Healthcare Provider Saves With E-InvoicingHealthcare Provider Saves With E-Invoicing

While many U.S. hospitals are working to digitize patient's paper medical records, Memorial Hermann Healthcare System, which operates 14 facilities in Texas including a Level One trauma center in Houston, is saving millions of dollars annually by trading paper invoices for electronic ones.

Memorial Hermann, which has revenue of about $7 billion, deals with about 700 suppliers who provide the healthcare provider everything from medical gear to utility services. "Those suppliers include anyone we'd issue a check to," said Don Sands, Memorial Hermann director of system accounts payables.

In the past, those suppliers generated about 500,000 paper invoices annually, many which changed hands in multiple Memorial Hermann departments several times. Before, it could take 60 days to process an invoice, and if there was a problem with the bill -- such as incorrect pricing -- "it could take another 50 to 60 days" to address it, said Daron Whisman, Memorial Hermann director of supply chain finance services.

"You can ignore a problem in a paper invoice, not address it right away" as papers get shuffled among people and departments, said Sands.

But since moving to an e-invoicing network from OB10 Limited almost two years ago, bills are processed much faster -- often within 24 to 48 hours, and errors are addressed right away. "If you recognize a problem, you resolve them right away -- and that can prevent a dozen of other mistakes from happening" in future invoices from a supplier, says Sands.

On the backend of the transaction, Memorial Herman's payment intermediary American Express provides e-payment to those suppliers. Memorial Hermann pays American Express monthly, which lets the healthcare provider benefit from the float between American Express' e-payment to Memorial Hermann suppliers, and the healthcare provider's payment to American Express.

As a result of faster invoice processing, payments to suppliers and a reduction in inefficiencies, Memorial Hermann estimates it saved between $3 million and $4 million since rolling out the e-invoicing. That includes savings through negotiating better terms with suppliers "because now we can pay them quicker," said Sands.

Before moving on the e-invoice platform nearly two years ago, Memorial Hermann evaluated its manual processes to remove or reconcile pitfalls in the paper-based procedures. "This forced us to standardize [processes] across departments," said Sands.

Right now, about 200 of Memorial Hermann's approximately 700 suppliers are using the e-invoicing platform, and the goal of the healthcare provider's incremental approach is to get most of its vendors using the system -- which would translate to added savings, said Whisman.

The e-voicing and e-payment also allows Memorial Hermann to better manage and anticipate cash flow. Staff, including those in clinical departments that in the past were involved with shuffling paper invoices, "has more time to focus on healthcare," said Sands.

Currently, Memorial Hermann is targeting to get four key vendors who account for 50% of invoice volume using the system, said Whisman. Getting some vendors to transition to e-invoicing is a harder sell than it is for others, he said. He estimates that when suppliers are requested to make the transition, about 70% are willing; 20% need more education about how and why; and "10% are hard-headed," about making the change.

As a result, Memorial Hermann made some changes of its own with suppliers, but won't disclose how many were dropped.

OB10 manages the outreach and enrollment of suppliers into the network. First, the customer identifies its targeted suppliers; OB10 then distributes a letter from the customer, contacts each supplier and enrolls them into the network.

OB10's network also includes 70,000 suppliers that have already signed up for the e-invoicing services. The services can connect to suppliers and buyers accounting system.

For Memorial Hermann, this means invoicing information is electronically sent by OB10 to Memorial Herman's Lawson ERP system, said Whisman. Prior to the e-invoicing data being sent to Memorial Hermann's system, OB10 validates invoice's purchase order numbers and pricing for accuracy.

Suppliers with high invoice volumes of 100 or more per month send the bills electronically from their accounting systems to OB10. Smaller volume suppliers can enter the data online into "WebForm" via OB10 portal. Also OB10 said its "Any to Any Data Formatting" allow suppliers to connect to OB10's system without making modifications to their own internal systems.

In addition to the healthcare sector, OB10 provides its e-invoicing services to customers in the manufacturing, pharmaceutical, food and apparel industries. OB10's e-invoicing services subscription pricing is based on volume and number of suppliers, said Ernie Martin, OB10 marketing manager for North America.

Blue Cross of Northeast Pennsylvania, the University of Louisville School of Medicine, and a range of large and small healthcare providers are using mobile apps to improve care and help patients manage their health. Find out how. Download the report here (registration required).