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David Alexander, Vice President, Finance, Memorial Health System

By David Alexander

Healthcare systems across the U.S. are facing the need to reform operations to maintain their financial health. Rising costs, aging populations and government reform mandates are changing how these systems work.

As the nation’s second largest public health care network, Memorial Health System has had to face these issues and more as we’ve expanded operations.

The good news? We’ve grown both organically by adding new facilities and by acquiring other hospitals and health providers.

The challenge? The complexity of our accounts-payable processes increased, transactional volumes skyrocketed, and we had no consistent way to validate vendors.

Our AP department, for instance, was handling more than 300,000 invoices a year from a wide array of vendors such as medical care providers, medial supply companies, electrical contractors, construction firms and janitorial services. And with no centralized process, the back-and-forth process of invoicing resulted in manual errors and lots of wasted time.

To keep pace with growth, it was clear we needed more transparency into the vendor vetting process, and we wanted to move the staff from clerical roles into more analytic-type roles. Our goal was to give Memorial employees greater visibility into the vendor community to build more efficient and trusted relationships.

Working with IBM, we were able to combine an enterprise content management system for consolidating accounts payable processes with an intelligent analysis system that checks vendor data against more than 800 internal and external databases.

This smarter analytics system, known as VETTED, was built based on our existing platform from IBM and business partner  Information Management Consultants (IMC). By adding analytics capabilities, we now have greater visibility into our vendor community and the accounting staff can complete vetting activities within a few hours instead of weeks. With analytics capabilities, we’re also able to connect the dots among vendor companies and between individuals, physicians and vendor companies to help uncover potential fraudulent behavior.

Here’s how it works: the content management application automatically routes invoices through a verification process that uses a hierarchy of people responsible for ensuring that products and services are delivered according to contract. The system has an audit trail to show that the appropriate person signed each invoice. As a result, we can control when we pay specific vendors and the process is auditable.

Faster processing of invoices means that a provider can now gain access to volume discounts, contract bundling and prompt-payment discounts that were previously impossible with our manual process. This has led to vendor discounts of more than $2 million to-date.

The VETTED vendor credentialing system gathers information from the content management system, cross-references against 800 internal and external databases, and analyzes the resulting data sets to provide previously inaccessible insights into the vendor community. In one case, for instance, our analysis showed that three vendors were colluding to price rig a proposal. With new insight into who these vendors were and what they were doing, we were able to address the situation immediately.

We’re now in a much better position to manage potential vendor risks, including conflict of interest and even criminal behavior. Previously, the vetting process for vendors was highly manual and limited mostly to checking for tax IDs, civil judgments and liens, which meant that fraudulent operations could still avoid detection.

Working with IBM, we now have a fraud management platform across the entire hospital network that reduces risk while simultaneously speeding up invoice processing and saving millions in the process.


Memorial Health System will be attending the IBM IOD 2013 conference from Nov. 3-7 in Las Vegas.

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November 8, 2013
2:06 am

[…] Memorial Health Fights Fraud with Big Data Analytics A Smarter … help Memorial Health keep pace with growth, it was clear we needed more transparency into the vendor vetting process, and to do it, we turned to big data analytics. […]

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