Checking Up On Health Care’s Digital ePayments Journey

Health care industry stakeholders are turning up the volume on calls to adopt digital B2B payments practices in order to spend more efficiently and cut costs.

The latest soapbox to do so was Becker’s Hospital Review‘s 7th Annual Meeting held last month. The event, sponsored by American Express, focused on the ways health care organizations can manage the exit of paper, manual-based accounts payable processes and progress into digital B2B payments.

“As government and commercial payers reduce reimbursement levels, many hospitals are seeing their margins shrink,” explained Becker’s Hospital Review in a recap of the event. “Hospitals and health systems must find new ways to streamline operations to remain financially viable.”

According to Stephen Anderson, manager of business development for health care and education payment solutions with American Express, most hospital accounts payable operations remain manual. Not only are they time-consuming, they can be costly, he explained.

B2B payments made via check can lead to loss or theft of funds, Anderson added, not to mention the fees associated with this form of payment. Cumbersome and clunky payments processes can jeopardize a hospital’s relationship with suppliers.

But the data suggests the health care industry is making its gradual march towards digitization.

Capital One researchers found last year that upgrading accounts payable systems are a top priority for health care executives, with 58 percent of professionals surveyed saying they had already made improvements to their B2B payments processes.

“As payments technology continues to advance in the health care sector, we fully expect organizations to implement improvements as needed, whether it be to automate the accounts payable process entirely, leverage commercial card usage or improve data analytics,” said Capital One Bank Head of Treasury Management and Enterprise Payments Colleen Taylor at the time the report was released.

Reports pointed to buyer-initiated payment (BIP) programs as an increasingly popular way hospitals are looking to digitize their AP processes and support electronic bank transfers. Bryan Olson, manager of business development for health care and education payment solutions with American Express, explained that BIP programs can be used alongside hospitals’ existing financial services providers and provide value-added features, like spend analytics, to aid in health care players’ cost-cutting efforts.

Hospitals also need to begin examining their payment terms with suppliers, according to reports covering the event.

One CFO of a nonprofit, two-hospital system told eventgoers that his company uses an eCommerce program to upgrade AP processes, an alternative to BIP systems that can also digitize payments to suppliers and improve relationships with these partners.

“Talk about a culture shift,” the CFO said at the event. “Our eCommerce program moved the needle dramatically in terms of our speed-to-pay.”

Adopting a platform to facilitate electronic B2B transactions must also involve the process of negotiating an agreement between the hospital and its suppliers, reports explained. Both parties need to be onboarded onto a BIP or eCommerce program, meaning both parties need to discuss payment methodologies.

“We have found [payment methodology] really is part of vendors’ contracting schemes,” the CFO said, adding that this discussion can make or break a partnership.

The CFO’s sentiments echo those of Brian Lunde, client strategy director for Insite Software, which inked a deal last year to modernize the eCommerce operations of health care supplier Medical Specialties Distributors.

“About 10 percent to 15 percent of the revenues in the sector come from the online channel. But a lot of companies in the space, when they do the analysis of moving to online B2B processes, they see a return on investment at a range of 25 percent to 30 percent,” he said in an interview with PYMNTS. He added that these platforms must support unique and personalized features, like variable discounts across specific customers or products.

Payments players have similarly targeted the health care industry as of late. In 2014, NACHA revealed that it initiated collaborations with health care companies to help the industry adopt ACH payments.

Today, improving B2B payments in health care is becoming a governmental issue, too. Former U.S. Secretary of Health and Human Services Tommy G. Thomson spoke of its importance when he joined the HealthcarePays board, a company that built the nation’s first health care payment utility infrastructure.

“There is little doubt that the future financial wellbeing of both the federal and state governments depends, in large part, on controlling health care payment inefficiencies,” he said.

As Becker’s Hospital Review reported, it seems that the health care industry is adamant about embracing more efficient B2B payments solutions.