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Why Virtual Cards Are the Future of Healthcare Payments
Authors: Blake Sorrell, Director, Healthcare Banking, and Jordan Miller, Director, Commercial Account Management
Despite the fact that healthcare providers operate in an industry with historically tight margins, only 16% use automated accounts payable processes. Most providers rely on manual healthcare payments like checks, despite the high costs involved, and organizations can expect to spend $38 on average to manually process a paper check and invoice. In addition, vendors wait on average 34 days to receive payment, putting providers at risk of supply chain interruptions that could place patient and employee safety at risk.
AP automation offers streamlined efficiency and cost savings over paper checks for healthcare payments. Automation begins with scanned or electronically submitted invoices, eliminating the possibility of errors due to manually entering information from paper documents. The efficiency of healthcare payments continues as approval requests flow directly to the appropriate authorizers within the company. Once invoices are digitally approved, electronic payments can be automatically generated according to the vendor’s method of choice, all with minimal employee touchpoints.
AP automation can lead to cost savings and faster payments, however, resistance to change can lead practices and facilities to continue making check payments even after beginning the process in a digital format. Cutting a check, tracking down signatures and mailing payments to vendors adds time, not to mention cost, to what could be a fully automated process.
Fortunately, there is now a way to improve healthcare payments by merging the familiarity of check payments with the digital efficiency of automation through the use of a virtual credit card.
How a Virtual Card Works for Healthcare B2B Payments
A virtual card solution can be designed to replicate an organization’s current payment process but adds greater security and efficiency over check and ACH payments. Invoices are still submitted and approved digitally, but instead of sending a request for a paper check, the system submits a payment instruction file to the bank for a virtual card, without the need for employee intervention.
The bank reviews the request and issues a one-time use number that acts as an electronic credit card. The number is sent to the supplier via email where accounts receivable teams can process it as they would any card payment.
Once the number is processed, Visa or Mastercard approves the transaction and sends the data back to the issuing bank. Because the process is performed digitally, payment reconciliation can also take place automatically, quickly reconciling ledgers and making it easier for hospitals and facilities to manage cash flows.
Virtual Cards Offer a String of Benefits to Healthcare Providers
Payment controls and transparency in the payment process will make customers lives easier while providing the supplier with enriched remittance data they would not get with check or ACH if they are not in the correct format.
Because the virtual card process works similarly to a provider’s check issuing process, virtual cards can support irregularly occurring disbursements, a norm for providers. Instead of making out a paper check to a vendor for a specified amount, a new virtual card number is created, offering the same flexibility without the hassle of printing and mailing paper payments.
Virtual cards also offer security enhancements over ACH and checks, which are susceptible to fraud. Bad actors can steal routing and account numbers and use this information to initiate counterfeit transactions. A virtual card number can only be used once, eliminating the risk that information can be stolen and used for subsequent purchases or payment activity
Another benefit is boosting the bottom line. By reducing checks, businesses can turn their AP departments into profit centers by generating rebates through virtual cards.
Because virtual cards are a form of electronic payment, vendors are paid faster, and providers receive the benefit of float (30-45 day pay period). Paying suppliers regularly and on-time can also result in additional payment rebates from vendors.
When the benefits are added up, virtual cards combine efficiency and security with cost reductions and rebate power to better meet the needs of a healthcare organization.
To learn more about virtual cards or get started with AP Automation, email us at firstname.lastname@example.org.
FNBO Healthcare Banking offers a full suite of revenue cycle and accounts payable solutions that allow our customers to focus their time and resources on what matters most – providing the best possible healthcare services throughout our communities. We offer financing for working capital, new construction, renovations, equipment acquisitions, medical lockbox, accounts payable solutions and patient financing.
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.