Best Practices for Expense Tracking in Healthcare Organizations

Healthcare organizations face rising costs and razor-thin margins, with the median operating margin at just 1.3% as of mid-2023. Managing expenses effectively is critical to financial stability and compliance. Many organizations still rely on outdated, manual processes, leading to inefficiencies, errors, and missed savings opportunities.

To improve expense tracking, healthcare providers need clear policies, automation tools, regular audits, and data analytics. Key strategies include:

• Establishing clear guidelines: Define expense policies to control spending, prevent fraud, and ensure compliance with regulations like HIPAA and the Sunshine Act.
• Adopting automation tools: Automated systems reduce errors, improve speed, and enhance compliance. Look for features tailored to healthcare, such as GPO pricing validation and 340B tracking.
• Using detailed categorization: Customize expense categories like medical supplies, personnel costs, and technology to improve tracking and budgeting.
• Conducting audits: Regular audits help identify red flags, catch errors early, and maintain financial visibility.
• Leveraging data analytics: Use analytics to reduce costs, track key metrics, and align financial decisions with patient care goals.

Switching to automated, cloud-based systems can cut expense processing times by 80% and reduce compliance risks. By combining automation, clear policies, and data-driven insights, healthcare providers can control costs while focusing on patient care.

How to Use an AI Agent to Transform Scanned Medical Bills into Expense Reports

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Setting Up Clear Expense Policies and Guidelines

Establishing clear expense policies is essential for managing financial pressures and meeting regulatory requirements. These policies act as a safeguard against unnecessary spending and compliance risks. Without proper guidelines, employees may unintentionally make decisions that conflict with budgets or regulations. In the healthcare sector, this challenge is magnified by the need to comply with the Sunshine Act and the Anti-Kickback Statute ^[4]. A well-structured policy eliminates uncertainty, ensuring both the organization and its employees are protected.

Consider this: correcting a single manual expense report costs roughly $52 and 18 minutes of labor ^[8]. Multiply that by hundreds of submissions each month, and it's clear how quickly inefficiencies can pile up. Even more concerning, expense reimbursement fraud schemes take an average of 18 months to detect, according to the ACFE 2024 Report to the Nations ^[7]. Pairing clear policies with automated checks can help catch these issues early, preventing fraud from becoming a recurring problem.

"Healthcare expense management is no longer just an administrative task–it's essential to keeping costs down, complying with regulations, and helping your healthcare staff focus on what they do best: patient care." - Sage Expense Management ^[4]

Main Expense Categories in Healthcare

Healthcare organizations deal with a more complex mix of expenses compared to other industries, requiring policies tailored to each category. Here's an overview of the key areas:

• General and Administrative (G&A) Costs: These include operational expenses like rent or mortgage, insurance (property and malpractice), utilities, HVAC maintenance, and food services ^[6].
• Healthcare-Related Expenses: This category covers medical supplies such as PPE (e.g., N95 masks, gowns), ventilators, lab and diagnostic equipment, and cleaning agents ^[6].
• Personnel and HR Expenses: Often overlooked, these include hiring bonuses, incentive pay, childcare assistance, temporary housing, and mental health resources for staff ^[6].
• Continuing Medical Education (CME): Expenses here range from conference registration fees and professional certifications to educational materials and related travel costs ^[4].
• Technology Costs: These encompass telehealth tools, EMR/EHR systems, and upgraded internet services for remote work ^[6].
• Travel and Entertainment (T&E): Includes lodging, meals, mileage, and transportation for conferences or patient care ^[4].

Tracking expenses can be tricky, especially for CME-related costs. For instance, 45% of CME hotel bookings are made outside of managed travel tools, making it harder to monitor spending ^[9]. Policies should require employees to log all CME-related expenses in a central system, even when booking directly through conference websites.

Creating Clear Policies

Your expense policy should be written in plain, straightforward language so employees can quickly find answers to questions like, How much can I spend? and How do I get reimbursed? ^[10]. Be specific about non-reimbursable items, such as alcohol beyond set limits, personal toiletries, traffic fines, and late fees on personal credit cards ^[7].

Adopting an IRS Accountable Plan can ensure reimbursements are both tax-free for employees and deductible for the organization. This requires clear business connections, timely substantiation (usually within 60 days), and the return of any excess advances ^[7][8]. Additionally, set tiered approval thresholds - for example, expenses over $1,000 or $5,000 should require director or VP-level sign-off. Self-approval should be prohibited at all levels ^[7].

A RACI (Responsible, Accountable, Consulted, Informed) framework provides clarity on roles. For instance:

• Employees are responsible for capturing receipts and confirming the business purpose.
• Managers review the necessity of expenses.
• Finance teams conduct policy audits.
• Accounts payable ensures disbursement accuracy and general ledger integrity ^[7].

To streamline submissions, require five key data points for each expense: merchant name, transaction date, itemized description, total cost (including tax and gratuity), and payment method ^[8].

Pre-approvals can help prevent budget overspend. For high-cost items or conferences, staff should submit requests in advance ^[4]. This allows organizations to flag out-of-policy spending before funds are committed. For CME expenses specifically, set clear caps on meals, lodging, and travel to align with recruitment and retention goals ^[4].

While IRS rules don't require receipts for business expenses under $75, itemized receipts should always be mandatory for lodging expenses, regardless of the amount ^[8]. Clear policies not only simplify day-to-day operations but also pave the way for effective automated auditing.

Using Automation Tools for Expense Management

Handling expenses manually is a time drain for busy healthcare organizations. Automation tools not only speed up processes but also enhance compliance. In fact, organizations using automated systems report 73% fewer audit findings^[11]. The trend toward automation is growing fast - over 75% of expense management systems are now cloud-hosted rather than on-premises^[11]. These tools can cut expense claim processing times by 80% or more^[11]. Plus, 55% of CFOs believe AI can detect more errors and potential fraud in expense reporting than internal teams can^[11]. Clearly, the right tools can address healthcare's specific needs effectively.

Take Accordcare as an example. This nonprofit healthcare provider, with 300 employees, integrated Expensify with NetSuite to resolve delays in month-end processes. The result? Manual data entry was eliminated, audit trails became more robust, and reimbursements were faster - all while scaling their financial systems seamlessly^[11].

Features to Look for in Automation Tools

Generic expense tools often fall short when it comes to the unique challenges of healthcare. To meet the industry's needs, your automation platform should go beyond basic receipt scanning and address the complexities of billing and compliance.

• GPO Contract Pricing Validation: Tools must cross-check invoice line items against Group Purchasing Organization (GPO) tier schedules. This ensures overcharges caused by tier changes or expired terms are caught, which generic tools often misinterpret as errors^[1].
• 340B Drug Program Tracking: Automated systems should track National Drug Codes (NDCs), unit prices, and facility identifiers to prevent duplicate discounts and meet HRSA audit requirements. Manual entry of NDC codes is prone to errors that can lead to audit findings^[1].
• Pharmaceutical Rebate and Chargeback Reconciliation: Tools should match NDC data across wholesaler invoices, chargeback credit memos, and manufacturer rebate statements to ensure accuracy^[1].
• Medical Device Consignment Reconciliation: Features should match supplier invoices using serial and lot numbers against hospital usage records, ensuring billing accuracy for implanted devices^[1].

Security is another critical factor. Look for HIPAA-compliant audit trails with AES-256 encryption, role-based access controls, and immutable logs to meet Medicare and Medicaid reporting standards^[1][11]. Sensitive invoices, like those for durable medical equipment, often include Protected Health Information (PHI) and require these safeguards.

Advanced tools should also offer intelligent line-item extraction. This goes beyond basic OCR to extract key healthcare-specific data fields like NDCs, manufacturer part numbers, and surgical identifiers. Modern AI platforms can process up to 6,000 files per job in just 1–8 seconds per page^[1].

