The majority of healthcare payment processes remain paper-intensive, despite electronic payments being the most efficient and cost-effective B2B payment method.
Inefficient processes cost the industry millions of dollars annually. In fact, data shows it costs as much as $31 to manually process each invoice and process paper checks.
The continuing dependence on manual processes runs counter to the industry’s mission to reduce waste and improve efficiency. Yet streamlining payments in healthcare is complicated, given that different objectives drive supplier and provider behavior.
To break the e-payment stalemate in healthcare, the industry must advance the adoption of efficient payment processes that benefit both healthcare providers and suppliers.
Healthcare Payables Today
From a technology perspective, accounts payables (AP) departments have historically fallen behind their counterparts in accounts receivables (AR). This is particularly true in healthcare, where chief financial officers are focused on monetizing cash flow and improving the cash conversion cycle. Changes in payment and reimbursement models increase financial risk for provider organizations. With the growth of high deductible plans by private insurance, nearly 30 percent of revenue shifts directly to collecting from the patient, not the insurance company. Hospitals are bearing the lion’s share of the reimbursement risk.
With this in mind, it makes sense why we’ve seen greater technology investments to support AR processes. Many of today’s AR systems, for example, already integrate with electronic health records systems, such as Epic and Cerner. Meanwhile, AP departments still rely on legacy systems. Compounding the payables challenges is today’s robust merger and acquisition environment, which has resulted in health systems managing multiple AP environments.
Providers rely on many manual processes, such as paper checks and credit cards. Meanwhile, suppliers must offer multiple payment options. Each individual payment method (check, automated clearing house, credit cards) requires different back-end data sources and business process.
This antiquated model must end. It’s time the healthcare industry leveled the technology landscape to facilitate the exchange of payments in a more expedient fashion.
More Options in Financing
Another change that has complicated the payments landscape is a growing number of financing options for hospitals and health networks. Historically, health systems leveraged their own balance sheets and negotiated their own terms with suppliers. The entrance of new models, such as dynamic discounting, variations on credit cards, and traditional financial institutions increasingly lending through alternative offerings, have given provider organizations a variety of financing options, each with varying terms. While this structure has helped them to better monetize cash flow, it has created an imbalance in the financial value between suppliers and providers. Consider credit card payments, for which suppliers pay the fee while providers get the rebate.
This state of affairs highlights yet another challenge: the differing financial objectives of suppliers and providers. Suppliers want to improve receivables performance and reduce transaction fees. Providers need to manage cash flow and gain access to available discounts and rebates, all while avoiding late fees.
Financial Harmony and Value
Today, both financial institutions and technology companies are working to capture a share of healthcare’s payment market. However, each only addresses a piece of the payments and financial value puzzle. What healthcare needs is an integrated platform – a one-stop shop for payments. An industry-wide solution can support any payment method – credit card, ACH, line of credit – helping to improve transactional efficiency and offer working capital benefits. This kind of integrated platform provides transparency and visibility, which allows both trading partners to find the right level of efficiency and financial value in the relationship.
Fortunately, a modern integrated e-payables platform is now available to give hospitals an easier, more transparent way to balance the financial equation, no matter how they choose to finance. Suppliers benefit from accelerated payment cycles and reduced cost of collections and fees.
These industry-wide solutions will help address the key issues faced by suppliers and providers:
- Mitigate risk in the cash conversion cycle,
- Eliminate manual processes and the high costs associated with them,
- Improve visibility and transparency, and
- Create a more level payments playing field for providers and suppliers.
The procure-to-pay cycle has undergone a great deal of technological advancement during the last decade. Today, electronic procurement and invoicing solutions are the norm. Payments, however, remains complicated. Increasingly, the industry is adopting more modern technology to automate a highly manual and fragmented payment process.
The industry needs more than automation, though. The time is right to embrace a common, standards-based payment platform that brings efficiency and speed to the payment cycle, reduces costs and time associated with transactions, enables better pricing, lowers operational costs, and balances the financial equation for all players.
Rob Alcock is General Manager, ePay with GHX.