance company, or Medicare, and will quite possibly end in retesting of the entire procedure altogether. Also, outpatient coding guidelines contain different information than inpatient guidelines. The challenge is knowing when to use the proper codes. This is why understanding outpatient testing interpretation is key to properly analyzing your hospital’s utilization trends.

Regulate Medical Waste and Excessive Pickup Fees

Many times medical waste and excessive pickup fees are 30% of the overall costs that hospitals just pay because no one is taking the time to check every invoice line item. By reviewing every invoice line item and asking questions about ambiguous charges, you will start to find opportunities for cost savings. If excessive fees are normally 30% of overall costs, then there is already a good chance of a 30% cost savings.

Examine Telecom Services

Telecommunication services is one of the six major hospital purchased services spends, but to manage those costs you must first perform a historical analysis and purchased services contract review. This will not only reveal pricing errors and credits due back to your hospital, but it also reveals utilization trends that greatly affect your telecom costs.

Measuring your hospital’s utilization trends for cost reduction opportunities is tough, and you’ll need an army dedicated to your supply chain department to achieve it. There are so many other factors involved as well, like variations and quality, that affect your purchased services spend. You will need to outsource a lot of the work to an independent group that has the clinical expertise, among other specializations, and experience to do the job right. You’ll want to work with a company like VIE Healthcare.

VIE Healthcare’s expert analysts use comprehensive data to identify trends in your top 50 most utilized supply costs by department. Our system involves proven processes to find cost-savings opportunities. We’ve helped hospitals proactively manage their monthly outsourced purchased services spend since 1999 and now our Invoice ROI™ technology will do the exact same thing for you in real-time. Call our office today at 1-888-484-3332 ext. 500 to schedule a call with founder and CEO Lisa Miller, a healthcare margin improvement expert.

Physician Preference Items (Part 1)

A healthcare organization’s primary goal is to provide quality care to its patients.  In order to accomplish this goal the organization must remain profitable, and in order to remain profitable an ongoing evaluation of spending must take place. Funding is absolutely necessary to support the operation of large complex facilities like hospitals. If the spending of a healthcare organization is not evaluated and adjusted appropriately, it will negatively affect the ability of the organization to provide quality care to its patients year after year.

Hospitals are faced with supply costs that continue to escalate at rates that have never been seen before, making the challenge of providing affordable quality patient care even more difficult.  According to a study by the Association for Healthcare Resource & Materials Management, supply costs will exceed labor as hospitals’ greatest expense by as soon as 2020 (https://blog.definitivehc.com/reigning-in-hospital-supply-costs-and-physician-preference-item-spending). Hospitals do not have the option to be spectators in the face of such trends.

Supply chains in healthcare have built a reputation for lagging behind other industries in how efficiently they are managed. A growing reason for this includes multiple reports estimating that “Physician preference Items (PPIs) constitute anywhere between 40% and 60% of a hospital’s total supply costs” (https://blog.definitivehc.com/reigning-in-hospital-supply-costs-and-physician-preference-item-spending).

With Physician Preference Items making up such a large portion of hospitals’ supply costs, it would prove beneficial to spend time analyzing how these items are purchased and how a hospital might benefit from addressing this area of spending. PPIs can be defined as devices or supplies used in medical procedures that are purchased and used at the discretion of the physician. The issue arises because while physicians determine what items are purchased, the hospitals are the entities that actually pay for the products.

The concept of PPIs began with hospitals’ efforts to give surgeons the ability to choose supplies that they deemed most appropriate for a particular patient with a particular need.  Unfortunately, this has led to an unprecedented rise in costs for these items. Manufacturers and vendors know how to make a profit. They also know that we are creatures of habit, and surgeons are no exception. If a surgeon has grown comfortable with a particular device, supply, or even sales representative, it can become extremely difficult to convince a surgeon of the benefits of using a similar or even superior product at a better price. PPIs are often more expensive than alternatives that have shown similar clinical outcomes – some studies have even shown worse outcomes for procedures using the more expensive PPIs (https://blog.definitivehc.com/reigning-in-hospital-supply-costs-and-physician-preference-item-spending).

While some have suggested eliminating PPIs altogether, it must be noted that surgeons often have valid, even life-saving, reasons for using particular supplies that they believe most appropriately serve a patient’s needs.

Hospitals must not blindly jeopardize quality care and best clinical outcomes in the name of saving money. Click To Tweet

Instead, healthcare organizations must focus their efforts on process improvement, better resource utilization, data continuity between information systems, and product visibility. All of these, in addition to partnering with physicians, will enable a hospital to improve the efficiency of its supply chain.

A JAMA Surgery study from December 2016, showed how partnering with physicians and providing them with data and financial incentives led to a 6.5% decrease in median supply costs over a one year period. The median supply costs for the control group that was not given data and financial incentives actually rose 7.5% over that same year. This study magnifies the costly difference between actively engaging supply chain stakeholders and taking a passive approach by doing nothing.

A 2015 study at the University of California in San Diego did not include financial incentives but gave surgeons detailed data regarding cost and OR start times. By providing more reliable data and better communication with surgeons, this program led to a savings of over $60,000 in a four-month period (https://blog.definitivehc.com/reigning-in-hospital-supply-costs-and-physician-preference-item-spending).

Regardless of these in-hospital approaches, hospitals across the country differ in their ability to negotiate prices for medical supplies. This is not a new problem. A study done as far back as 2006 revealed that one New York City Area hospital paid $8,000 more than a competitor paid for the same artificial hip (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2690325/).

What can hospitals do about this discrepancy? We’ll cover that in part two of this series!

Technology Management Solutions

Conversations with VIE

Healthcare IT Cost Reduction and
Technology Management Solutions

In this podcast series, VIE Healthcare’s CEO, Lisa Miller, and COO, Rich Dormer, discuss managing healthcare technology spend, as well as several opportunities for healthcare IT and technology cost savings.

Healthcare IT and Technology Statistics and Overview

  • The annual overall healthcare provider spend on IT programs is $40 million
  • Clinical healthcare IT spending alone was $18.9 billion in 2015
  • Healthcare big data is expected to grow 42% by 2019
  • 40% of us healthcare providers report that IT budgets are growing.

How does a hospital or healthcare system effectively budget for this technology and IT growth?

Defining Healthcare IT

How does your hospital define IT? Beyond data warehousing, encryption, and email:

  • Technology touches every department.
  • Analytics
  • Cybersecurity
  • ACO integrations
  • Telehealth
  • Marketing
  • HR
  • HIM
  • Support services

New Healthcare Technology Pricing and Utilization Benchmarking

Is your hospital paying the best pricing possible in a competitive marketplace?

Accuracy and Healthcare Technology Enterprise Pricing

Check for inaccuracies (functionality being under-used or not used at all, duplicate software and licensing, optimization of licenses)

Multi-hospital systems merging under vendor enterprise pricing agreements

Healthcare IT and Technology Pricing Structure Breakdown

Break down pricing structures and proposals for leverage where benchmarking data and insights are limited and make negotiating difficult – as in the case of brand new technology.

Ask questions: How is the pricing structure built? How are the costs calculated? What is the baseline?

Evaluating Your Healthcare Technology ROI

Identify “nice-to-haves,” or non-critical software and technology

Contact Us To Learn More About VIE’s IT Expense Reduction Services

To explore your options for managing and reducing your hospital’s IT and technology spend, reach out to Denise Bisogno at 732-359-7646, or email Lisa Miller at lmiller@viehealthcare.com or Rich Dormer at rdormer@viehealthcare.com.