Category: Financial Advisory
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More than a third of healthcare executives have identified fraud or abuse during the supply chain management process.

Despite a growing reliance on monitoring technologies to prevent fraud, healthcare organizations are still struggling to combat theft and abuse when it comes to supply chain management.

According to a new survey from Deloitte Financial Advisory Services, 36 percent of healthcare organizations have experienced supply chain fraud, waste, or abuse during last year, a five percent increase from 2014 levels.

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While organizations prefer to trust their employees to use and manage resources appropriately, this trust is often misplaced, leading to financial losses that can significantly impact revenue cycle management.

Many organizations are trapped in a pay-and-chase model for fighting supply chain fraud, said Mark Pearson, Deloitte Advisory principal, Deloitte Financial Advisory Services LLP. Invoices are paid first, then retribution is sought much later when fraud is found, if its found at all.

Participants believed that certain types of employees are more likely to commit supply chain fraud than others. They named project managers, invoice approvers and procurement professionals as those who present the largest risk of supply chain fraud, waste, and abuse in their organizations.

Pearson believes that organizations need to closely examine their supply chain management procedures to ensure that they are not leaving openings for fraud and abuse. Supply chain management is already a providers second largest expense, which makes it critical to keep unnecessary waste out of the system.

However, healthcare providers are not implementing appropriate supply chain management strategies. The industry continues to struggle with streamlining its supply chain management strategies because so many different people and organizations are involved in the entire healthcare process.

Outdated health IT systems, poor inventory control, and inadequate distribution management are some of the weak points in the supply chain.

One way the industry could dodge fraud and increase automation is by leveraging analytics to track important data. According to a study by Cardinal Health and SERMO Intelligence, data and analytics can transform supply chains in the healthcare industry into strategic business assets.

If organizations use technology more effectively to better manage supply chains, they will most likely experience fewer cases of inflated bills or falsified labor.

More than nineteen percent of participants in the Deloitte poll do not use analytics to examine financial risks in supply chain management.

An additional 13.7 percent of participants said they have purchased analytics software, but are not actually using it. More than 20 percent of participants only use analytics to manage their third party relationships, such as suppliers and shippers.

Analytics is only one part of resolving issues of fraud and waste. Both providers and payers need to monitor the validity of their vendors and the accuracy of their transactions. One way to monitor the validity of a transaction is by reviewing unpaid invoices before making a payment.

Participants also revealed that many of their organizations were not taking the time to examine unpaid invoices for evidence of fraud.

Only 27 percent said their organizations reviewed unpaid invoices for evidence of fraud, waste or abuse before making a payment. Almost half of the poll takers reported that they were not sure if their organization analyzed unpaid invoices for fraud prevention.

Healthcare fraud, waste and abuse running through supply chains continues to be a huge problem for the industry. If purchasers, providers and producers used more data analytics and automation tools and analyzed invoices before making payments, perhaps more fraud could be prevented, leading to fewer dollars lost. Although this expensive problem may never be truly be erased, it can be reduced significantly.