Amid stay-at-home orders in the height of the pandemic, only essential businesses were allowed to stay open. To the dismay of many in the industry, not all healthcare businesses were allowed to stay open. Indeed, service providers in areas like dental and elective surgery were forced to close, creating a massive cash flow problem for healthcare providers.
With businesses now allowed to reopen, opening up revenue streams and supporting cash flow is paramount. According to John Innes, CEO of ACH Processing Company, the complex flow of B2B payments in the healthcare space has several areas of opportunity to not only bring efficiency to the process, but actually provide financial relief to both payers, like third-party administrators (TPAs), and payees, like dental offices and private practices.
Speaking with PYMNTS, Innes described how the virtual card is sometimes an optimal payment method to optimize payment flows and support the cash flow of both ends of the B2B transaction.
The Virtual Card Value Prop
Traditionally, a payment between health insurance companies or TPAs, which are third parties that manage claims processing, paper checks and ACH payments are typical when paying healthcare providers. Yet these payment methods have their drawbacks.
One of the largest is a lack of transparency, according to Innes.
“I own a company called the ACH Processing Company, and there are limitations to the visibility of the ACH payment,” he said.
Introducing a virtual card solution was the result of conversations with TPAs that sought a more efficient, digital means of paying healthcare providers. It’s one of the largest value propositions of the virtual card: because it is digital by nature, visibility into the status of a transaction is augmented, and a payer can gain insight in real time to see that a transaction has occurred and been accepted by the other side.
Other benefits for payers include the virtual card’s ability to negate the need for a TPA to obtain, manage and store securely the bank account details of a payee.
With its new virtual card offering, ACH Processing Company has added another incentive for TPAs to adopt virtual card payments. Each transaction offers a cash rebate, generated from the interchange, that Innes said can open up a much-needed new revenue stream for payers at times when cash flow is tight.
For payees, meanwhile, virtual cards offer greater immediacy of payment receipt than other methods like cash or ACH, a cash flow benefit Innes noted can be instrumental in the survival of many businesses. The contactless nature of virtual cards also offers convenience, as opposed to paper checks that must be physically handled to be deposited.
Providing Choice
With virtual cards able to support the cash flow of both sides of the transaction — for payee, through faster access to capital, and for payer, through access to cash-back rebates — adoption of this payment method is expected to grow in the B2B healthcare space, Innes said.
Yet the technology is not necessarily looking to replace ACH or other electronic payment methods outright, he noted. Indeed, each payment method has its pros and cons (for example, accepting cards can be a challenge and an added expense for healthcare providers).
As such, Innes emphasized the importance of optionality.
“There are pros and cons to different payment methods, and I think having the right mix of payment methods provided to businesses is the right approach,” he said.
With the threat of more lockdowns looming, healthcare providers and their business partners must be prepared for another shutdown — and for more moments of a cash flow squeeze. Being strategic about B2B payment methods and embracing choice will play an important role in aiding the perseverance and recovery of businesses across the industry.
“Certainly this year, there has been a bit of change and disruption in the healthcare industry,” noted Innes, “and companies, be they large or small, have to adapt.”