"Accuracy in healthcare AP starts with extracting the right data fields, not just reading the document."

• David, Author at Invoice Data Extraction^[1]

Fraud detection is another must-have. AI-powered systems can flag suspicious spending patterns and policy violations before payments are processed. This is vital, especially since 22% of healthcare leaders admit their current travel and expense solutions fail to meet regulatory standards^[2].

Choosing Tools That Scale with Your Organization

Your chosen automation tool should grow with your organization, whether you're running a small clinic or a large health system. For multi-entity healthcare networks, format-agnostic batch processing is vital. The ability to handle thousands of documents (up to 6,000 per job) in one go saves time and effort^[1].

Multi-entity consolidation is another key feature. The right tool should centralize accounts payable across hospital networks with varying ERP systems and charts of accounts. This streamlines visibility into spending and reduces manual reconciliation efforts.

Integration is equally important. Focus on how well the tool connects with your existing healthcare ERPs - like Sage Intacct, Oracle, or specialized supply chain platforms. Real-time data flow is essential, and companies using integrated, cloud-based ERP systems report a 19% boost in employee productivity^[2]. This integration also enables secure mobile capture and remote submissions.

Mobile functionality is increasingly prioritized, with 42% of healthcare leaders emphasizing real-time expense capture through mobile apps^[2]. These apps let clinicians submit receipts instantly, and two-factor authentication ensures sensitive patient data stays protected during remote submissions.

Lastly, confirm the tool's data retention policies. Clear timelines for data deletion help prevent indefinite storage of sensitive information, adhering to HIPAA standards. Look for "human-in-the-loop" features that automate most transactions while escalating high-risk items for manual review^[11].

How Phoenix Strategy Group Supports Automation

Getting the right tools is just the first step - integrating them effectively is where Phoenix Strategy Group comes in. They specialize in helping healthcare organizations streamline expense management with tailored bookkeeping, FP&A systems, and strategic advisory services.

Phoenix Strategy Group's Integrated Financial Model links expense tracking directly to cash flow forecasting and budgeting. This creates real-time visibility into spending patterns across multiple entities, breaking down data silos and enabling faster, better decision-making.

Their data engineering capabilities standardize extraction templates and normalize data from various supplier invoice formats. This is especially useful for health systems with shared services, where consistent data output is critical for accurate reporting.

Through fractional CFO services, Phoenix Strategy Group helps select and implement automation tools that suit your needs. Whether it's GPO contract validation, 340B program tracking, or pharmaceutical rebate reconciliation, their team ensures compliance rules are configured from the start.

With services like the Weekly Accounting System and Monday Morning Metrics, they monitor automated workflows to ensure accuracy and address issues before they escalate. This proactive approach minimizes challenges during audits or month-end close.

For healthcare organizations planning fundraising or M&A activities, Phoenix Strategy Group ensures automated expense tracking supports due diligence and produces audit-ready documentation. This not only simplifies the process but also improves valuations.

Visit Phoenix Strategy Group to see how they can help your healthcare organization cut costs, stay compliant, and focus on patient care.

Improving Expense Tracking with Categorization and Budgeting

In an industry where margins are razor-thin and expenses keep climbing, getting a handle on costs is non-negotiable. With hospital margins averaging just 2% and nearly a third of facilities operating at a loss, precise tracking is critical to survival^[12]. The complexity of healthcare spending, driven by over 11,163 CPT codes, makes generic accounting systems inadequate for the task^[12].

Customizing Charts of Accounts

A well-tailored Chart of Accounts (COA) is the backbone of effective expense tracking. It’s not just about listing categories - it’s about creating sub-accounts that reflect the nuances of healthcare spending. For instance, payroll can be divided into salaries, benefits, and overtime, while pharmaceutical inventory should be separated from general supplies^[13].

