Jun 23, 2022 2:37:40 PM | 9 Min Read

Automation From Implant Bill Sheet to Purchase Order: How Kermit Integrated with Oracle at Inova Health to Increase Accuracy, Save Time, and Reduce Spend

Posted By
Tim Anderson
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Automation From Implant Bill Sheet to Purchase Order: How Kermit Integrated with Oracle at Inova Health to Increase Accuracy, Save Time, and Reduce Spend

Today’s hospitals are facing an unprecedented set of challenges as labor shortages, supply chain disruptions, and inflation combine to depress hospital operating margins.

As hospitals work to alleviate these pressures, many are seeking out ways to automate manual processes, reallocate resources and drive down operating expenses. Very few areas within the hospital present a better opportunity for digital transformation than the implant bill-only process. The typical bill-only process in hospitals is still manual, with paper being shuffled around between several departments, sucking up critical hospital resources and frequently leading to overpayments to medical device vendors.

Inova Health, a 6-hospital system in Northern Virginia, recognized the drawbacks of this manual process and decided it was time to act.  Inova identified several areas in the bill-only procure to pay workflow that could be automated and looked for opportunities to cut down on the amount of time and effort it took to issue purchase orders. The result is a streamlined process that required very little manual intervention and reduced the time from procedure to purchase order down from three or four weeks to one day or less.

Today’s Typical Bill-Only Process in Hospitals

The bill-only process can be found in more than two dozen surgical divisions, including high-volume/high-cost areas such as orthopedic reconstruction (total joints), spine, and trauma. Bill sheets are utilized when the device (or distributor) representatives bill for the implants and devices used in surgery and, most often, are procured directly in the operating room. The items used (and sometimes wasted) are scribbled down on a paper bill sheet by the vendor rep along with the associated price for each item. An important point to remember is that these vendor reps are often 100% commission-based and under constant pressure to maintain revenue and margins.

Once the bill sheet is completed, it is passed to the nurse circulators, perioperative staff, and supply chain resources who are responsible for entering charges into the EMR and for processing the vendor payment. Staff often face significant bandwidth constraints that allow them to only spend 3 to 5 minutes on each bill sheet while, in reality, it takes 25 to 30 minutes to perform a comprehensive review of the case and prevent overpayments.  

The Impacts of the Typical Bill-Only Process

This cumbersome process comes with widespread impacts on hospitals and health systems of all sizes, further stressing the already fragile infrastructure.

For Inova Health, with 20,000 bill sheets processed each year, these impacts were substantial.

Purchase Order Turnaround Time Elongated

Very few health systems can afford to have a dedicated staff allocated just to process bill sheets. As a result, those 20,000 bill sheets are certain to be backlogged, causing delays downstream and resulting in purchase orders being issued late.

For Inova Health, purchase orders were being issued 2-4 weeks from the date of surgery.

Incomplete, Inaccurate, and Out-of-Date Data

The bill sheet contains important information about the case that must then be manually entered into the EHR (for billing purposes) and the ERP (for payment purposes). This manual data entry process is prone to error and often means that the data required to properly analyze spend and utilization data must be pulled together from two disparate systems, since the clinical data such as patient, procedural, and surgeon data live in the EHR while supply chain data like vendor, device, and cost data live in the ERP.  

High Match Exception Error Rate

And with this process of matching the items listed on the paper bill sheets to the ERP comes frequent “match exception errors” where the amount billed on the vendor’s invoice does not match the amount on the bill sheet. These exceptions require research and additional information about each case, which is often not available at the time of payment processing. Hospital purchasers are often forced to accept whatever amount the vendor billed, leading to overpayments. 

At Inova Health, this match exception error rate was between 5-8%, and Kermit anticipates that this number can be much higher at many hospitals.

5-10% Overpayment on Implants

Given the lack of time in auditing and processing paper bill sheets, hospitals spend up to 5 to 10% more on their medical implants than they should. Issues such as wasted items, overcharging, and clinically inappropriate usage can erode margins quickly, especially if the entire process is on paper.

To put it in numbers, this process will cause a health system that spends $50M on implants per year to overspend by $2.5M to $5M.

How a Kermit-Oracle Integration Streamlines the Process

Hospitals should be wary of any efforts to streamline the bill-only process that do not give proper consideration of the audit and compliance function. Through our proprietary AI and ERP integration, Kermit streamlines the bill-only process while, at the same time, strengthening audit and compliance of each case. Critical data elements from the bill sheet are stored in Kermit, turning the bill-sheet into a digital asset that is used to unlock valuable data to further reduce spending. 

We accomplish this by equipping vendor reps with a mobile application that can be used to capture case and bill-sheet information directly in the operating room. This case information and an image of the bill sheet is transmitted securely to the Kermit cloud shortly after the procedure takes place. From there, Kermit’s proprietary AI checks each case for compliance with the hospital’s contract terms and pricing with the vendor and looks for issues such as waste, unbundling, and price mismatches. The Kermit team of implant experts then interacts directly with both hospital resources and vendor reps to resolve issues identified by Kermit.  

Approved bill sheets are sent to the Oracle cloud ERP via a file-based data integration process that provides more than 50 data fields to build the purchase order. 

Images of the original paper bill sheet are stored within Kermit along with a uniform digital bill sheet as well as all the surgical demographic, product, and pricing information. Kermit serves as the one source for clinical and supply data, allowing hospitals to analyze the data within the platform or download it for further analysis.

The Real Operational Impacts at Inova Health

With the implementation of Kermit and the integration into their Oracle ERP, Inova Health experienced measurable results in their bill-only process.

While their 20,000 bill sheets-per-year volume did not change, the person-hours required to process the sheets were cut dramatically. Previously requiring 10,000 hours per year, the process now only requires an estimated 1,667 hours or about five minutes per bill sheet.

The match exception error rate went from an average of 5-8% down to less than 1% due to the audit and compliance process provided by Kermit.  

The integration from Kermit to Oracle that automates the purchase order creation process cut the time from surgery to PO issuance from 2-4 weeks down to 1 day or less.

And when it comes to total implant savings, Inova Health has saved $6M working with Kermit and anticipates an additional $10M - $15M with the implementation of additional surgical service lines.

Topics: PPI Spend Management, Bill-Only Process

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