Today, most hospital business offices rely on third-party vendors, such as collection agencies, extended business-office partners and eligibility firms, to augment their internal collection efforts. Every day, accounts and financial updates flow back and forth between a hospital and its vendors. "Despite everyone’s best intentions, the current operating routines and processes often result in inconsistencies between the inventory records of a hospital and its vendors," says Steven Levin, CEO of Connance, a provider of back-office, self-pay collection and scoring solutions.

Recent research suggests the inventory reconciliation problem is significant, pervasive and critical, Levin says. "Reconciliation issues between providers and their vendors can lead simply to lost cash and high operating costs or go so far as to create regulatory issues and major public-relations problems."

Based on findings from inventory-reconciliation initiatives at multiple providers around the United States, between 5 percent and 34 percent of inventory held at vendors had reconciliation issues with the providers’ records, according to Levin. The average reconciliation error rate across this sample of providers was 13 percent, he adds.

"Vendors also appear to demonstrate different performance on account and inventory reconciliation activities," he says. "As the research indicated, some vendors seemed to systematically operate at lower than 90 percent accuracy, while others were close to 98 percent accurate."

For each account, countless financial events, such as payments, adjustments and reversals, occur every day both in the hospital business office and in vendor operations. All these events need to be credited, debited and noted in both provider and vendor inventory records in exactly the same way.

"The scale and scope of the research, plus the trend to use more outsourcers in business-office processes, suggest providers and their vendors need to enhance key routines," explains Levin, such as:

1. Check placement files for misplaced accounts and identify root causes of problems. Assure the accounts are identified, inventory records are corrected and the underlying reasons for the account being incorrectly placed are identified and corrected.
2. Reconcile balances for all accounts in placement and recall files. Individual account balances need to be verified, preferably by cross-checking account-level financial transactions.
3. Reconcile full inventory at each vendor, at least monthly. In many situations, weekly reconciliation of the entire inventory may be appropriate.
4. Update policies and procedures and monitor adherence. One practice is to review policies and procedures at least once a year to check that they are up to date, cover all reasonable situations and are understood by vendors and employees in the business office. The provider also needs to monitor adherence to these policies and procedures.
5. Ensure comprehensive and common reporting. Having accurate reports that are common across vendors to track inventory reconciliation is central to having accurate account inventories.

"Ultimately, whenever a provider corrects existing inventory-reconciliation issues and prevents new ones from occurring," Levin says, "they are improving the patient experience, reducing operating costs and compliance risks, and enabling their vendors to be more effective. It is a true win-win-win experience."