Temple University Health System (TUHS) offers a great example of how this can work. Managing $2.7 billion in net patient revenue and handling 290,000 invoices annually, TUHS revamped its accounting system in 2025. Under the leadership of Chief Accounting Officer Mike Difranco, utilizing fractional CFO services for strategic oversight,, they conducted an "ERP health check" and introduced standardized KPI dashboards. This overhaul aligned their supply chain, IT, and finance operations, laying the groundwork for scalable automation and streamlined performance metrics^[5].

Your COA should cover several key categories:

• Direct costs: Items tied directly to patient care, such as clinical labor, diagnostic tests, and medications.
• Indirect costs: Costs like equipment maintenance or operating room time.
• Overhead expenses: Administrative salaries, utilities, and liability insurance.
• Technology costs: Expenses for EHR hosting and AP automation tools.

Finding the right balance is crucial. Too many accounts can lead to "analysis paralysis", while too few can obscure spending trends^[13][14]. Integrating your COA with systems like EHR and inventory management can automate categorization, reducing manual entry errors and lowering the risk of audit issues^[12][13].

While a well-designed COA provides clarity, dynamic budgeting ensures your financial plans adapt to real-world conditions.

Using Rolling Budgets

Once you have a strong COA in place, rolling budgets can take your financial planning to the next level. Unlike static annual budgets that quickly become outdated, rolling budgets offer a continuously updated 12–15 month view, refreshed monthly or quarterly^[16][18]. This approach spreads forecasting across the year, reducing the burden of traditional budgeting cycles, which can take 4–6 months to complete. By comparison, rolling forecasts typically require just 2–3 weeks per quarter^[17].

A compelling example comes from Scripps Health in San Diego, which used rolling forecasts during the COVID-19 pandemic to navigate dramatic shifts in patient volumes. John F. Wong, Director of Corporate Financial Planning and Reporting, led efforts to monitor daily reports on charges and productive hours. When elective procedures dropped by 35%–37%, these forecasts helped identify departments that were managing labor effectively. This data-driven approach allowed Scripps to make informed decisions, such as temporarily closing clinics and reallocating resources to secure federal CARES Act funding^[15].

"Rolling forecasting empowers [the] health system to make the right decisions in a changing environment - which is precisely why healthcare organizations need rolling forecasting now more than ever."

• John F. Wong, Director of Corporate Financial Planning and Reporting, Scripps Health^[15]

To get the most out of rolling budgets, focus on high-level projections for service lines like radiology or emergency services, rather than diving too deep into departmental details^[17]. Scenario planning can also be invaluable - testing forecasts against different conditions, such as reimbursement changes or supply cost spikes, can provide a clearer picture of potential risks and opportunities^[15].

Labor costs, which typically make up about 50% of a healthcare organization’s budget, deserve particular attention. Tracking trends in productive hours and overtime can reveal inefficiencies and highlight areas for adjustment^[18]. Regular check-ins - whether monthly or quarterly - help keep forecasts accurate and ensure team alignment, offering a more efficient alternative to the traditional annual planning marathon^[15].

Conducting Regular Audits and Maintaining Financial Visibility

Once you've streamlined categorization and established a solid budgeting system, the next step is to conduct regular audits. These audits are key to ensuring your expense tracking remains accurate and reliable. In healthcare, for example, expense reimbursement fraud accounts for 13% of misappropriation cases, with median losses hitting $50,000^[19]. Regular monitoring helps catch issues early, before they spiral into bigger problems.

Defining Audit Triggers

Identifying the right triggers is crucial for effective audits. Keep an eye on red flags like high-value cash purchases, vague "miscellaneous" expenses, duplicate claims, and missing receipts^[19][20]. Pay special attention to frequent travelers, new employees, and individuals with a history of policy violations^[19][20]. In healthcare, specific triggers include disabled audit logs, unauthorized access to electronic health records (EHRs), or tampered encryption settings^[20].

