How the NHS saved millions by challenging contract billing, and what you should be doing to avoid the costly implications of this contract type
If you’re not familiar with the concept of contract billing, you won’t be alone. It is exactly this lack of awareness that nearly cost the NHS millions of pounds.
Thankfully, due to the diligence of Anenta, which specialises in healthcare waste management, the costly impact of healthcare waste contract billing was identified and addressed, nipping this questionable, yet permissible practice in the bud.
For many other businesses in the healthcare sector, it could be quietly costing them many thousands of pounds.
Why? Because left unchecked, contract billing has the potential to dramatically, and in some cases unintentionally, ramp up costs, impacting budgets and the bottom line. Let us explain.
Background
The background to the discovery of the NHS’ clinical waste contract billing ‘issue’ emerged as part of Anenta’s work to help Integrated Care Boards (ICBs) streamline their healthcare waste processes, to reduce costs and remain compliant.
Acting on behalf of Clinical Commissioning Groups (CCGs), which subsequently became ICBs, Anenta undertook a discovery audit to establish the average annual amount GPs and pharmacies were being charged for their clinical waste collection and disposal services within each ICB’s geographical scope.
Here, the goal was to establish the true quantum of waste volumes and charges invoiced to the ICBs so that budget forecasts for clinical waste and collection services could be developed. The output of this audit identified that certain ICBs – which have an obligation for the collection and disposal of GP and Pharmacy healthcare waste – were being charged significantly more for their GP’s clinical waste collections than others of an equivalent size and scope. This begged the question, why?
To get to the bottom of this, Anenta first looked at the type of legacy contracts that had been procured by the ICBs more than a decade ago, which were still in operational service by the waste collection service suppliers.
In principle, the procurement of healthcare waste collection and disposal services aims to not only meet or exceed the requirements set out for public sector procurement but also to ensure that value for money services are delivered efficiently, with clarity on potential overall charges throughout the life of the contract term. As such, supplier contracts should be designed to provide certainty over waste collection service costs for GPs and pharmacies, ensuring that a smooth, safe, reliable and cost-effective waste collection and disposal service is in place, without which healthcare waste producers cannot operate.
The impact of contract/fixed billing clauses
What Anenta discovered was that those ICBs experiencing higher GP clinical waste costs were being directly and negatively impacted by contracts containing contract/fixed billing clauses. Under this clause suppliers of waste collection and disposal services charge for predetermined quantities scoped over the course of a year. This is based on the collection frequency required by the waste producing location (a fixed specification) regardless of the quantities actually collected.
To fully understand the impact of these contract billing clauses on the ICBs, Anenta compared the fixed service specification for every single GP practice against their actual service usage. This revealed that, in most cases, GPs were producing far lower quantities than initially specified to the supplier in the fixed specification.
But there was another problem. Fixed service specifications were being affected by GP practice requests for additional services. Once requested these would be billed on a recurring basis, regardless of usage. And where non-standard services were requested, these too would be added to the recurring bill, often at varying rates.
The issue here was that although GP practices were the producer of the clinical waste, the responsibility for the payment of their waste collection, disposal and associated services lay with the ICBs.
As such, GP practices had no awareness of:
– the cost implications of their requests for additional services
– the contract implications of additional requirements
Worse still, the ICBs, as the bill payer, had no awareness of the service amendments requested by GPs, which meant that the ICBs previously could not implement effective invoice validation.
To address this, Anenta implemented its proprietary invoice validation process which analysed thousands of invoice data points spanning a period of 6 years. In so doing Anenta identified many hundreds of historic irregularities in billing that required further investigation.
Vector’s role in identifying the root cause
Powered by Vector – Anenta’s cutting-edge, proprietary, real-time contract and waste management platform – it quickly became clear that those ICBs affected by the contract billing clause had been charged for significantly higher quantities of waste of varying types and categories than had physically been collected. Anenta calculated that this had the potential to cost those ICBs millions of pounds in extra costs each year, taking vital budget away from frontline services.
As an example, Anenta identified multiple instances where GPs would request a single additional item to be collected on a one-off basis. Although acknowledged as such by the supplier, the contract billing mechanism meant that this was then billed as part of every collection going forward. Where the GP had a weekly collection, the item would be added to the fixed service specification, which meant that over the course of year it would automatically be billed 52 times. For sharps containers this led to an additional charge of c. £1,599 as opposed to the one-off charge of c.£30. In cases, where more sharps containers had been requested, this figure was far higher.
Putting things right
Armed with this detail Anenta approached the ICBs’ waste service suppliers to deal with the issue, providing a vital interface between the waste producer, collection provider, and contract owner.
Working at the highest level, Anenta shared its findings supported by data from its Vector management interface to provide total transparency. This revealed every instance of contract billing, showing the gap between the volume of waste collected, and that billed for.
This showed that over 100,000 bags/containers of waste were charged for, which were neither produced by GP surgeries nor collected by the ICBs’ waste services suppliers. This alone would have cost the ICBs over £900,000 in extra charges, but for Anenta’s intervention.
Using its transparent approach to managing the relationship between the contract owner and the suppliers, Anenta succeeded in securing the concession that, although permissible under the contract, the practice was detrimental not only to the waste services suppliers’ ongoing relationships with the ICBs, but also to the NHS’s ability to fund and deliver front line services. This was particularly critical at a time of significant structural change within the NHS and financial pressures that threatened the prospect of significant job losses within the health services sector.
