Achieving cost savings through continuous monitoring: 4 examples

Eric Jolly, Tim Bruhn, Michael Kittoe
| 4/10/2023
Achieving cost savings through continuous monitoring: 4 examples

Crowe Financial Control Analytics is one digital tool helping healthcare finance teams solve some of their biggest challenges.

With the wide array of challenges facing healthcare finance leaders today, it can be difficult to determine if they have strong enough financial controls. Having more confidence in financial controls requires a new approach – and innovative solutions.

Even within a complex industry like healthcare, many organizations are still using manual processes to track and reconcile key finance areas, such as accounts payable (AP), supply chain, and payroll. With financial and human capital in short supply, these labor-intensive, error-prone processes can take too much time – and use up too many valuable resources. Digital tools and automation offer hope, and they are changing how finance leaders manage their workflows. These tools use continuous monitoring to highlight problems quickly so they can be addressed before they turn into bigger, more costly issues.

Crowe Financial Control Analytics is one example of a digital tool helping healthcare finance teams solve some of today’s biggest challenges. Following are four examples that demonstrate how such solutions can provide finance leaders the actionable feedback they need, aid in decision-making, and help them achieve much-needed cost savings. The examples showcase savings in two pressing areas – accounts payable and payroll.

Accounts payable

Discovering duplicate payments

Duplicate payments aren’t often top of mind for many finance leaders, largely because their organizations’ enterprise resource planning (ERP) systems typically have features designed to identify such payments. Frequently, however, duplicate payments are discovered during audits. And the dollar amounts can be (shockingly) high.

Typically, duplicate payment reports from an organization’s ERP system have been formatted in spreadsheets that can be difficult to view and sort in any meaningful way. A digital tool, on the other hand, allows management to identify potential duplicates faster and more accurately, which can help expedite communication with vendors to recover the money.

Exhibit 1: Duplicate payments

Duplicate payments
Source: Crowe analysis example data, February 2023

An at-a-glance visual highlighting potential duplicate payments – as seen in Exhibit 1 – allows finance managers to identify duplicates quickly. The bar graph on the left-hand side of Exhibit 1 indicates that a spike in duplicate payment activity occurred in December 2022. Looking at the right-hand side of Exhibit 1, a manager can see that two payments of $123,568 were made to the same vendor on two different dates in December 2022. The graph also shows that the payments had the same invoice number, another quick visual clue to the duplicate payment.

Losing funds to lost discounts

Many organizations, for varying reasons, are not taking advantage of discounts offered by their vendors. Such discounts include favorable payment terms. For example, 2/10 net 30: If clients pay within 10 days, the vendor gives them a 2% discount on the total invoice amount. The combined savings from multiple discounts can add up, sometimes to thousands or millions of dollars during a year.

In testing for missed discounts, auditors in a typical audit might pick a random three-month period. In doing so, however, they might miss the period when a lost discount occurred. Looking at Exhibit 2, the organization experienced more than $220,000 in lost discounts from June to October. Had auditors chosen a sample from April to June or October to December, they would not have caught these lost discounts. Finance managers can benefit from a tool that can identify areas where they’re not taking advantage of the vendor discounts available to them.

Exhibit 2: Lost discounts

Lost discounts
Source: Crowe analysis example data, February 2023

A tool such as Crowe Financial Control Analytics keeps finance managers up to date on lost discounts. It allows AP managers to quickly see the number of lost discounts and the total dollar amount. They can then dig deeper into the data to see which vendors are associated with the discounts and determine whether there might be an issue with a particular vendor or if there is a problem across all vendors. The monthly view (right-hand side of Exhibit 2) provides AP managers a convenient, long-term look at lost discounts. This view can help guide managers in determining how big of a concern lost discounts are so they can focus on the lost discounts immediately or, if they do not appear to be an issue, focus time on other, more pressing issues. As part of continuous monitoring, the tool can generate a report as frequently as every AP run.


Optimizing overtime pay

Overtime is an ongoing issue for healthcare organizations, and it has only worsened during the pandemic due to exacerbated workforce shortages. With staff members leaving at higher rates, many organizations have increased their use of overtime as one way to compensate for fewer staff members.

Exhibit 3: Overtime

Source: Crowe analysis example data, February 2023

Healthcare organizations can benefit greatly from continuous monitoring of their overtime spend, which often is substantial. Exhibit 3 shows how a manager can look at overtime data in the Crowe Financial Control Analytics tool from various perspectives. Using the sliding bar at the top, they can view recent information, see overtime use long term, or compare different time periods. The left-hand side of the exhibit shows how overtime can be viewed at the division, department, or company levels. Managers also can view overtime pay by employee number and can compare regular pay with overtime pay by employee or department. Being able to quickly determine which departments are using significant amounts of overtime can help managers see where their organizations are understaffed and assist with decision-making regarding hiring additional employees.

The savings from reducing overtime spend can be substantial. An audit of one healthcare organization revealed 32% of paychecks included overtime pay, with nearly 10% over 20 hours per pay period.1 The organization’s managers knew payroll costs had increased, but because no one was monitoring overtime specifically, they were completely surprised to find, during an audit, that it was the cause of the increase. They could have saved significant costs had they identified the issue earlier and acted.

Organizing on-call pay

Having clinicians on call to assist with patient cases is an important part of patient care, but it can be tricky to manage from a cost perspective. Management must avoid overstaffing on call, as it could cost the organization unnecessarily. Understaffing on call, on the other hand, could put patient safety at risk. A healthy balance is essential.

Additionally, a low callback ratio can indicate that an organization is paying excessive on-call pay to individuals who are not doing any work during those hours. Because on call is included in an organization’s overtime calculation, it can become expensive to have large numbers of staff who are on call but who aren’t participating in any patient callbacks.

Exhibit 4: Ratio of callback hours to on-call hours

Ratio of callback hours to on-call hours
Source: Crowe analysis example data, February 2023

The example in Exhibit 4 shows an organization’s on-call and callback hours. The total dollar amount for the one-year period selected was more than $826,000. Because the tool allows an organization to see at the department, division, and company levels where it might be overstaffing on call, management was able to determine where the high costs were occurring. Being able to review granular-level data is much more valuable to managers than looking at a basic financial statement that might indicate an increase in payroll expenses but not provide much explanation.

Start your digital transformation

No one likes surprises when it comes to financial statements. In the current healthcare industry, more frequent, data-driven, and accurate financial information is needed to make successful business decisions. And continuous monitoring is vital. To find out more, reach out to specialists to discuss your organization’s plans for a digital transformation.

1 According to Crowe client encounters, 2022.

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Eric Jolly Portrait
Eric Jolly
Partner, Healthcare Consulting
Tim Bruhn
Tim Bruhn
Senior Manager, Healthcare Consulting
Michael Kittoe
Michael Kittoe
Senior Manager, Healthcare Consulting