Healthcare’s Working Capital Shift Strengthens Supplier Ties

The healthcare industry might be likened to a battleship when it comes to payments innovation. It’s massive and slow to turn, but once turned, the waves made are enormous.

In the United States, for example, the Centers for Medicare & Medicaid Services estimated that the healthcare sector accounts for as much as 17% of GDP.

In Europe, The Commonwealth Fund found that healthcare spending as a percentage of GDP ranges from the high single-digit percentage points to the low teens.

Complexity is a hallmark in the industry, as payments wind their way between patients, insurers, providers and the government.

However, some commonalities exist within healthcare that would be seen in any other sector. Flexible spending and digital options are keys to optimizing cash flow, paying invoices promptly, and improving the dynamics between buyers and suppliers as they keep operations humming and manage inventory and supplies.

The Bigger Picture

In the second edition of “The Growth Corporates Working Capital Index,” for 2024-2025, Visa commissioned PYMNTS Intelligence to conduct a deep dive into the working capital practices embraced by 1,297 treasurers and chief financial officers across eight industries, five global regions and 23 countries.

Healthcare, for all its complexity, is finding a tailwind for payments modernization. Overall, the data showed that working capital efficiency was boosted by a 41% surge in the strategic use of financing solutions that span virtual and corporate cards.

Growth corporates are broadly defined as companies with $50 million to $1 billion in annual top lines. Across various industries, these firms turn to working capital solutions to fuel market expansion and enhance their systems, with a particular emphasis on using them to make strategic investments. This trend is especially pronounced in sectors like healthcare and agriculture, where utilization rates surged by 51% and 15%, respectively.

The index found that 97% of industry growth corporates used at least one external working capital solution, an increase of 51% year over year.

The preference for on-demand solutions — such as corporate and virtual cards and bank lines of credit — surged 285% and 92%, respectively.

Using Virtual Cards as a Payables Solution

The top performers, as measured by working capital efficiencies, used corporate and virtual cards to shorten cash conversion cycles by more than half. Healthcare firms used virtual cards as a payables solution.

Healthcare growth corporates not only quadrupled their use of corporate and virtual cards overall and took on 50% more financing, but 41% of these firms used the working capital options to seize growth opportunities.

Healthcare firms were able to pay 30% more of their invoices earlier than the year before.

Among all the sectors measured, healthcare had the largest industry boost in index scoring measured with working capital efficiencies, particularly in Europe and Asia Pacific, where index scores increased by 16%.

The joint effort between Visa and PYMNTS Intelligence also noted a 7.5% improvement in supplier integration, which in turn means that the payments, terms and automation of accounts payable processes all enable firms to grow strategically rather than grapple with manual procedures.