Even with a barrage of MU mandates, the shift to ICD-10 and value-based/outcome-based reimbursement schedules, the healthcare industry is surprisingly strong, financially speaking. The past decade has seen innovative administrators pursuing new revenue streams and re-thinking patient flow to reduce operating costs. Yet while these efforts are working, more can be done to optimize payments and reduce accounting errors in the medical sector. Take inventory management, replenishment and procurement procedures as an example.

While most hospitals recognized (and embraced) the myriad benefits of cloud technology earlier than independent practices and medical service providers, mid-level and C-suite managers are still dragging their feet when it comes to automating inventory procedures with Web-based purchasing and accounting software. Perhaps it is a control issue. Cafeteria managers don’t want to run out of food staples, plastic ware or room trays. Housekeeping supervisors get nervous when the stockpile of antibacterial cleanser and bin bags gets low. Maintenance prefers to order their own bulbs and plumbing supplies. Perhaps it is fear. Department heads don’t want to be blamed for a shortage that puts patients at risk or jeopardizes productivity.

Why tackling supply chain management head-on is mission-critical

Medical organizations have made laudable strides in curbing operating costs. Now is not the time to stop working toward even higher profit margins without compromising point-of-care services. HIT Consultant reported $5 billion goes down the drain each year in the implantable device supply chain, primarily due to inefficiencies, lack of visibility and out-right waste. That is just one example, and there are dozens of other examples, that clearly demonstrate medical organizations have opportunities to capture more spendable revenue.

No one is suggesting those who own the budget should relinquish total control. A better solution is to open the lines of communication between departments and accounting staff to streamline the cycle — end to end, purchase to pay. This will empower buyers to negotiate bulk contracts and automate replenishment that can save thousands of dollars a year compared to fragmented procurement procedures that do not leverage the power of purchasing in volume.

Improving efficiency and accuracy in one department or area may lead to higher productivity (and higher profits) in other departments. Such was the case for South Jersey Healthcare in Vineland, New Jersey. When management decided to automate the distribution of prescription medications in their hospitals, they saw their inventory turns double, their nursing staff had more time to devote to patients, and they saved significantly by taking advantage of special pricing since their shelves were not over-stocked. Patients received more personalized care and expenses went down. Every point along the supply chain has the potential to improve patient experiences and lower costs for medical organizations.

Key benefits for hospitals and medical organizations

Every dollar saved on inventory management and procurement can be reinvested in another area. Every minute saved by automating replenishment on a schedule that ensures every department has vital supplies, without overstocking, can be re-allocated toward more urgent tasks. Every manual entry that is avoided reduces human errors, enabling CFOs to capture an accurate, up-to-date snapshot of financial standing throughout the month. Purchasing software — when integrated with accounting modules — streamlines operations, facilitating faster, more accurate payments.

Implementing automated procure-to-pay policies also gives managers more control over what is purchased, ensuring spend does not exceed the budget. Online approval gives managers the freedom to work from anywhere with apps that allow purchase requisition approval from mobile devices.

It is clear that optimizing procurement and payment policies promises to save medical organizations thousands of dollars each year that is now lost to inefficient workflow patterns. Automation is the engine that will drive that train forward.

Steve Smith is the U.S. Chief Operating Officer at Esker, a document process automation company with global headquarters in Lyon, France and U.S. headquarters in Madison, Wis.