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Uncovering Automation Value in Healthcare Supplier Payments

Lauren Ruef

Through the passage of The Patient Protection and Affordable Care Act in 2010 and the adoption of electronic medical record reform, hospitals and healthcare organizations have undergone unprecedented change. Stringent medical reimbursement requirements have created thinner hospital budgets, and healthcare systems must meet the challenge without compromising quality of patient care. How? Keeping an eye towards reducing waste and optimizing efficiency in the supply chain and beyond.

The backstory

Before the Affordable Care Act, hospitals were reimbursed for procedures and patient cost based on patient intake volume. Getting money in the doors wasn’t much of a challenge then. The time between patient treatment and payment for medical services was shorter as a larger percentage of medical bills were paid through an insurance provider versus out of pocket.

With ICD-10, hospital reimbursements are now contingent on patient satisfaction scores and how care facilities meet clinical best practices and other requirements for Medicaid patients. Patients are also slower to pay bills out of pocket, which impacts a hospital’s ability to pay its suppliers.

This has triggered an avalanche of mergers and consolidations, as some health systems have simply been unable to navigate the changes as standalone care facilities.

Curtis Rooney, President of the Healthcare Supply Chain Association remarks on the trend:

"Consolidation has been ongoing, and mergers and acquisitions are huge. Predictions say in the next 10 years, 5,000 hospitals will turn into 500 health systems. I'm not sure if that will actually happen, but the driver will be the same for everyone: efficiency."

Rooney’s response reveals how healthcare organizations are responding in the wake of these regulatory changes. Change is coming to healthcare, albeit, slowly but surely.

The wakeup call issued to hospital back offices

While the healthcare industry has successfully implemented the electronic conversion of medical records, accounting departments still buried in paper are largely forgotten. There are 5,300 registered acute-care hospitals in the United States each with hundreds or even thousands of suppliers, waiting to receive payment each month.

Common pain points shared by healthcare AP back offices:

  • Intensive staffing to oversee manual payment processes
  • Redundant processes that lack data visibility or sharing capability
  • Lack of access to useful financial data helpful in reducing waste

High processing costs, late payments, and missed discounts were the three highest ranked complaints of modern healthcare AP departments, as revealed in a 2016 Paystream Advisor’s ePayables for Healthcare Report.

The report analyzes current payment methods being used by hospital back offices and found that 63 percent of organizations surveyed were still using checks for at least half of all supplier payments. Slow processing time in preparing checks payments adds to the already burdened back office. Credit card and ACH payments have the ability to revolutionize this time gap by saving AP staff precious hours cutting and mailing checks by outsourcing the responsibility to a payments provider.

value in healthcare payments
Created by Ryan Mason

The opportunity

Most AP staff are familiar with AP automation technologies on the front end, like Optical Character Recognition (OCR) or front-end scanning of invoices, yet payments automation is a distinctly different opportunity to save time and cut down on cost on the operational side of healthcare. But automating payments in healthcare is a step that may have the largest possible impact for the dynamic ways it offers to cut costs and earn rebates.

Using an electronic payments provider optimizes each supplier payment to ensure maximum savings and benefit for the customer with little to no downtime to onboard the new technology. Through flexible payment options like ACH, credit card payments, or electronic print check, back offices can make healthcare supplier payments effortlessly while earning valuable rebates to invest back into their hospital budgets or contribute to a charitable arm of the organization.

Removing paper-based payments affords healthcare organizations much more than extra time. It’s a strategic business decision that boosts accounts payable from a paper shuffler to a strategic contributor. But the benefits of payment automation aren’t just in-house. They extend outward to suppliers whose life-saving products and equipment ensure a healthcare organization maintains the very best quality of care for patients.

A payments automation partner ensures delivery of funds in an error-free, efficient way for every supplier payment made. While banks may already offer credit-card programs to hospitals, they aren’t actively reaching out to new suppliers to ensure their payment methods are optimized. Otherwise, new suppliers may not know if or when a credit card payment option exists.

Payments automation providers have live customer support teams to guide each payment individually until it lands in the supplier’s account. Imagine never having to give the “check is in the mail” excuse to another supplier when payment is delayed.

The challenges

Technology upgrades viewed as a burden

Championing paperless healthcare payments for a back office, when it requires miles of red tape, implementation phases, and joint decision-making, sounds overwhelming. However, many payment automation partners offer hosted, plug-and-play solutions with minimal implementation or downtime. These solutions are built with integration in mind to play well with existing ERPs so there is minimal disruption to existing systems.

Payment automation comes at the end of the procure-to-pay journey, making it an easier change for the back office. It takes paper-based payments and makes them electronic, enabling hospitals to pay vendors ahead of time at a cheaper rate or earn substantial card-based rebates.

AP automation not viewed as an emergent priority

The lack of urgency surrounding technology upgrades in AP is a fundamental problem. Accounts payable departments must fight an uphill battle to prove their merit for a slice of the hospital’s budget against other strong contenders.

PayStream Advisors’ report weighs in on this challenge:

“Finance offices at healthcare companies have the burden of competing for capital-expenditure money with departments that are using those funds to buy lifesaving medical equipment.” The problem? ‘How do we justify spending money that doesn’t help move our mission to improve patient outcomes?’”

A payment automation solution that pays its way in rebates is a technology any hospital can afford to get behind. Not only will a hospital earn back its investment on the technology, but also the solution will continuously generate new revenue.

To change the perception of accounts payable staff from mere data processors to strategic business influencers, AP staff must grasp the attention of key stakeholders. Identifying ways that AP can contribute to the day-to-day cost cutting initiatives of the hospital will make any decisionmaker sit up and take notice.

Conclusion

Many healthcare systems haven’t considered payment automation for its potential in savings. While awareness is very high among hospital administrators of the need to introduce evidence-based decisionmaking into the supply chain through automation and data solutions, there’s a fundamental opportunity to earn savings with rebates from card-based payments in AP. Current processes in most hospital back offices aren’t keeping up with the pace of automation, and for administrations hungry for solutions that remove manual processing burdens and enable data-based decision making, payment automation is the next place to look.

 

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