Reducing Hospital Costs Through Automation and Payment Rebates
Author: Blake Sorrell, Director, Healthcare Banking
It’s no secret that healthcare provider costs are rising. In 2018, the year-over-year cost of medical and surgical supplies increased 5.5%, but that was before a global pandemic disrupted supply chains and drove prices even higher on critical items. The price for exam gloves, for example, soared 225% from March of 2020 to the same time in 2021.
Escalating expenses like these add weight to tight hospital margins. While there are a number of ways to handle pricing pressures, there is one little-known tactic that more hospitals should consider: payment automation.
The Added Cost of the Traditional Accounts Payable Processes
Hospital accounts payable (AP) departments understand all too well the time-consuming process of receiving and paying for hospital supplies. As paper invoices come in, information must be entered manually into accounting systems, taking up valuable resource time and effort.
Manual processes like these also increase the chance of error, another factor that could lead to added expenses. Just imagine that someone enters an extra zero on a $1,000 payment to understand the potential impact of errors on your bottom line.
But that isn’t the only way that manual payments could be costing money. Given the scope of the traditional AP process, AP staff doesn’t always have the time to review vendor contracts and compare to invoices received. This can lead to pricing discrepancies, as hospitals wind up paying more for medical supplies than they should.
If that weren’t bad enough, the traditional payment functions are inflexible and expensive. For example, paper checks can cost a business as much as $2,000 a month for every 500 checks processed when expenses associated with materials, labor and postage fees are added up. Plus, the time it takes to manage and pay an invoice using paper checks may put the hospital out of the running for receiving supplier discounts, not to mention the risk of fraud associated with paper checks.
Automating the AP lifecycle reduces these concerns, streamlining the process and enabling electronic payments. Electronic payments promote faster and assured payment times, allowing providers to negotiate contract discounts. But there is another advantage, the impact of which few hospitals consider: the chance to reduce costs through rebates.
AP Automation, the Key to Supplier Rebates
Vendors often offer rebates for prompt payments to providers that pay in an accelerated timeframe. Over time and across vendors, that rebate from a prompt payment can add up to a significant cost reduction.
The reason why many hospitals are unable to take advantage of rebates is simple. Processing ACH and card payments requires electronic payment processing, and too many hospitals remain committed to their existing AP procedure, relying on manual processes typically involving paper checks
However, adopting a technology solution can have big benefits. For instance, FNBO’s GHX epay platform is easy to implement and optimizes the payment process by enabling electronic payments across a vast number of healthcare vendors. Another unique feature of FNBO’s GHX epay platform is the realization of rebates for payments made with card and ACH to a network of suppliers. The GHX epay platform can also be added to an existing card program from any financial institution, making it easy to implement.
Taking this approach eliminates manual work, allowing AP teams to seamlessly process payments via card or ACH. Best of all, the process is automatic. You simply make the payment, and the rebate is applied. Plus, when using a solution like GHX epay, the system is integrated with existing ERP systems, making it easy to upload the payment file and reconcile payments.
With automation, hospitals can process payments faster and even pay all invoices from a consolidated file, reducing costs through early-pay rebates. As supply costs continue to rise, hospitals need to seize every advantage, and payment automation affords a faster and more efficient payment process that ultimately pads the bottom line.
Interested in learning more? Contact our Healthcare Banking team to get connected to an expert.
About the Author
Blake is a Director of Healthcare Banking, working with hospitals to contain costs, improve controls and accelerate revenue cycles. He believes that stronger financial management can mitigate many concerns around profitability, allowing administrators to focus more on patient outcomes. Blake is proud to be a part of the FNBO community—one that meets the definition of a “great big small bank”—and strives for the personal touch in all of his banking relationships.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.