Transcript Lehigh Valley Health Network

Going for the Green
“E”Payment’s service helps you move from paper to
electronic payments
Vanessa Taggart
Paula Strollo
Supply Chain Managememt
Who We Are
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Largest academic
community hospital in PA
Largest Level 1 Trauma
Center in PA
Certified Stroke Center
Employees – 9,500
Medical Staff – 1,100+
Nurses – 2,334
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Magnet Hospital
143,850 ED visits /
49,300 admissions
988 acute care beds
3 hospital campuses
Revenues over $1 Billion
Supply Chain Management
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Synergies between Supply Chain and
Accounts Payable
– There is significant overlap between
Supply Chain Mgmt & Accounts
Payable
– Typically work with the same
suppliers and internal customers
Supply Chain Management
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Value in tight connections within the
P2P process
– Accountability for entire P2P cycle
– Shared Vision – Goals aligned
– Leverage relationships to bring overall
value to contracting
• Pricing/Terms/Compliance/EDI/Payment
– Accounts Payable has access to vendors
Supply Chain Management
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Value in tight connections within the
P2P process
– Accounts Payable “owns” the vendor
master
• Assures compliance to government
regulations
– Internal Audit findings addressed with full
continuum of Supply Chain for process
improvements
Supply Chain Management
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100% of Supply Chain mission ends in
a payment… contracting, purchasing,
inventory etc…
89% of AP’s workload is directed by
Supply Chain processes
– 54% Purchase Order
– 18% Contracts
– 17% Direct Procure (VISA)
Supply Chain/AP Connection
First Half FY10 Invoice Lines by Type
MM Contract Lines
18%
Chk Requests
4%
EE Reimb
3%
Visa Transactions
17%
Patient Refunds
4%
PO Lines
54%
LVHN Credit Cards
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In place >10 years
– Significant growth over time
– Average transaction amount = $398
– 77,000 transactions annually = 77,000
less invoices
– 5-6 FTE’s needed for that many invoices
– 77,000 @ $3.18/per invoice
• $245k additional costs
Rebate
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Rebate for FY 09 was only on credit
card transactions
FY 10 we will realize additional rebates
thanks to “E”Payment’s
LVHN Accounts Payable
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FY 2009
– 48,000 checks issued
– 522 “E”Payment’s
– 2.3 average invoices per payment
– $12,200 per payment (“E”Payments’s & Checks)
– 112,000 invoices processed
– 74,000 credit card transactions
– $0.47 processing cost per invoice
LVHN Accounts Payable
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Rebate received annually
– Helps pay for wages
– Helps pay for benefits & overhead
– Helps pay for supplies and other expenses
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Without the rebate
– Our invoice cost was around $3.18
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Benchmarks range from $3.58 to $35*
*Aberdeen Group
What is “E”Payment’s?
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Back end credit card
– Vendor is given a credit card number
– There is no physical card
– The card is funded at $0
• Can’t decide to use it to pay an invoice
– Funding occurs when we transmit the
payment
– Card is funded for what is payable
How to run “E”Payment’s?
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Using ERP system
– Identify suppliers who accept
“E”Payment’s
– Run basically same reports we run for
cutting checks
– Do not print checks
– Create a transaction file that is encrypted
and transmitted to the bank
– Bank pulls into their web based system
How to run “E”Payment’s?
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Bank’s system
– Creates a remittance email or fax that is
sent to supplier
• Card is funded instantly
– Supplier uses previously communicated
credit card number to process payment in
their credit card system
– Supplier gets payment immediately
Projected for FY10
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FY 2010 - Projected
– 43,500 checks
– 2,600 “E”Payment’s
– 2.4 average invoices per payment
– $11,000 per payment (“E”Payments’s & Checks)
– 110,000 invoices processed
– 77,000 credit card transactions
– - $0.24 processing cost per invoice
Team Structure
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Project Team Resources
– Accounts Payable
– Supply Chain Analytics
– Information Services
– Finance
– Internal Audit
– Bank Personnel
How are Suppliers Selected
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Project Steps
– Hospital provided file to bank to contact
suppliers regarding participation
• File included contact information, address,
annual spend etc.
– Bank contacted suppliers with >$50k
explained program
• Supplier makes decision to participate
How are Suppliers Selected
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Project Steps (cont’d)
– Suppliers who chose to participate receive an
email confirming their participation
– LVHN copied on the email
– LVHN is provided credit card numbers by bank
– LVHN calls supplier with credit card number (no
plastic is issued)
• Safe because card has $0 value
After the Call
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Project Steps (cont’d)
– On the hospital side
• Update vendor master
– Change payment code to drive payment to
“E”Payment’s
– Assure contact information is updated
• Begin paying using “E”Payment’s in next
payment cycle
LVHN Rebates
$600,000
$500,000
$400,000
$300,000
Rebate
$200,000
$100,000
$0
FY 07
FY 08
FY 09
FY 10
Budgeted
We are confident this will
be achieved.
Other Savings
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Interest on cash float – we hold our cash longer
– $57,000 annual estimate (first year)
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Supplies
– Fewer checks & envelopes
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Postage
– Supplies & postage savings
• $3,300 annual estimate (first year)
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Staff time savings
– NO sorting or moving of paper
Supply Chain Next Steps
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All areas of Supply Chain participate
– Add language regarding payment methods
– Extended payment terms for vendors who insist
upon a check
– Ask vendors who are looking for payment if they
participate
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Go for the green
– Push “E”Payment’s NOT paper payments
Contact Information:
[email protected]