Understanding Healthcare's Procure to Pay Process
Mastering the complex ecosystem of healthcare procurement and payment
The procure to pay (P2P) process is a complex process comprised of various smaller processes, all leading to acquiring and purchasing goods for a health system at the most advantageous price. Purchasing and paying for items seems simple, but in large health systems and hospitals spanning various departments and locations, the process easily breaks down.
It only takes one error or process gap in any part of the P2P process to have upstream and downstream consequences for all parties involved in the P2P ecosystem: Finance/Accounts Payable (AP), Supply Chain, Vendors, and the End-User.
What is the Procure to Pay Process?
The procure to pay process typically begins with a requisition for an item or service, goes through the purchasing and receiving of the good/service, and ends with payment for the good/service.
Over our 35+ years of working with Supply Chain and AP at health systems exclusively, we have come to learn that the process begins when a contract is entered into the system.
Top Procure to Pay Focus Areas to Reduce Risk
Contracting
Contracting involves much, from negotiating terms and conditions to entering contract data to managing expirations that affect actions downstream, costing lost funds and resource waste.
Requisition, Approval, & PO Creation
The next focus area contains the traditional start of procure to pay: requisition. Beginning with the end user, this area also contains requisition approval and the creation of purchase orders (POs).
of health system spend is NOT made with a Purchase Order (PO)
Goods Received or Services Performed
The third focus area we advise on is receiving (and often the return) of goods, as well as the management of services. This area makes up 36% of P2P errors our team uncovers at health systems on average.
Invoice Processing
Invoice processing begins by matching the received invoice against the PO allowing the ERP system to match the PO to the received status. When each of these documents aligns, a three-way match is successful.
Payment Issued
Although issuing payment may seem self-explanatory, the payment issued focus area contains ten categories of significance that impact the P2P process.
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