Healthcare behind the times with EDI

Clearly not every best practice resides in healthcare. Although the clinical technology used in our industry is second to none, the use of technology to run our businesses that is common in other sectors is largely different. The case of electronic data interchange (EDI) is a classic example. Almost any retail company asks two key questions as it relates to the use of EDI:

  • Why should you pay anything for your suppliers to do business electronically with you?
  • Why should you do any business with suppliers who don’t communicate with you electronically?

 

Unlike other industries, healthcare has been told that isn’t the way EDI works. The buyer pays for EDI for a few of the top-dollar-spending vendors, (usually fewer than 200) and more than 90 percent of suppliers still operate by some sort of automated fax or worse yet … paper invoices. The cost in EDI fees and pricing errors are enormous. Not only is the system inefficient and labor intensive, but the flaw of only connecting to your high-dollar-volume vendors is that it costs the same to process a $5 invoice as it does a $50,000 invoice. The cost of the invoice is irrelevant, yet for years this description of the healthcare purchasing and receiving process has been common.

To make it worse, there’s a limited number of companies in healthcare that provide EDI, and they work both sides of the fence, charging both the buyer and the seller for the privilege of using their EDI services. By looking outside of healthcare for best practices, we can find proven technology with 20 years of experience that brings healthcare up to date with other industries.

A best-practices checklist for EDI includes:

  • Fees should be paid for by the vendors rather than the buyers.
  • Fees should be affordable and driven by the actual cost of providing the service as opposed to an arbitrary percentage of the cost of the invoice.
  • The process should include a web-based portal that is easy and practical for vendors of any size to use.
  • There should be a 360-degree electronic process that allows for an automated method to track the complete process of purchase order, purchase order acknowledgement, invoice creation/matching and straight through processing to the accounts payable system.
  • A robust dashboard of analytics should be available to efficiently run your business.

It is time for us in healthcare to reach out to solutions from other industries where the above-described process has been standard for decades.

Kevin L. Shrake (kevinshrake@mdresources.net) is a 35-year veteran of healthcare, a board-certified fellow in the American College of Healthcare Executives and a former hospital CEO. He currently serves as the executive vice president/chief operating officer of MDR, based in Fresno, California