Taking a strategic view of payments.

There is growing urgency to automate many of the healthcare industry’s prevailing manual administrative processes in search of efficiency gains and cost savings. Recent estimates suggest that healthcare could shave more than one-fifth of current spending on high-volume administrative transactions by moving to fully electronic processing.^{1 footnote 1} 

One locus of attention for automation and digital payments is accounts payable (AP). Healthcare shares this priority with many industries, evidenced by a survey showing that 74% of AP teams have achieved partial automation in 2024 and have a “growing intention to transition toward full automation.”^{2 footnote 2} 

CommerceHealthcare^® experience affirms that health systems, hospitals and practices promote automation success when they adopt a holistic view of financial processes and develop an integrated payments strategy. This report identifies five principal characteristics of such a strategic view (Figure 1). While AP is spotlighted, many of these considerations are relevant to the full healthcare payments landscape.

Figure 1
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View AP processes comprehensively.

A gap often exists in provider implementation of front-end payment solutions. By overlooking changes that should be made in the invoicing process that precedes payment, many manual steps that create automation leakage are allowed to persist. A full evaluation of workflows can reveal common time-consuming problems:

• Invoices are reviewed many times throughout the payment cycle.
• Researching purchase orders and other information requires staff to tab through multiple screens.
• Resolving invoice exceptions through the purchasing department can be a lengthy process.

These issues underscore the vital need to analyze end-to-end workflows as part of implementation of a centralized invoice automation solution that impacts the payment spectrum (Figure 2). This solution consolidates scheduled or one-time payments into a single file, whether the disbursement involves credit card, electronic funds transfer, or check. Routine steps are automated so that staff can focus on exceptions and more complex matters. Reconciliation reporting is also automated.

Figure 2
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By tackling the issues comprehensively, organizations can maximize savings from multiple sources: enhanced staff productivity, reduction in paper checks issued, and extension of days payable outstanding. This combination generates solid return on investment (ROI).

Generate revenue from AP payments.

Supplier payments offer another avenue to augment ROI. A virtual credit card program manages electronic supplier payments and offers revenue sharing for the provider when suppliers enroll in the card program for regularly scheduled, one-time or point-of-sale payments. A traditional cost center becomes a source of additional income for the organization. Desirable features in a virtual AP card are numerous:

• Monthly revenue sharing to improve cash flow. Many card issuers only pay providers on a half-yearly or yearly basis, whereas Commerce pays monthly.
• No software to host on-premises.
• Card system that works with existing accounting and ERP systems.
• No cost for implementation.

At certain commitment levels, an opportunity also exists to receive up-front revenue sharing, based on realistic forecasts and without onerous claw-back provisions.

Supplemental card opportunities.

Those who have a virtual card in place are often surprised to find that their program isn’t optimizing revenue. Card sponsors can fail to maintain enrollment levels over time as the organization’s supplier roster expands or as suppliers shift payment preferences. A supplemental virtual card from a different bank can be easily deployed to bring fresh diligence and take advantage of the missed revenue. CommerceHealthcare^® has conducted spend file analyses uncovering significant potential cardable amounts.
 

Consider all payment types.

Healthcare AP departments typically use a variety of manual and electronic payment rails, each following its own process and workflow. A strategic approach analyzes the entire spend file in search of optimizing automation and minimizing cost. That paves the way for an integrated payables solution that streamlines the origination of all outgoing payments. While fully encouraging electronic payments, a unified system should support still-prevalent paper checks rather than mandating their elimination or requiring “prefunding” payments.

The right solution also unlocks frequently overlooked opportunities. For example, CommerceHealthcare^® offers an option whereby Automated Clearing House (ACH) payments can generate revenue share for providers, analogous to the virtual card. The bank enrolls a provider’s suppliers on its clearinghouse’s ACH platform and is able to share transaction rebates with the provider.
 

Patient refunds.

Refunds to patients and insurers are a specific payment type that presents growing challenges for AP. Organizations can now take advantage of systems that assume complete life cycle management of refunds. Providers initiate electronic requests to the refund management system. Patient information is gathered using mobile or desktop software, including choice of refund through direct deposit, direct-to-debit card, e-check, or paper check. Accurate reconciliation data is provided. The benefits of automation are achieved and patients gain convenience, choice and speed.
 

A note on unclaimed payments.

A wide-ranging view of payments should also encompass funds unclaimed by recipients. CommerceHealthcare^® experience reveals that many organizations aren’t fully informed about their state’s escheatment regulations. Many are often late in their required filings for unclaimed funds.
 

Align AP and enterprise technology strategies.

Today’s healthcare CIOs and CFOs seek financial solutions that are congruent with their enterprise technology strategies. When evaluating AP automation, several salient features should be prioritized to help ensure this alignment:

• Integration with accounting, electronic health record management, and other core data management systems to share data and avoid creating another siloed healthcare system.
• A “vendor neutral” solution that works well with most existing central systems and respects an organization’s workflows rather than forcing modifications.
• Ease of implementation to avert added strain on today’s overloaded IT departments.
• Incorporation of emerging technologies when appropriate. Various digital and real-time payments will see expanded use in healthcare in coming years. Artificial intelligence (AI) is gathering momentum in all businesses. A cross-industry survey of AP departments estimated that 74% were using AI by the end of 2024.^{3 footnote 3} AI applications that some hospitals and health systems are implementing include indexing all invoices to perform analysis on this valuable data and AI-driven automation in invoice processing.

Seek a full working capital organization.

Acquiring AP solutions from a well-resourced bank can bring added benefits to working capital management. Beyond providing the AP automation described in this report, the right bank can strengthen working capital optimization strategies with tools such as overnight cash sweeps and short-term lines of credit. These strategies can be deployed without disrupting existing primary banking relationships. Accessing all available working capital tools is vital to address the growing liquidity pressures on health systems, hospitals and practices.
 

Conclusion.

Acquiring AP solutions from a well-resourced bank can bring added benefits to working capital management. Beyond providing the AP automation described in this report, the right bank can strengthen working capital optimization strategies with tools such as overnight cash sweeps and short-term lines of credit. These strategies can be deployed without disrupting existing primary banking relationships. Accessing all available working capital tools is vital to address the growing liquidity pressures on health systems, hospitals and practices.

CommerceHealthcare^® solutions are provided by Commerce Bank.

Disclosures: