Blog · Data quality and reconciliation · Healthcare and med-tech
How a medical supplies company checks that what it invoiced each facility matches the price on the contract that facility is entitled to, from the invoice lines and the contract price files: overbilling that becomes a credit and a relationship problem, underbilling that is margin given away, the tier assignment errors that cause both, and the identity that ties the check to the ledger.
A medical supplies company's contract compliance figure says facilities are buying on contract. The invoice lines say some of them are buying on contract at the wrong price, in both directions. This guide sets out the price check per facility, the two leaks, the tier errors behind them, and the identity that keeps the check honest.
Per invoice line:
Entitled price = contract price for the facility's contract and tier on the invoice date Variance = invoiced price − entitled price Over if variance > tolerance; under if variance < −tolerance
Per facility, per period:
Overbilled value, underbilled value, lines at contract, and the cause where known
Facility identifiers only.
Σ invoice lines = lines at contract + overbilled + underbilled + no contract price found
A line with no contract price found is its own class: a product not on the facility's contract, which is off-contract purchasing, or a price file gap.
| Cause | Symptom | Fix |
|---|---|---|
| Facility on the wrong tier | Every line for the facility off by the tier difference | Mapping |
| Price file not updated on the effective date | Lines in the weeks after the date off by the change | Price file |
| Facility not mapped to its system's contract | Lines at list price | Mapping |
| Manual price override | One line, one order | Process |
The pattern of variances says which; the report suggests the cause per facility.
| Facility | Lines | At contract | Over | Under | Cause suggested |
|---|---|---|---|---|---|
| F-2207 | 1,240 | 98% | $1,100 | $0 | Overrides |
| F-4471 | 880 | 12% | $48,000 | $0 | Wrong tier: billed tier 3, eligible tier 1 |
| F-9034 | 610 | 100% | $0 | $0 | |
| F-1187 | 720 | 31% | $0 | $22,000/qtr | Wrong tier: billed tier 1, eligible tier 2 |
Facility F-4471 has been billed at the wrong tier for a quarter, forty-eight thousand dollars over, and the health system's auditor will find it if the supplier does not. Facility F-1187 has been billed at a better tier than it qualifies for, and the fix is worth eighty-eight thousand dollars a year forward.
Compliance measured on contract, not on price. The facility is on contract and off price.
Price file undated. Last quarter's lines checked against this quarter's prices; everything looks wrong.
Underbilling ignored. The margin leak is the larger one at most suppliers.
Overbilling corrected quietly. Credits without the cause fixed recur next month.
Mapped once and dated, the invoice lines, the price file and the facility mapping produce the variance per line, the leaks per facility and the suggested cause every month. Covirage builds this from the exports as they are. The healthcare page describes the setup, and the facility identifiers guide covers the mapping that most of these errors trace to.
The price on the contract the facility is eligible for, at the tier the facility qualifies for, effective on the invoice date. Where a facility is eligible for more than one, the contract terms say which takes precedence, and that rule is stated on the report.
Common enough that GPOs and health systems run their own audits and issue chargebacks. A supplier that finds its own overbilling first issues credits on its own terms; one that does not finds out from the customer's auditor with a penalty attached.
Rarely by re-invoicing the customer. It is worth fixing forward, because a facility on a lower tier than it qualifies for is paying less on every line every month until the mapping is corrected. The report shows the annualised value of the fix.