Author: Vice President of Healthcare Banking Oscar Gonzalez
You may think that for a hospital to pay a vendor, the process is as simple as writing a check. However, many healthcare providers have to deal with manual, paper-based processes and multiple accounting softwares to simply make a payment. According to a survey by PayStream Advisors, healthcare organizations receive nearly three-quarters of their invoices on paper or via email and rely heavily on manual invoice processes. The rows of file cabinets full of invoices and payments at providers’ offices can attest to it.
The Challenge with Manual, Paper Payments
Fortunately, automating the accounts payable (AP) process can reduce the paperwork and streamline operations. You may ask, “What is the concern with manual payments if we’ve always done it this way?” One of the chief reasons to reconsider your payment process is the work your AP team currently spends its time on. Manual payments require manual work that takes time away from more productive and valuable tasks. Another key reason to consider automating payments is efficiency. Reimbursements are tighter than ever before and improving internal processes, like the AP process, is one area where a facility can improve efficiency and better manage cash flow. The cost of paper and postage alone can quickly add up.
Secondly, manual AP processes are labor intensive and take time to process, meaning providers are often missing out on early pay discounts offered by vendors. According to PayStream Advisors, missed discounts are one of the prevalent challenges payment management teams experience.
Another key issue that is often missed with manual payments is contract discrepancies. AP staff don’t have the time to review vendor contracts to ensure invoices are meeting the agreed upon pricing, which could mean providers are overpaying for some services and products. For example, if a hospital has an agreement with a drug manufacturer to pay a specific price for a medication, they may potentially be paying a higher amount than what was agreed upon because the contract is not being compared to the invoice.
Fraud is another key challenge with manual AP processes. Checks are naturally a higher risk since you are handing someone a copy of your account number and checks are easily intercepted or duplicated.
The Benefits of Streamlining the AP Process
With a small labor pool and tight margins, improving efficiency is essential—and streamlining the AP process does just that. With AP automation, payments can be easily made with minimal staff intervention. For example, with AP automation, your AP team is uploading one payment file instead of sending hundreds of checks. This reduction in manual work allows staff to focus on more valuable tasks, like pricing negotiation, enabling different payment types or contract analysis.
Automated AP processes are also more secure. Because you can use virtual cards to make one-time payments, you’re not writing as many checks with your account number prominently displayed.
Automated payments can also provide access to new revenue streams. By making faster payments, providers can take advantage of early pay discounts. Additionally, some AP automation vendors offer rebates on card and ACH payments by negotiating pricing with healthcare suppliers. AP automation systems can also electronically reconcile payments to ensure providers aren’t overpaying.
On top of that, if a provider needs access to additional cash flow, it’s possible to open a line of credit through an AP automation vendor. This is an appealing option since the interest on the line of credit is often paid by the AP automation vendor. This essentially offers providers an interest-free line of credit.
AP Automation is a Win-Win
As providers look for new ways to improve efficiency and margins, AP automation is an easy win. There are free AP automation systems that integrate into providers’ existing systems that can be up and running in a couple of months.
To learn about FNBO’s healthcare AP automation product, First Payment Exchange, email us at email@example.com
FNBO Healthcare Banking offers a full suite of revenue cycle 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 and patient financing.
About the Author
Oscar is the Vice President of Healthcare Banking at FNBO, where he joined in 2007 and has held numerous commercial banking positions. He grew up in Mexico City where he attained his Bachelor's in Economics and interned at the Central Bank. He then moved to Spain and obtained his Master's in Banking and Finance, and finally moved to the United States and received his MBA with a concentration in corporate finance.
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.