5 Unique Challenges of Managing Healthcare Spend
Healthcare organizations are continually looking for ways to reduce cost, ensure compliance, and serve more patients, while still maintaining the highest quality of care.
The challenge is though that travel and expense (T&E) management in healthcare is far different than any other industry, with most organizations relying on generic expense management software — or manual processes — to get the job done. Therefore, it can be nearly impossible to gain the visibility, control, and comprehensive data insight required to drive positive change.
The best way to illustrate this point is to contrast T&E in healthcare to T&E in a Fortune 1000 company. Here are the top five differences that are easy to see:
1. Air travel patterns
In healthcare, clinicians and staff primarily travel to attend multiple-day conferences, symposiums, and educational seminars. So, they travel by air much less frequently, but for longer lengths of time.
“They don’t have one or two meals on the expense report, but 20. They don’t rent a car for one day, but one week. And, they’re probably booking outside of the T&E system because that’s the only way to get the conference discount,” explained Christian Hon, senior director of sales for the SAP Concur healthcare division.
In fact, according to an SAP Concur healthcare customer survey, an average of 45% of hotels booked currently fall into the direct-bookings category. This is primarily because continuing medical education (CME) typically makes up the majority of travel spend with many of the conferences requiring physicians to book directly through event websites. This lack of visibility not only makes expense management challenging, but also makes duty of care near impossible. If disruption occurs, healthcare leaders have no way to quickly identify which of their physicians, clinicians, and staff are impacted.
2. Higher mileage expenses
Car travel and mileage reimbursement requirements are significantly different between healthcare organizations and other large companies as well. And it comes as no surprise because the bulk of healthcare organizations’ travel is done by car – clinicians going from facility to facility or to patients’ residences to administer home healthcare or hospice services within their specific regions. All of this movement adds up.
“The amount spent on mileage varies from provider-to-provider, but it’s very rare to have a healthcare organization where personal mileage is not one of the top three expenses,” Hon said.
On average, healthcare providers spend at least twice as much on mileage than any other industry. With the demand for mobile healthcare expected to increase from $103 billion in 2018 to $173 billion by 2026 as the population ages, those mileage costs will continue to escalate. Yet, most healthcare organizations continue to rely on their staff to manually track and submit mileage reimbursement requests, which impedes accuracy, increases costs, and adds complexity to the expense process.
3. A unique, non-mandate culture
While large corporations might put tight controls on traveling sales teams and mid-level managers, the healthcare industry is far more lax with clinicians. Many physicians are also removed from accountability because they leave the task of completing expense reports to their administrative assistants and other support personnel, making spend management controls even more difficult to enforce. As a result, most healthcare organizations have a non-mandate culture. However, there is a risk to not having an enforceable policy and healthcare-focused T&E solution in place.
“Every organization in the world struggles with change management. The bad actors continue their bad acting until it finally hits a breaking point where regulatory agencies step in and force that change. We’ve already seen that happen in the pharmaceutical industry, with the Sunshine Act and Stark Law,” Hon said.
By gaining visibility into their expenses, healthcare organizations can begin to identify areas of questionable spend and begin the self-regulating process – before being forced into compliance.
4. Amplified fiduciary responsibility
Perhaps more than any other industry, healthcare providers, as well as payors, face a great deal of scrutiny around fiduciary responsibility. In the same healthcare survey, nearly half our customers claimed their organization doesn’t monitor if their physicians receive any type of compensation for attending CME conferences. Without total and immediate visibility into spend, it’s nearly impossible to mitigate fraudulent or even corruptive activity such as bribery. It’s also more difficult to prevent cost overruns due to basic human error – particularly in organizations in which a large portion of T&E spend comes from an annual stipend.
CME spend is also another common area of unnecessary financial bleeding with 64% of our healthcare customers stating their physicians always exceed amounted budgets for expenses each year. The problem is, some not-so-scrupulous vendors have turned that CME into boondoggles – golf trips, wine country trips, cruises – even heli-skiing for CME credits.
5. Not-for-profit or religious affiliations
Unlike companies in most other industries, many healthcare providers are not-for-profit organizations or have religious affiliations, both of which create a number of different rules around T&E management. For example, some healthcare organizations have hard rules against reimbursing any alcohol purchases. Others may have restrictions around how they spend their grant money or the endowments they receive. All of that has a trickle-down effect, right down to something as granular as a line-item on an expense report.
“Those unique requirements make managing expense more difficult already, but to add to the complexity, in most cases, there will always exceptions to the rules,” Hon said. “For example, expensing alcohol may be prohibited unless a staff member is recruiting a surgeon at a dinner meeting.”
Healthcare organizations that accept endowments or use volunteers are also expected to guard against excessive or unnecessary spend or risk a donor exodus.
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Download the healthcare whitepaper to uncover more insights about each of the five challenges, including some best practices that can help your organization reduce costs and gain control.
