Small to mid-sized community hospitals are confronting numerous complexities brought on by various regulatory changes, such as the Affordable Care Act, technology overhauls due to ICD-10, declining reimbursements and more.  

Moving from Paper to Electronic Payments Is Complex but Critical

11.17.14

Small to mid-sized community hospitals are confronting numerous complexities brought on by various regulatory changes, such as the Affordable Care Act, technology overhauls due to ICD-10, declining reimbursements and more. As a result, organizations work tirelessly to streamline processes in an effort to both reduce costs and boost margins. A significant part of this challenge revolves around financial officers and treasury managers, who must gain greater visibility and control over AP disbursements and how that money is spent.

Unfortunately, many hospital AP departments are still saddled with manual processes, despite being costly and creating delays for processing invoices and paying suppliers. In the 2013 AP Automation Study published by the Institute of Financial Operations the cost to process a paper invoice ranged from $2 to more than $25 each with some 36.6% of the respondents not sure. From a payments perspective, 70 percent of disbursements by U.S. companies are still done by check, at an average processing cost of anywhere from $1.61 to $8 per transaction.

How do hospital AP departments face this paper challenge and stay competitive while not adding to their FTEs? In other words, how do they automate the invoice, presentation and payment process?

To immediately address the payment challenge, many hospitals may turn to automated clearing house (ACH) payments, which process large volumes of credit and debit transaction in batches, electronically.

While this may solve some of the headaches associated with manual payment processes, ACH may not always be the best fit. The technological investment required to perform ACH transactions could be an obstacle for many small to mid-size community hospitals. In addition, ACH requires vendors to give out their bank information, which many aren’t comfortable doing due to the perceived risks that could be posed to both privacy and security. From the buyers’ point of view, suppliers often change their bank accounts, so additional management of the vendor database becomes both onerous and costly—especially when ACH payments are returned.

Consequently, business-to-business (B2B) credit card payments have grown rapidly in popularity over the past few years. As an alternative method for eliminating paper checks, B2B credit cards and virtual card (VC) payments also offer unique benefits to the supplier, such as getting paid faster and receiving detailed remittance information along with the payment.

As market needs continue to evolve, the key to success will be for buyers and suppliers to be flexible and work together to determine which payment method works best to optimize each partnership. A holistic approach to Payment Optimization, encompassing a comprehensive set of payment strategies, including ACH, credit or virtual cards (single use accounts) and wire transfer, can be beneficial for hospitals and vendors of all sizes. This approach not only allows a hospital the opportunity to reduce costs, but can also help to improve margins over time.

In today’s environment, Inworks is leveraging their experience and familiarity in healthcare to deliver a consultative approach for today’s busy hospital CFO. The company takes a holistic approach to automation by addressing the hospitals unique operating requirements for invoice automation to streamlining the payment process, all designed to drive down cost and improve margins.

Inworks strives to strengthen its clients’ relationships with the suppliers by helping hospitals evaluate which electronic payment method makes the most sense when choosing to leave the check behind.

For example, a large strategic supplier might be set up for ACH, while others prefer to accept virtual card or B2B credit cards for their convenience and remittance information.

Another example of the flexibility Inworks provides its clients is found in how the company approaches vendor enrollment and payment delivery. Using Comdata’s card platform, Inworks facilitates a vendor enrollment campaign that first seeks to understand the vendors’ ability to accept electronic card payments. The options are limitless from delivering virtual card payments (single-use accounts) with comprehensive controls and e-mail remittance to B2B card payments delivered straight to the supplier’s merchant bank account.

Moving from paper to electronic processes can be both complex and critical; Inworks is a partner that strives to make AP automation and electronic payments easier. When hospitals automate AP, they reduce costs and allow for staff to focus on higher value tasks that will drive even greater business results over time. Doing so also generates incremental revenue and increases cash on hand, which definitely solidifies the business – especially for a hospital that’s frequently waiting on reimbursements.