Author: Blake Sorrell, Director, Healthcare Banking
- Hospitals across the country are under financial pressure.
- Healthcare organizations can improve by focusing on payment efficiency.
- Payment automation can improve efficiency and help your bottom line.
It’s hard to go anywhere without hearing about proposed Medicaid cuts and the impact on program eligibility. According to the Congressional Budget Office, Medicaid spending will be reduced by $793 billion over next 10 years, eliminating coverage for 10.3 million people.
When coverage levels decline, so does individual ability to pay, leaving hospitals with rising uninsured health care costs and growing amounts of uncompensated care.
However, Medicaid changes are not the only factors impacting hospital bottom lines.
- The average facility loses $4.85 million a year due to staffing shortages.
- Drug and supply costs continue to rise.
- Unrecovered payments caused by delays and denials add to financial strain.
In fact, hospital expenses increased 5.1% in 2024, outpacing the inflation rate of 2.9%.
While that’s a lot of numbers, the overall message is clear. CFOs at healthcare organizations need to find ways to cut expenses and bolster profitability in the years to come.
One often-overlooked solution is improving payment efficiency.
Efficient Payment Processing Supports Hospital Financial Health
Improving the way hospitals manage payments, reconciliation and supplier disbursements can deliver significant results. We’ve seen hospitals drive real financial lift by rethinking how simple payment processes, such as checks, ACH and card programs, are used across accounts receivable (AR) and accounts payable (AP). These changes are small but can lead to an outsized impact.
- Efficient payment processing reduces errors, delays and unnecessary expenses.
- Improved payment processing frees staff time for higher-value work.
- Healthcare cost management becomes easier with more accurate and timely revenue collection.
Why Medical Billing Reconciliation Matters
Reconciling insurance payments requires hospital staff to manually compare patient accounts against insurer reimbursements. The process is lengthy and complex as remittances from various sources, including insurers, patients and government programs, use different formats.
As a result, hospitals experience gaps in charge reconciliation, exacerbated by manual or inadequate auditing and infrequent reviews.
In addition, traditional billing processes can lead to high error rates and claim denials. Denied claims, combined with the highly manual payment workflows, create bottlenecks and backlogs, delaying reimbursement cycles.
How Can Payment Automation Improve Accounts Receivable?
Automation can eliminate many of the time-consuming manual steps associated with sending bills and logging payments. Depending on you AR solution, everything from billing patients through capturing electronic payments and eventual reconciliation can be completed using sophisticated technology.
Other automation benefits include:
- Flagging mismatches immediately.
- Reducing denied claims and appeals.
- Improving accuracy and speed.
Improved efficiency and accuracy have been shown to reduce collection times by 67%, putting cash back in hospital accounts faster. Investing in medical billing automation can help hospitals capture more revenue and strengthen liquidity.
Accounts Payable Automation Reduces Hospital Costs
The average hospital receives goods and services from 1,300 different vendors, creating a complicated network of AP processes.
Challenges include:
- Invoice error rates between 5% and 15%, costing the industry up to $6 billion annually.
- Payments on inaccurate invoices are difficult to recover.
- Manual processes cause delays.
- Late payments that lead to fees and missed early-payment discounts.
AP systems that automate the process, from invoice receipt through payment and reconciliation, can collect prompt and efficient vendor payments. Automation can help ensure suppliers are paid promptly, making it possible to negotiate early payment discounts and avoid late fees, two factors that can easily boost profitability.
Electronic Payments Deliver Cost Savings
Electronic payments are another significant source of efficiency and cost gains associated with automation. Recent research indicates that check payments cost organizations between $4 and $20 per check, while ACH transactions average about 30 cents per payment. Transferring to card payments from paper checks can achieve similar savings, if not more when factoring in the revenue generated though rebates.
Building a More Efficient and Profitable Hospital
Overall, automation of billing and supplier payment processes can:
- Reduce hospital costs
- Deliver more efficiency
- Improve liquidity by accelerating reimbursements.
- Increase profitability while maintaining high-quality patient care.
For hospitals facing rising uninsured health care costs and tightening margins, payment automation offers a practical, effective path forward.
Partner with FNBO Healthcare Banking
FNBO Healthcare Banking offers a full suite of revenue cycle and accounts payable solutions so you can focus resources where they matter most — on providing excellent patient care. Our services include:
- Working capital financing
- New construction and renovation financing
- Equipment acquisitions
- Medical lockbox services
- Accounts payable automation
- Patient financing solutions
Contact our team to learn how we can help your organization improve efficiency and reduce costs through better payment processes.
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.
