Cash flow is a fickle beast for any organization, but in the healthcare sector, bottlenecks and friction points are aplenty thanks to issues like late patient payments, insurance payouts and negotiations, and refunds. Accounts receivable departments are often hospitals’ first lines of defense for maximizing days cash on hand, but when cash flow trickles to a drip, the ramifications are felt all the way through to accounts payable.
Inworks EVP and COO Officer Jim Walker recently told PYMNTS that hospitals’ accounts payable departments play a critical role in managing the cash flow bottlenecks that start in accounts receivable. The most efficient way to expand days cash on hand, he said, is to slow money going out — and to do it strategically.
“Cash is always important, but for hospitals, it’s extra important,” he said in an interview.
Unfortunately, accounts payable automation in the healthcare sector is far from ubiquitous. A recent report by the Healthcare Financial Management Association, citing research by Levvel Research, found 36 percent of invoices received by hospitals are paper (while 35 percent are emailed), and 27 percent of survey respondents aren’t using any kind of AP automation solution.
That’s an opportunity for AP technology providers in the healthcare industry. Inworks first launched in this space, offering industry firms a way to slow down healthcare firms’ cash outflows by connecting hospitals to capital to finance unpaid invoices, or by facilitating dynamic discounting programs — both of which can bolster cash flow. In recent years, though, accounts payable and B2B payments technology has progressed to introduce new ways to strengthen cash positions.
One of the most promising is the introduction of virtual cards in hospitals’ accounts payable departments, which connect healthcare businesses to opportunities like rebates while accelerating payments to vendors. Although a decade ago, virtual card programs were not able to address the needs of modern-day AP departments, the industry is advancing its v-card offering to the healthcare industry.
FinTech collaboration is an integral part of that advancement. Inworks recently announced a collaboration with US Bank, which will integrate its Virtual Pay Visa Card capabilities within the Inworks platform, allowing for payment submission, tracking and management.
And by collaborating with Visa, Inworks is able to offer more favorable terms for suppliers that, coupled with speed of payment, promote broader supplier acceptance, said Walker.
But, he added, virtual cards are only one piece of the puzzle. Hospitals need an array of payment options to settle vendor invoices, whether that be through virtual and physical cards or direct deposit ACH. They also need to be able to split payments — settle a portion of an invoice via, say, a virtual card, and pay the rest via ACH, Walker noted.
Accounts payable is also only a single piece of the broader hospital payments and cash management landscape as industry players demand access to ways to refund patients with real-time solutions like Zelle, as well as ways to pay physicians and employees electronically and more efficiently.
Increasingly, data is emerging as an integral part of hospitals’ cash flow management strategies, too. Walker pointed to the opportunity to integrate accounts payable into various networks that can ease vendor v-card acceptance friction.
The industry faces some unique challenges in compliance and security, however.
Walker said Inworks is exploring the opportunity of API integrations between accounts payable and health information systems like MEDITECH, which enable hospitals and other healthcare providers to manage their data and remain compliant with HIPPA and other data security regulations.
“What that helps us do is leverage our PCI compliance and required HIPPA compliance to protect accounts payable data in a similar way that patient data is protected,” he said.
As hospitals progress in their accounts payable digitization efforts, AP data security will be instrumental, considering the popularity of hospitals as a target for cybercriminals. Walker noted that paper checks remain among the most common sources of fraud for the industry (Levvel Research found checks to be the most popular B2B payment type among healthcare providers), so migrating toward electronic payments can address much of that risk right off the bat.
The industry’s cybersecurity spend is slated to reach $65 billion by the end of the decade, according to a 2017 report by Cybersecurity Ventures, which found that ransomware attacks on hospitals are expected to quadruple during that time space. High-profile data incidents, like the recent hack at New York’s American Medical Collection Agency, has the industry on high alert, and while protecting patient data and privacy are top priorities, healthcare providers are keen to protect financial and payment data, too.
The ability to expand access to accounts payable data (and secure it) presents a new opportunity for healthcare providers to further automate accounts payable and ease pain points throughout hospitals’ cash flows.
“There are three key things,” said Walker. “That’s cash, revenue and rebates, and automation in a secure way. You have to have technology that can take payments and automate all of them.”