Healthcare Manufacturer Secondary Audit
Deeper Review of Worldwide Healthcare Manufacturer Improves Results
CLIENT
Worldwide Healthcare Manufacturing Company
INDUSTRY
Manufacturing
Improving Quality of Daily Life, Working on the Bottom Line
This healthcare manufacturing company is recognized as a world leader in life science research and diagnostics. They design, manufacture and market products that simplify and automate complex biomedical testing. They have an installed base of more than 200,000 research and clinical systems operating in laboratories around the world; their customers include hospitals, pharmaceutical and biotechnology companies, universities, medical schools, and research institutions. The products they create produce information used by physicians to diagnose illness, plan treatment, and monitor patients. Scientists use their life science research instruments to study complex biological problems including causes of disease and potential new therapies or drugs. This company helped revolutionize science and medicine, and their products save countless lives and improve the quality of daily life. The majority of this healthcare manufacturing company’s $3.25 billion revenue comes from recurring income consisting of consumable supplies (including test kits), service, and lease payments.
First Audit Realized Recovery, Suspected Results Too Low
This manufacturer had a primary firm contracted, but was unhappy with the depth of their existing audit; they suspected there were too little recovery results. They were also disappointed in the level of interaction from the audit firm, the difficulty of administering claims, and the lack of process improvement recommendations. This healthcare manufacturer was looking to augment or replace their previous audit firm with a firm that had knowledge and expertise in the industry, as well as a proven portfolio of process enhancement suggestions. BSI was the natural fit as a business partner for this organization because of the high level of familiarity with the industry and focus on providing leadership and education to clients.
Deeper Review Improves Results
The client partnered with Business Strategy to perform a secondary procure-to-pay audit, including contract compliance reviews and a complete audit of the accounts payable process - a Four-Way Match™ rather than just a review of invoices and statements. Contract compliance and missed discounts accounted for nearly 35% of the recovery in the secondary audit. The client realized over $460,000 in additional recovery from the secondary audit performed by BSI. Beyond recovery of AP funds, a primary focus of the ongoing engagement has been to recommend best practices for the client. Business Strategy continues to provide comprehensive review, assistance, resolution and recommendations to the client for process improvement. Implementation of proposed solutions is expected to result in significant decline in errors and overpayments, thereby producing declines in related recoveries in subsequent years.
Difficult to Query Decentralized Records
The fact that this healthcare manufacturer has several locations and decentralized purchasing made contract management and pricing reviews complex. At the onset of the engagement, even after the primary audit firm was involved with the client, the client’s records were disorganized and difficult to query. Internal staff found the process of comparing pricing charged to pricing contracted very laborious and seldom took the time to review invoiced charges against contracts. The initial audit firm had ignored the issues of contract compliance and management, focusing solely on statement review. Business Strategy’s secondary audit assessed contract compliance and recommended technology solutions for improving contract management. In addition, BSI provided best practice process enhancements for centralization of contracts, a Vendor Master List, and a Price Change Team. The client is focused on implementing these solutions and developing methods to identify and implement continuous process improvements.
Online Claims Administration Streamlines Process
When addressing the client’s stated concern over the primary audit firm’s levels of interaction and poor claims administration process, Business Strategy provided a communication approach that was beyond the client’s expectations. High-levels of information paired with a low-intrusion process that required only one hour per week, on average, of the client’s time. This was accomplished by scheduling weekly management meetings to facilitate claim movement and discussions regarding vendor relations, obstacles, and implementation of early process recommendations; complemented with access to IRIS, the BSI automated claims tracking and reporting system. Through IRIS (Image Retrieval and Information System), the client can log-in whenever convenient and easily manage claims within the system. “I use the [IRIS] system extensively,” said the supervisor of disbursement services, “and it is very intuitive and simple to navigate. Plus, it is available whenever I need it.”
Bottom Line, Results
Through the partnership with Business Strategy, over $460,000 has been recovered for this healthcare manufacturer in the initial 1-year secondary audit period. Due to the success of the secondary audit, and the higher level of review, knowledge and customer service, the client has moved Business Strategy into a primary audit position and has eliminated the need for a second audit firm. The organization continues to work toward full implementation of BSI’s recommendations. The client’s internal auditor stated, “I have appreciated learning about our process deficiencies, and I am encouraged that we can quickly solve many of these issues - with BSI’s expertise and help.”
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