Here’s an example of how this works in practice: In 2025, Temple University Health System processed 290,000 invoices using KPI dashboards and hosted a "Procure-to-Pay Excellence Summit" to identify risks. They flagged issues like failed TIN/EIN validations and unverified bank account changes^[5].

Start with a three-month baseline audit to pinpoint high-risk areas^[20]. Then, set clear KPIs - like exception rates, rejection rates, and review times - to measure progress over time^[19]. These triggers and metrics create a foundation for swift intervention, especially when paired with real-time alerts.

Using Real-Time Alerts

Real-time alerts give you instant visibility into spending. For example, business credit card transactions can trigger immediate notifications, helping you monitor activity as it happens^[4]. AI-powered systems enhance this process by detecting suspicious transactions and policy violations before payments are made, reducing fraud and compliance risks^[2][4].

The benefits of real-time alerts are clear. In November 2024, Chobani adopted SAP Concur's AI-driven tool, Verify, to automate expense reviews. According to Marcy Hagenbuch, a Finance Systems Specialist at Chobani:

"Employees knew that every line item, every expense in every report was going to be reviewed by AI."

• Marcy Hagenbuch, Finance Systems Specialist, Chobani^[19]

This automation saved the company three to four hours of manual work each day. Similarly, Uber saw a 70% drop in help desk tickets thanks to real-time expense checks. These systems notify employees about policy violations and rejected expenses in real time, allowing them to fix issues before submitting reports^[19].

For healthcare organizations, real-time alerts are especially useful for managing complex reconciliations. They can match surgical usage logs to invoices for medical device consignment or verify pharmaceutical chargebacks by aligning NDCs across invoices, credit memos, and rebate statements^[1]. Automating these processes can cut reimbursement errors by 60% and reduce processing times by 32%^[2][4]. These tools strengthen financial oversight and complement the broader systems already in place.

Using Data Analytics for Cost-Saving Insights

Data analytics takes automated monitoring and auditing a step further by providing a deeper understanding of cost patterns. For example, hospital expenditures have surged by 19.1% since 2019 ^[21]. By turning raw expense data into actionable insights, healthcare organizations have managed to lower costs by 8%–15% without compromising care quality ^[21].

Tracking Key Financial Metrics

Spotting inefficiencies early is crucial to keeping costs under control. With supply chain expenses making up 30–40% of hospital operating costs, analytics can help cut these costs by 7%–10% ^[21]. Real-time dashboards make it easier to track vital metrics like operating margin, cost per case, labor cost percentage, and accounts receivable (A/R) days ^[21].

Here are two real-world examples of success: Cleveland Clinic used supply chain analytics to review surgical preference cards, saving $5.6 million annually and reducing opened-but-unused items by 67%, all while maintaining clinical outcomes ^[21]. Meanwhile, Kaiser Permanente adopted a machine learning algorithm to predict hospital admission likelihood with 85% accuracy. This reduced patient boarding time by 28% and saved $3.2 million annually in staffing costs ^[21].

Focusing on the 20% of departments responsible for 80% of costs, as suggested by the Pareto principle, can lead to significant savings ^[21]. Cost variance analysis - calculated as ((Actual – Expected) / Expected × 100%) - can help identify priority areas. Additionally, AI-powered tools can validate supply chain expenses by cross-referencing invoice line items against Group Purchasing Organization (GPO) contracts, catching overcharges before payments are made ^[1].

These financial metrics form the backbone of aligning data analytics with broader strategic goals.

Aligning Analytics with Business Goals

Analytics is most effective when directly aligned with organizational objectives. For example, machine learning–driven forecasting can predict patient volume fluctuations, allowing hospitals to fine-tune staffing and supply orders. This is especially crucial since staffing accounts for over 50% of total hospital spending ^[3].

