How to streamline your accounts payable operations
How intelligent data capture can replace paper with efficiency and create opportunities.
By Robert Banwart, November 2012
There is a continual demand for change within the healthcare delivery system that reaches down to every level of operations. Healthcare reform legislation has called for a consolidation of hospital systems, upgraded IT infrastructures and the implementation of new technologies that relieve the administrative burdens placed on operational management and staff.
Accounts payable was no exception, and opportunities for streamlining and belt tightening will always exist. According to the Institute of Financial Operations (www.financialops.org) – a trade organization devoted to operational insights and best practices for back-office operations – manual keying of data is inherently problematic, with one in 40 keystrokes producing an uncorrected error. These errors can potentially disrupt supply chain, strain vendor relations, incur late payment penalties, cause duplicate payments and more.
According to Lawrence Livermore Labs, lost documents – a common hazard when trafficking paper throughout a large organization such as ours – cost an average of $120 each to replace (www.corelogic.com/products/marketlinx-document-and-transaction-managers.aspx).
Aberdeen Group (www.aberdeen.com), a business intelligence research firm, finds that a streamlined, best-in-class accounts payable operation will process an invoice, on average, in about one-sixth the time, at about one-twelfth the cost, of so-called “laggards” in a similar situation.
In answering the call for operational improvements, Resurrection Health Care explored the strategic benefits of automating or outsourcing the slow, manual data entry routine that had burdened our accounts payable operation. Deciding that outsourcing the process would carry too many long-term costs, and concluding that e-invoicing would not offer a suitably comprehensive alternative, we turned our attention to capture-based automation technologies, in the hopes that efficiency might be obtained through the elimination of paper. We were looking for a product that would actually enable us to affect the bottom line – to take work out of the system and, as a result, enable us to allocate full-time employees (FTEs) elsewhere. We were looking for hard-dollar, bottom-line savings.
Our financial and IT management organized a practical test to evaluate available options; the test included a number of optical character recognition (OCR) products from such vendors as Kofax, EMC-Captiva and Brainware. Our approach was simple: We would invite each vendor to come on site at Resurrection, provide each of them with a sampling of invoices – 100 actual documents, reflecting a typical range of formats, including possible errors and inconsistencies, which we might handle on a given day – and observe their systems’ capabilities for processing and reconciling the data.
Upon completion of these live demonstrations, we determined that Brainware’s intelligent data-capture technology clearly demonstrated the ability to reduce costs throughout the accounts payable process. It could take a transactional document, extract the key header and line-item information and process it for payment without requiring our staff to intervene manually.
Brainware’s unique value proposition extended from the fact that the software did not require templates; its ability to integrate with our existing systems and extract key information from a variety of formats almost immediately was unique among the vendors. They used a small, generic sampling of invoices to “teach” the technology how to identify an invoice, locate the data we needed, verify its accuracy relative to other line items on the document and validate it against internal sources (such as a purchase order database) as per our requirements. With thousands of suppliers in our database, each issuing their own unique invoices – including many through various electronic means, such as PDF – creating a unique template, or set of rules or “anchors,” would place a burden on my staff that could potentially negate the benefits of automation, at least in the near term.
Resurrection contracted Brainware to implement the software on Microsoft SQL Server for processing accounts payable documents into our McKesson ERP system.
Brainware’s staff came on site, and the whole process – from the actual start of the implementation until we were up and running with purchase order-related transactions – took about a month and a half, and that’s a very fast implementation. The project leads stayed off the critical path and accurately delivered their products on schedule. They were very helpful in walking us through the process of developing the customized features, understanding our business processes and feeding back their recommendations. Brainware’s specialists brought a level of experience that enabled us to better align the application with our long-term business objectives, and the process even helped us uncover weaknesses in our prior routines.
As a result of the Brainware implementation, we were able to reduce the permanent hourly AP staff by about 40 percent; prior to the merger, we had achieved field extraction rates of 94 percent on purchase order-based invoices, and paper-based processing was reduced from 87 percent to 10 percent. On our purchase order-related invoices, about 45 percent of those transactions are able to go through the verification process without our intervention, and about 75 percent of the transactions were able to have the software match automatically (the line items on the invoice to the line items on the purchase order). Those percentages are significant reductions in key punching.
Our minimum standard invoice cycle time is now far quicker, which has given us the ability to work with more vendors to obtain prompt payment discounts – money once left on the table, but now available for critical healthcare delivery.
One of the greatest benefits to the application was its scalability. As Provena Health comes on board and the merger is completed, our invoice volumes will increase accordingly, but we anticipate being able to heavily leverage our initial design and development work to enable a smooth expansion of the system. We believe the processing platform will compound the efficiency inherent to a merger of two major healthcare providers, resulting in higher efficiency and productivity gains than would be achieved through consolidation of a paper-based environment
In addition to transforming the routine for processing invoices, expense reports and other document types from “data entry and paper handling” to “analysis and exception handling,” the software provides a vastly improved audit trail, as well as a consistent method for discrepancy resolution. We have been able to more quickly identify possible duplicate payments and develop additional reporting mechanisms to drive down the risk of making duplicate payments. When you have a system like this, where everything is visible, you’re actually driven to continuously improve your process.
We also implemented Brainware’s application for enterprise search, which has helped our department quickly retrieve previously scanned documents and review all physician payments; yet another essential routine that once consumed many hours. By creating a scalable, searchable archive for structured and unstructured data, we have been able to convert all of these documents into electronic images, negating the need to physically store seven years’ worth of paper files. The search technology saves my department a great deal of time and effort that would otherwise be spent retrieving paper documents. Our accountants also use it to efficiently recall invoices related to specific checks, and I anticipate the technology benefitting additional users as we continue to roll out Brainware more broadly.
In terms of innovation and long-term strategic initiatives, healthcare financial operations typically take a back seat to functions more directly serving the core mission of delivering medical treatment and conducting research. In this case, however, we have leveraged available technology to deliver a true benefit to the bottom line at Presence Health, creating efficiency in the back office so that more dollars can go to the facilities where they are most needed.
Working in accounts payable, you don’t have many opportunities in your career to implement significant change. In the case of the Brainware project, we are implementing some cutting-edge technology in an area that is not accustomed to that. With the procurement of Brainware, I feel we have taken the fundamental step to becoming a world-class accounts payable operation. I firmly believe the benefits of going through this change will position us for the future, in accounts payable, to contribute even more directly to the mission of Presence Health.
(Editor’s note: One year ago, Provena Health and Resurrection Health Care merged and became Presence Health, the largest Catholic healthcare system based in Illinois – and one of the state’s largest employers. As of October 2012, the Brainware platform is now known as Perceptive Intelligent Capture, powered by Brainware, and is adaptable to document-driven processes across the healthcare enterprise, including the sorting, capture and reconciliation of EOBs, HCFAs, UBO4s, patient records and others.)
About the author
Robert Banwart is director of accounts payable, Presence Health. For more on Brainware, click here.
Tags: Document Management