PowerTrack Promises Smoother Money Flow
Edition: February 2003 - Vol 11 Number 02
U.S. Bank is introducing to the healthcare industry a service designed to close the gap between the movement of products from sellers to buyers, and the movement of money associated with it. Minneapolis-based U.S. Bank has brought the service, called PowerTrack, to other industries before, including transportation and telecommunications.
Healthcare transactions are convoluted and fraught with potential errors. Typically, a buyer orders products and then accrues the expected cost, explains Bob Fleischman, director of marketing for PowerTrack. The seller provides the product, sends an invoice and waits for payment. Before making the payment, the buyer performs an audit to ensure that the product was indeed provided, and then reconciles the invoice amount. Only then does the buyer cut and mail a check, mapping the payment back to the proper G/L expense center. The seller receives the check, applies the cash to the correct account and sends out a statement to the buyer. The whole process, without exceptions or disputes, usually takes a month or more.
By injecting PowerTrack – and the resources of U.S. Bank – behind the transaction, that time becomes days instead of weeks and months, says Fleischman.
How It Works
In a nutshell, a PowerTrack system operates like this:
· Order information is transmitted from the hospital to the distributor or manufacturer. A copy of the order is sent electronically to PowerTrack and matched with the corresponding invoice information.
· The invoice information is sent from the manufacturer or distributor directly to PowerTrack and matched to the correct order.
· PowerTrack contract and pricing tools verify the invoice and/or order line item prices.
· The order is delivered and receipt notice is posted in PowerTrack.
· The buyer approves the order amount and PowerTrack pays the seller the contracted invoice amount.
· A consolidated bill for payments made to all suppliers is sent to the hospital.
· The hospital makes one payment to PowerTrack for all purchases.
U.S. Bank has brought PowerTrack to the transportation and telecommunications industries with success, says Rick Langer, senior vice president and general manager for PowerTrack. The bank decided to tackle healthcare after several manufacturers, including 3M and BD, asked that it do so. “They want to be paid more quickly than they are,” says Langer. “They had heard about what we’re doing in other industries.
“Healthcare is a good testing ground for us, because so many different parties are involved in transactions,” Langer adds.
Because it is a bank, with more than $160 billion in total assets, U.S. Bank knows how to handle risk, says Langer. For that reason, it pre-qualifies buyers for PowerTrack based on their creditworthiness.
Providers pay a per-transaction fee for the service, and sellers pay 1 percent of the transactions.
To install PowerTrack, implementation teams from U.S. Bank work with cross-functional teams from providers (usually hospitals), comprising representatives from information technology, purchasing, finance and operations. They work out a variety of issues, such as how the PowerTrack system will electronically match invoices to purchase orders. Implementation can take anywhere from six weeks to three months, depending on the motivation and ability of the customer to move ahead.
PowerTrack offers healthcare buyers and sellers the opportunity to reduce discrepancies between purchase orders and invoices. “But it doesn’t do a lot of the work,” says Langer. “Rather, it provides tools for our customers to do the work.” For example, hospitals, manufacturers, distributors and group purchasing organizations still have to notify PowerTrack of pricing changes if they expect the process to run smoothly, he says. “We provide one universal platform for all parties to use. PowerTrack is simply a tool.”
While PowerTrack offers buyers an opportunity to avoid costly and time-consuming discrepancies, and sellers the opportunity to receive payment in a timely manner, one of its biggest benefits may be in the information it provides to both parties over time.
“The beauty is that you have a complete reporting system, and it’s all held in one spot,” says Langer. “It’s not just a matter of moving money back and forth, but it’s the data stored within it.” For example, both buyers and sellers can identify trends with errant invoices and figure out ways to lower the exception rate.