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Streamlining Accounts Payable Operations and Generating Revenue at Cookeville Regional Medical Center

Cookeville Regional Medical Center | Cookeville, Tennessee

Like most healthcare organizations, Cookeville Regional Medical Center (CRMC) is constantly seeking to streamline operations to gain cost-saving efficiencies. Recently, the organization identified opportunities to achieve this goal within its accounts payable department. AP maintains a large vendor master relative to the size of the institution, consisting of approximately 4,000 active suppliers and more than 3,000 additional vendors which are paid more infrequently. The vendor base covers a wide array of products and ranges from large national companies to small local suppliers.

Managing the numerous payment transactions to these vendors had become a cumbersome affair. “AP was getting bigger and bigger, and our staff was making more and more phone calls, dealing with more lost checks and handling a steady stream of issues,” explains Elizabeth Kase, Senior Manager, Accounts Payable and Accounting. The upshot was considerable productivity drain. “We were struggling to perform our regular functions,” added Kase. Growing costs were also being incurred in printers, supplies and other ancillary expenses associated with all the activity.

At the same time, the department saw an opportunity to turn what had been a pure cost center into a revenue contributor. The challenge was to monetize the large transaction base. As Kase succinctly put it, “We are making all of these payments anyway, so why not look for ways to earn some money from them.”

Then the COVID-19 pandemic happened. Staff and many vendors wanted paperless and frictionless transactions. Like most healthcare providers, CRMC also saw an urgent need to find additional revenue.

Solution: AP Card from CommerceHealthcare®

CRMC first heard about the CommerceHealthcare® AP Card several years ago while attending a presentation at a Tennessee Hospital Association conference. CRMC was intrigued upon hearing another provider discuss the program’s ease and return on investment. The AP card program appeared to offer a timely solution. “We were ready to investigate any kind of alternative to paper checks,” said Kase.

The CommerceHealthcare® AP Card optimizes supplier payment management by replacing paper checks with electronic payments through a virtual card. The program also offers organizations the ability to earn revenue. The card can be used for everything from regularly scheduled invoices to one-time payments.

Before launching the AP Card program, CommerceHealthcare® conducts a thorough spend file analysis, identifying potential revenue opportunities. A dedicated team then executes a process to maximize supplier enrollment. The bank also provides full service and program reporting. The result is a fast and simple implementation, requiring very few resources on the part of the provider and the potential to earn significant incremental income.

Rapid Implementation, Diligent Ongoing Management

“I had been told repeatedly that setting up AP Card was very easy, and I will say that implementation was definitely as advertised,” said Kase. CRMC opted to start using the card with several smaller vendors. Initial success led to rapid program expansion and enrollment of a high percentage of its suppliers within the first year. Now in the fifth year, the process runs on an efficient track that includes CommerceHealthcare® performing an annual spend file analysis and CRMC alerting the bank when a wave of new vendors is added to the AP roster, along with general ongoing diligence.

Continuous support from Commerce Bank is the bedrock for the program. “Everyone on the Commerce team is outstanding,” said Kase. “We rarely need support, but when we do, they solve problems quickly, same day or next at the latest.”

Adoption and transaction volume have grown over the years. “Most vendors want an alternative to checks and want to know your options,” noted Kase. Acceptance has ranged widely across supplier size and type, including a number of small local vendors.

Results and Benefits

The results from the AP Card program have been substantial and sustainable, generating multiple benefits:

  • Operational efficiency. The well-maintained virtual card solution has reduced internal staff time devoted to payables transactions. As Kase described it, “We just process the invoice and send off the card payment — and we are done. It really is as easy as they say.” The resulting productivity gain translates both to cost savings and the ability to concentrate on priority work rather than routine processing and troubleshooting.
  • Added revenue. The numbers are impressive. CRMC has earned $466,000 in revenue share since program inception. The medical center earned $111,000 in 2020, the highest annual earnings for the program. Payments covered by the card jumped $4 million in one year. Given the minimal investment required and the scalability, the ROI proves strong. As Kase explained, “This is extra money that goes straight to the bottom line.” The 2020 contribution is meaningful, representing approximately 2% on CRMC’s roughly $5 million net income.
  • COVID-19 response. CRMC has also used AP Card’s no-touch processing to heighten staff and vendor safety throughout the pandemic. Supplier staffs working remotely have appreciated the streamlined payments.
  • Strengthened banking relationship. The continuing success of AP Card has reinforced the trusted relationship between CRMC and CommerceHealthcare®. Such relationships are a source of strength in today’s challenging financial environment.

 

Recommendations for Success

Elizabeth Kase offers five recommendations for those looking to build a successful virtual card program:

  • Embed the card option into AP operations. Make the card offer routine, not episodic. Ask vendors to try the card and stop if unsatisfied. “Most companies stay on the program once underway,” emphasized Kase.
  • Maintain diligent attention to enrollment. Stay on top of your vendor base to keep identifying opportunities. Perform a combination of scheduled spend file analysis and daily surveillance, and respond quickly when prospective adopters arise. CRMC informs suppliers that the card can be set up on the “very next payment.”
  • Train AP staff. In addition to promoting consistency among staff, training can strengthen attentiveness to signals. Kase points to examples such as noticing an incoming invoice with a “cards accepted” statement.
  • Deploy all internal channels. CRMC educates Purchasing and other departments that have close relationships with vendors and are thus better positioned to pitch the AP Card option. The hospital’s RFPs also routinely include a requirement to accept card payment.
  • Be flexible. Resistance usually comes in the form of questioning the fees associated with card use. Where the objection cannot be overcome, CommerceHealthcare® can sometimes structure other alternatives to checks.

These steps add up to a disciplined methodology that is powered by the proven AP Card approach. As Elizabeth Kase stated, “They really make it easy to operate and grow this program.”

About Cookeville Regional Medical Center

Cookeville Regional Medical Center (CRMC) is a 247-bed hospital serving 14 counties in Tennessee’s Upper Cumberland region. The flagship of Cookeville Regional Health System, the state-of-the-art medical center has over 2,000 employees and 200 physicians. CRMC discharges more than 14,000 patients annually with 140,000 outpatient visits. It has earned consistent recognition for excellence in orthopedic and cardiac surgery, among many awards.