Analyzing service line profitability - by looking at cost per case and contribution margins - can pinpoint underperforming services and highlight cost variations in clinical care ^{[21] [23]}. On the revenue cycle side, AI-powered analytics can identify front-end denials and automate claim status checks, reducing manual workloads and lowering collection costs ^[22]. Some organizations have even cut finance department workloads by 30–40% by streamlining data collection and reporting ^[21].

Conclusion

In today’s healthcare environment, keeping track of expenses isn’t just a good practice - it’s essential. With 89% of practices facing rising costs and hospitals operating on razor-thin margins of just 1.3% ^[3], having a system that’s both efficient and accurate is critical for financial stability.

Switching from manual processes to automated platforms can make a huge difference. Automated systems not only cut down on errors but also speed up processing times ^[8][4]. Plus, integrating travel, expense, and accounts payable into a single cloud-based system can improve employee productivity by 19% ^[2]. This means clinical staff can spend less time on tedious administrative tasks and more time focusing on patient care. As Rick Pollack, President of the American Hospital Association, put it:

"The dramatic rise in costs of labor, drugs, supplies and equipment continues to put enormous pressure on our ability to provide care to our patients and communities" ^[3].

Tools like pre-approval workflows help prevent budget overruns, while AI-powered forensic analysis can catch synthetic receipts and metadata anomalies that might otherwise go unnoticed ^[8]. Automated compliance checks are another game-changer, reducing the cost of expense report errors by 60% and cutting down late invoice payments by 24% ^[2].

Expense tracking in healthcare isn’t just about crunching numbers - it’s about aligning costs with patient outcomes. By 2030, all traditional Medicare beneficiaries are expected to be part of Accountable Care Organizations ^[3], making it even more important to track metrics that highlight both quality and efficiency. Real-time dashboards and predictive analytics can help finance teams spot unusual spending patterns and minimize administrative waste, which currently eats up 15% to 30% of provider budgets. Shockingly, up to half of these costs may be entirely unnecessary ^[3].

Organizations that standardize electronic processes, adopt mobile-friendly tools, and perform regular audits create a system that’s always ready for scrutiny. Combining automated monitoring with strategic audits and real-time analytics not only ensures compliance but also allows clinical teams to prioritize patient care. In the end, this approach provides the financial clarity needed to control costs without compromising the quality of care.

FAQs

What should be included in a healthcare expense policy?

A healthcare expense policy needs to lay out clear guidelines for what counts as allowable and reimbursable expenses. This typically includes categories like medical supplies, administrative costs, and staff-related expenses. These definitions help ensure consistency and prevent confusion.

The policy should also outline processes for accurate documentation and emphasize the importance of centralized data storage. Incorporating automation tools can play a big role in minimizing errors and streamlining the workflow.

Another critical aspect is establishing internal controls. This means setting up regular audits, implementing approval processes, and ensuring compliance with industry standards. These measures not only help detect and prevent fraud but also protect the financial integrity of the organization.

Which automation features matter most for compliance in healthcare?

Healthcare compliance has a lot of moving parts, and automation can simplify the process significantly. Some of the standout features include AI-driven tools for handling unstructured data, which can quickly make sense of messy information like handwritten notes or scanned documents.

Other key tools include audit trails that track every action taken within a system, ensuring transparency and accountability. Access controls are another must-have, limiting sensitive data to only those who need it, while policy enforcement mechanisms help ensure that regulations like HIPAA are consistently followed.

These features not only help reduce manual workloads and minimize the risk of human error but also reinforce strong data security - something that's non-negotiable in healthcare.

How can analytics reveal cost savings without hurting patient care?

Analytics helps uncover ways to save money in healthcare by examining how operations run, how resources are used, and the results of clinical care. It can highlight inefficiencies, simplify workflows, and improve how resources are distributed, cutting costs without sacrificing quality. By keeping an eye on clinical performance and outcomes, healthcare organizations can make sure cost-saving strategies don't harm patient care. This approach supports consistent best practices, boosts patient safety, and leverages data insights and automation to make smarter decisions.

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