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Healthcare Provider Saves With E-Invoicing

Electronic invoices are saving Memorial Hermann Healthcare System millions of dollars.

While many U.S. hospitals are working to digitize patient's paper medical records, Memorial Hermann Healthcare System, which operates 14 facilities in Texas including a Level One trauma center in Houston, is saving millions of dollars annually by trading paper invoices for electronic ones.

Memorial Hermann, which has revenue of about $7 billion, deals with about 700 suppliers who provide the healthcare provider everything from medical gear to utility services. "Those suppliers include anyone we'd issue a check to," said Don Sands, Memorial Hermann director of system accounts payables.

In the past, those suppliers generated about 500,000 paper invoices annually, many which changed hands in multiple Memorial Hermann departments several times. Before, it could take 60 days to process an invoice, and if there was a problem with the bill -- such as incorrect pricing -- "it could take another 50 to 60 days" to address it, said Daron Whisman, Memorial Hermann director of supply chain finance services.

"You can ignore a problem in a paper invoice, not address it right away" as papers get shuffled among people and departments, said Sands.

But since moving to an e-invoicing network from OB10 Limited almost two years ago, bills are processed much faster -- often within 24 to 48 hours, and errors are addressed right away. "If you recognize a problem, you resolve them right away -- and that can prevent a dozen of other mistakes from happening" in future invoices from a supplier, says Sands.

On the backend of the transaction, Memorial Herman's payment intermediary American Express provides e-payment to those suppliers. Memorial Hermann pays American Express monthly, which lets the healthcare provider benefit from the float between American Express' e-payment to Memorial Hermann suppliers, and the healthcare provider's payment to American Express.

As a result of faster invoice processing, payments to suppliers and a reduction in inefficiencies, Memorial Hermann estimates it saved between $3 million and $4 million since rolling out the e-invoicing. That includes savings through negotiating better terms with suppliers "because now we can pay them quicker," said Sands.

Before moving on the e-invoice platform nearly two years ago, Memorial Hermann evaluated its manual processes to remove or reconcile pitfalls in the paper-based procedures. "This forced us to standardize [processes] across departments," said Sands.

Right now, about 200 of Memorial Hermann's approximately 700 suppliers are using the e-invoicing platform, and the goal of the healthcare provider's incremental approach is to get most of its vendors using the system -- which would translate to added savings, said Whisman.

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