The NHS Sustainable Development Unit (SDU) is considering a new initiative that could see healthcare trusts reclaim millions of pounds wrongly paid in service charges and procurement and plough this cash back into green energy solutions.
The SDU is in talks with UK profit recovery specialist, MAID, about a possible trial that would see specialist teams analysing accounts payable, telecommunications, utilities, and research and development spend by trusts over the past six years.
In other industries, and in a handful of forward-thinking NHS organisations, this has already uncovered substantial savings that can be put back into improving services.
We look at spend and we see where overcharges may have been applied. We also look at accounts payable and contract compliance issues. Where something has been missed, we can bring this money back to the client
If the collaboration goes ahead, the so-called Green Budget would provide much-needed extra capital for sustainability teams at a time when budgets are being cut, energy bills are rising, and the NHS is being charged with cutting emissions by 80% by 2050.
Speaking to BBH this week, Richard Davies of MAID explained: “As a company we go into organisations and look at retrospective profit recovery. We have a group of specialists who are able to identify various overpayments in areas such as energy and utilities and telecommunications. We look at spend and we see where overcharges may have been applied. We also look at accounts payable and contract compliance issues. Where something has been missed, we can bring this money back to the client.
This is exciting and we can see a phenomenal opportunity for the NHS to reclaim money and invest that money in sustainable measures like energy reduction initiatives
“This is exciting and we can see a phenomenal opportunity for the NHS to reclaim money and invest that money in sustainable measures like energy reduction initiatives.”
He predicts the NHS will see substantial savings in the area of accounts payable, but also in utility spend.
He said: “In our experience, all utility suppliers are now raising some invoices incorrectly and significant overcharges are now commonplace. The inherent complexity of the utilities marketplace, coupled with basic manual errors and an over reliance upon systems and software, contributes to utility companies’ mistakes and inefficiencies.
“Utilising our proprietary software and experienced industry professionals, we check to ensure the charges invoiced for every bill match the allowable industry charges and the client’s contracted agreement. This provides an industry-leading audit of the all visible and invisible charges that can stretch back up to six years.”
Examples of where this approach has already worked include two UK supermarket chains which each received more than £1m in refunds over a six-year period; and a leisure and hotel company that received £400,000 in refunds, plus secured ongoing savings of £100,000 a year.
Speaking about the potential to find savings within accounts payable, Davies said: “Overall accounts payable is a small percentage of an organisation’s activity, but the numbers in terms of potential savings are very high. We think this will be a key area for the NHS moving forward.”
A recent survey by the Institute of Management and Administration found an average error rate during invoice processing of between 1-5%, a margin which over a number of years can prove substantial.
Overall accounts payable is a small percentage of an organisation’s activity, but the numbers in terms of potential savings are very high. We think this will be a key area for the NHS moving forward
Davis said: “The complexity of today’s procurement-to-payment process means that every transaction is open to misunderstanding and supplier error. In our experience, 99.7% of payable and receivable transactions are processed accurately – that 0.3% is lost profit. Individually, these errors may be small, but collectively they can add up to millions of pounds.”
The NHS SDU is keen to utilise this avenue as a way of helping NHS trusts find the cash they need to invest in green energy initiatives which will, in turn, help them to cut energy costs in the longer-term.
The latest SDU newsletter states: “The Green Budget is a potential collaboration between MAID and the SDU. It is designed to create a budget for sustainability teams at a time when budgets are being cut. Very often these returns can run into millions of pounds of recovered revenue.
“The SDU is interested to see if MAID can replicate this success and is looking to trial the system within the NHS on a contingency fee basis.”
Sometimes it is a difficult thing to do because people take a view that it is a witch hunt and they are being blamed for making mistakes, but we find errors in places that procurement teams would not be expected to know about
Under the agreement being mooted, MAID experts would go into a trust and carry out an investigation into possible revenue recovery. If it discovers no errors or potential for rebates and returns, the NHS will not be charged for the work carried out. If revenue is returned, MAID will receive a percentage as a fee. The rest of the money can be reinvested by the trust.
Davies said: “At the moment we are out there speaking with trusts and we know there is the potential for sizeable returns.
“We may find that in some trusts accounting teams and procurement managers have everything battened down and they have got it right, and there have been times when we have not uncovered any rebates and have gone back to the client and said their systems are robust and they work well. In this case they do not pay anything.
“Sometimes it is a difficult thing to do because people take a view that it is a witch hunt and they are being blamed for making mistakes, but we find errors in places that procurement teams would not be expected to know about.
“It’s exciting and we can see a phenomenal opportunity to reclaim money and take that money for sustainable measures like energy reduction. We think it will be of huge benefit to the NHS.”