With the waste services suppliers’ agreement, those ICBs still operating under the contract billing term have now had the baseline fixed service specification reset for each GP location. To set this at the right level, Anenta brought multiple datasets from past years together to identify trends in service levels. This is a process which is used to map and set the agreed pricing schedules each quarter and helps to identify if changes in usage are valid or not. This in turn enables Anenta to reset the baseline specifications in line with actual usage.
Through the implementation of this change, Anenta has secured a reduction in monthly billing of up to 70% for some ICBs; equivalent to a recurring saving of up to £678,000 per year.
Where any set levels are exceeded, these automatically go through Anenta’s invoice validation processes, and if any errant items appear on an invoice that do not from part of the agreed schedule, these are not approved for payment.
Combined, these measures have enabled Anenta to deliver an estimated annual saving of over £2m to ICBs and to the NHS.
Vitally, this process, which took almost a year to complete, resulted in a resolution that enabled the ICBs to recover the full cost of the excess contract billing through the issue of service supplier credits notes against the cost of future services, balancing out the amount previously overbilled.
Importantly, by working with the waste service supply chain to balance out transactions transparently through credit notes, Anenta helped turn a potentially damaging public interest story into a positive outcome for all. It has led to a change in all new ICB contracts which now deploy a usage billing model, where ICBs pay only for the waste services that their GPs and pharmacies actually use.
Why had contract billing not been identified as an issue earlier?
Due to the way in which GP waste is collected and paid for, most GPs are not directly responsible for covering the cost of their healthcare waste. This is because they benefit from consolidated waste contract services which are paid for by the ICBs. Under these contracts GPs have no reason to cross reference volumes of waste collected against that produced.
Combined with changes in the NHS over the past decade, which meant that significant knowledge in the management of contracts had been lost, incidents of contract billing increases became hard to spot.
Moreover, without Anenta’s advanced data-driven digital management platform in place, the ICBs did not have the technology to analyse and cross reference the huge volume of data, including single line invoices, that are received each year. Only with this technology in place can issues such as large-scale contract billing be identified and discrepancies successfully challenged.
How does Anenta’s technology identify invoice discrepancies?
Working with ICBs and waste collection suppliers across England, Anenta pulls data from previous years to identify the typical amount of waste produced by individual GPs. This data is logged in Anenta’s Vector waste management platform and then used to identify discrepancies in invoices that require further analysis and investigation.
Automated using Anenta’s own algorithms, this is an instant process which enables Anenta to check contract agreements against invoices at scale so that discrepancies can be challenged before being paid. This helps to ensure that ICBs – as well as other healthcare clients – are never in a position where they need to recover cost.
How is Anenta helping ICBs and other organisation avoid contract billing?
As part of its service offering, Anenta provides guidance to ICBs and other healthcare organisations on their procurement process. This includes specifying contracts more accurately, including the exclusion of contract billing, delivering greater control over contracts.
Built around a holistic understanding of organisations, Anenta sources the right contract for individual needs. These are designed to meet unique requirements and are set up to save organisations money. This helps to enhance efficiencies and ensures the delivery of high-quality services to GPs, pharmacies and other healthcare clients.
Using a trusted network of waste services providers for private sector and non-NHS clients, Anenta works to find organisations their perfect partner, delivering procurement solutions that are easy to navigate, and which align with corporate financial instructions, and budgetary limitations.
Are other sectors affected by contract billing?
Contract billing has the potential to affect all manner of healthcare waste producers including private hospitals, private dentists, care homes, laboratories, and many other too.
This is because when waste producers take on commercial or healthcare waste collection service providers, it is not unusual for contracts to be based on set monthly service charges.
This means that, regardless of how little waste is produced and collected, the same amount will be charged for the healthcare waste collection each month.
While this provides certainty of cost on the surface of things, if contract/fixed billing clauses are present and you as a healthcare waste producer request services on a one off basis which exceed the agreed upper limit for waste produced on site, you’ll not only be charged for the extra amount, but you could see your monthly charges increase to reflect the new upper limit. You’ll then be billed at that rate from that point on.
With such contracts in place, water only runs one way. So, even if you produce no waste the following month, you’ll still find yourself paying at the higher set rate. Here, diligence is vital.
For organisations with large volumes of waste or multiple sites, analysis can easily become overwhelming. This is where invoice validation working with a specialist managing agent can save huge amounts of time, money, and stress.
How can you avoid contract billing as a private healthcare waste producer?
The good news is that contract billing needn’t be a costly consequence of being a healthcare waste producer. It’s where a specialist healthcare waste managing agent can help businesses and organisations avoid unfair charges that will only add to your monthly healthcare waste collection bills.
In effect, the managing agent acts as an expert intermediary, policing and handling the relationship with your waste collection vendor. In Anenta’s case, Vector makes this process quick, effective and transparent. Anenta can even commission the waste services supplier on your behalf, operating an Anenta contract which avoids the potential for contract billing.
As part of this service, Anenta analyses the volume of waste produced by client sites and compares this with the amount billed, cross referencing this against Hazardous Waste Consignment Notes to rule out the possibility of overbilling. Should a discrepancy be identified, Anenta instantly logs a challenge, ensuring that clients never pay an invoice unless it has first been approved through Vector’s rigorous invoice validation service.
This gives clients piece of mind, keeping costs down, preventing contract billing issues, and ensuring that producers of healthcare waste are never out of pocket.
Need help?
If you think that your organisation may have been affected by contract billing, or if you are interested in healthcare waste management services to save money, streamlining your clinical waste logistics and disposal services, contact the Anenta team on 0330 122 2143 or email [email protected].