5 Ways Electronic Payments Improve the Healthcare Revenue Cycle
If your healthcare organization’s knees are buckling from the pressure of managing shrinking reimbursement rates, skyrocketing costs, and growing cyber security threats, you are not alone.
Hospital and health system CFOs and revenue cycle leaders are under ever-increasing pressure to develop strategies to improve the financial health of their organizations—and his won’t change in 2020.
Against this backdrop, improving revenue cycle performance is a top priority for healthcare finance leaders, and they are meeting this challenge by optimizing their payments to suppliers.
How electronic payments improve revenue cycle performance
Optimizing payments to suppliers enhances the healthcare revenue cycle in five ways:
1. Higher profit margins: Electronic payment solutions reduce the costs of paying suppliers, contributing to higher profit margins. Electronic payments also streamline payment operations. A single payment file upload initiates payment to all a hospital or health system’s suppliers; instructions are parsed, and payments are automatically remitted in all payment methods. This eliminates the need to log in to multiple banking systems and wipes out the costs of printing and mailing paper checks. What’s more, electronic payments provide real-time payment reconciliation that eliminate the keying of data or the decoding of banking messages. Additionally, advanced solutions deliver detailed payment and reconciliation reports. These reports enable more accurate accrual reporting, greater payment reporting integrity, and better visibility into spending based on the metrics most important to executives.
2. Better cash flow: Best-in-class accounts payable departments – typically, those with a high level of automation – approve and post an invoice within 3.6 days of receipt, per The Hackett Group’s E-Invoicing Benchmarking Study. Conversely, it takes departments with little or no automation 16.6 days to process a single invoice. Hospital and health systems are literally leaving money on the table because of slow invoice approval cycles. The average discount that suppliers offer for early payment is 2 percent, IOFM’s 2017 P2P Benchmarking Study finds. Highly automated accounts payable departments capture seven times more early-payment discounts (as a percentage of spend) as their peers, per The Hackett Group’s E-Invoicing Benchmarking Study. That means that a $1 billion-revenue hospital or health system that previously captured $200,000 annually in discounts may gain $1.4 million in additional discounts through automation—which is a significant increase in net profits.
3. Enhanced cash and spend management: Electronic payment solutions empower CEOs and other health finance leaders to effortlessly drill down into key information, analyze issues, and uncover opportunities for driving growth and profitability. Decision-makers have real-time access to critical data, including on-time payment percentage, spend by supplier, payment value and volumes, Days Payable Outstanding (DPO), discount capture, cash-back rebate metrics, and team productivity metrics. Electronic payment solutions also track the status of payments (including initiated payments and rejects), generate detailed transaction and reconciliation reports, and provide a consolidated view of all payout accounts.
4. Cash-back rebates on corporate spend: Hospital and health system CEOs can really get excited about cash-back rebates on payments made via virtual card (or vCard). It is not uncommon for organizations to earn cash-back rebates on 30 percent of their spending. In some cases, the cash-back rebates earned by hospitals or health systems have single handedly made their accounts payable department a profit center. The money earned through cash-back rebates also can be used to fund innovation in the finance department and beyond.
5. Extended DPO: Leveraging certain card programs for electronic payments enables hospitals and health systems to extend their DPO, a measure of the time it takes an organization to pay its suppliers, without changing their payment terms. Since the funding for vCards is provided by the buyer’s bank, and the payback period to the card issuing bank doesn’t kick in until the payment is initiated, buyers can extend their DPO by several weeks. Extending DPO frees up cash that CEOs and other health finance leaders can use to pay down corporate debt, make capital investments, increase research and development, or support other growth initiatives.
These benefits are sure to capture the attention of CEOs and other health finance leaders looking for ways to improve revenue cycle performance. Want to learn more about how Paymerang can improve your healthcare organization’s revenue cycle? Contact firstname.lastname@example.org today.