Grocery-Pharmacy

Solving unique challenges and delivering domain-specific insights

Many grocers are pursuing transformational digital strategies and delivery mechanisms to positively impact revenue growth and retain customer loyalty. At the same time, fulfillment methods remain largely unchanged. The number of pharmacy counters located within supermarket chains likely peaked in the past five years and are being replaced as consumers choose to fill prescriptions at large pharmacy stores and through online ordering. Overall, the grocery and pharmacy sector will continue to experience rapidly changing conditions. Protecting margins is essential and grocery chains and pharmacy stores need experienced auditors with a long tenure and focus to deliver superior audit results. Cotiviti is the trusted audit partner to 14 grocery and pharmacy clients across North America. We have an average partnership length of more than 16 years per client. Combined, our net grocery recoveries exceed $175 million annually—plus we deliver even more future savings via root cause insights and continuous process improvements.

 

Driving results with best practice insights 

A grocery recovery audit presents unique challenges. Solving those challenges requires expertise cultivated over the course of many audit engagements. Cotiviti’s Grocery leadership team specializes in procurement and discount negotiations (including off-invoice and purchase allowances), new item offerings and promotional/volume rebates. Our auditors have experience with a variety of proprietary and off-the-shelf deal systems used by the world’s leading grocers.

We offer best practice and market benchmark insights across claim categories that account for the largest share of recoveries in grocery:

  • Promotional allowances (scan, off-invoice, warehouse movement)
  • Pricing
  • New item allowances 
  • Reclamation and markdowns 

Our comprehensive grocery audit experience and long-term client relationships have given us the ability to accelerate a number of client audits by improving processes and finding efficiency gains.

 

Accelerating recoveries through efficiency gains and trusted supplier relationships

Cotiviti’s Grocery team routinely collaborates with clients on continuous improvement initiatives. Our teams prioritize speed and efficiency to accelerate the identification and collection of claims. Here’s how we’re working with clients to improve the audit process and realize more value. A number of clients have incorporated these practices into their modernization initiatives. 

 

Standardization   

  • Development of audit guidelines that incorporate best practices by claim type 


Automation

  • Automation of certain claim types and reduction in the total number of hours to complete an audit 


Data pre-processing

  • Improvements to the data ingestion process to assist in acceleration, automation, and process efficiencies 

 

Leveraging email data to expand recovery opportunities 

Email is a powerful source for data mining that serves as the genesis of many claims and recoveries. Many grocery and drug retailers have ongoing privacy and security concerns around sharing email data as part of the audit process. Our clients’ sensitive information is safeguarded and only used as necessary in audit investigations. In an overall analysis of Cotiviti’s Retail clients, email-driven claims have been measured to be four times larger in average value than non-email claims. A Cotiviti grocery client recently added email to their audit scope and saw a 20 percent incremental increase in claim findings as a result.

 

Closing gaps in pharmacy (Rx) purchasing and contract agreements 

The evolving nature of the pharmaceutical supply chain and wholesaler contract agreements is creating opportunities for recovery and future savings in the pharmacy business. Cotiviti’s team possesses unique pharmacy expertise and industry-specific knowledge. We partner with our national pharmacy chain and grocery clients to identify substantial claims in the areas of price protection, price increase, and cost overcharge.

Wholesaler contracting inconsistencies as well as Group Purchasing (GPO) agreements are also creating supplier funding issues. We are focused on recovering funds as well as helping pharmacy chains and grocers to strengthen these agreements to prevent future losses and improve relationships with wholesalers and GPOs.

 

Don't just take our word for it
Here are a few client examples:
Use of email data to expand recoveries in a Grocery audit

Claims identified or supported by email continue to drive recoveries for many of our clients. During a recent audit, Cotiviti reviewed more than 1 million individual emails. With a combination of keyword searches and proprietary processes, our technology quickly cut through the data to find the 161 emails that generated valid claims. Through this email analysis, Cotiviti facilitated a claim that was presented to a vendor and ultimately approved for around $40K.

In 2018, email data supported 70% of claim deductions and resulted in > $7M in recoveries for another client. Examples of email recoveries by category for this client include:

  • Returns—93% of claims for > $3M

  • Scanback allowance—50% of claims for > $2M

Reducing days to cash to accelerate and audit

Audit acceleration is more than just identifying and writing claims faster—it’s also about collecting those claims in a timely manner. An accelerated pace allows clients to correct transaction errors closer to real time. As a secondary auditor, Cotiviti averaged less than 25 days-to-cash for one major grocery client while outperforming the primary in percent of claims collected and dollars collected. And by examining other data and processes for the same client, Cotiviti found that:

  • A shift in recoveries 90 days ahead of current audit timing was possible

  • 50% of all audit findings could be collected within the fiscal year

  • Days-to-cash could be reduced to under 30 days

Maintaining low void and payback rates to reduce noise

Low void and payback rates and high gross claim conversion rates are evidence of accuracy over the course of an audit. Accuracy reduces “noise” associated with low probability claims, builds confidence, and alleviates work for vendors and buyers. Showcasing strong partnership, Cotiviti leveraged tenured auditors at one long-term client to deliver low void and payback rates well below industry standards.

2018 results for this client include:

  • < 2% Voids

  • < 3% Payback rate

  • > 95% gross claims conversion rate

A focus on partnership and continuous improvement

Cotiviti understands that each client has unique needs. Rather than apply a “one-size-fits-all” or a “one-and-done” audit approach, we provide tailored services that maximize savings now and in the future. To that end, Cotiviti assisted one client in transitioning to monthly audit reviews for cost overpayments, scans, and off-invoice / billback allowances during a 2018 audit. We also facilitated a revamp of their monthly scorecard that was distributed to their category management team.

Overall successful results for this client in 2018 include:

  • >$17M in primary recoveries (+15% YOY)

  • 33 average days to cash (compared to 44 days previous year)

  • +14% increase in vendor response rates YOY

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