Virtual Cards Bring Relief to B2B Healthcare Payments

As the focus on improving commercial payment flows in healthcare intensifies, virtual cards are increasingly being tasked with taking up the slack while being pitted against the sector’s predominant payment method: paper checks.

While there are numerous reasons for making this switch, Stephen Masko, vice president of business development at Boost Payment Solutions, told PYMNTS that the transition can’t happen fast enough to relieve pressure on the accounts receivable (AR) teams that are swimming in paper.

“Healthcare AR departments are overwhelmed by the deluge of check payments. They simply can’t keep up with the volume,” Masko said, noting that many healthcare systems are still recovering from the pandemic. “They’re limited by severe cost restraints, and they just don’t have the required amount of staff to handle the volume.”

This ongoing reliance on paper-based health payments, he said, leads to missed or late claim payments at a time when healthcare providers are struggling with working capital issues, causing longer wait times for payments that are compounded by other inflationary effects.

“Now we have healthcare provider AR departments spending their valuable time making collection calls to drive sorely needed revenue,” he said.

Even inflation, which is currently hovering near 9%, is a consideration, Masko said, noting that every 30 days a provider has to wait to get paid is costing them money in lost buying power. Plus, late or missed claim payments are also affecting the supply chain, which in turn hurts patient care when critical supplies cannot be procured.

“I want to address the elephant in the room, which is the negative reputation of virtual cards in the healthcare market,” Masko said. “We have some industry groups pushing providers to stop processing virtual cards altogether,” he added, calling it a “mistake based on misperceptions,” albeit one that healthcare CFOs are waking up to, especially as they face cashflow concerns needing triage now.

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The Cost of Not Acting

As much as replacing paper in healthcare B2B payments is something that virtual cards are ideally suited to do, many organizations have outdated ideas of what that means.

Setting paper aside for a moment, the use of credit cards and the associated cost of processing those payments has led to misperceptions around virtual cards as a healthcare payment solution.

Saying clients have replaced “bullpens full of people” processing credit card payments with automation, Masko said, “What’s the dollar efficiency cost of that?”

He added: “Another big driver of the negative reputation is the perceived high cost of acceptance. The average effective cost of card processing in the healthcare industry is about 2.52%. Many providers are simply not educated on the process. They don’t fully understand what they’re paying to process credit cards or how to optimize their pricing.”

Boost offers a free cost-savings analysis to healthcare providers to show how virtual cards and tools like its Boost Intercept straight-through processing (STP) solution can help providers “fully automate an end-to-end process of accepting virtual cards” to alleviate these issues.

“In the past with virtual cards, healthcare providers and their staffs were burdened with unpacking, storing and processing sensitive card-related data tied to their payer customers, but the latest technology addresses most of these concerns,” Masko said.

See also: Digital B2B Payment Solutions Provide Flexibility for Buyers and Sellers

Securing B2B Healthcare Payments

Paper checks and credit card fraud are also serious impediments to healthcare operations, and this is another area where organizations are finding virtual cards to be an effective solution.

Masko said that with the volume of check and credit card payments being processed, “there exists a risk for a data breach, because the AR staffs are exposed to critical credit card data. Believe it or not, I’ve seen some providers receiving hundreds of virtual card payments via fax. This can result in stacks of paper all containing credit card data lying around on people’s desks.”

Saying the average financial impact of data-and-card-compromise fines on healthcare companies can be as high as $10 million, and reputational costs on top of that where business relationships can be lost, solutions like Boost Intercept using STP offer a valuable alternative.

“Providers and their staff will never see the credit card numbers,” he said. “That eliminates the PCI scope, and it’s helping to make credit card breaches a thing of the past. Additionally, our solution is designed to protect any sensitive PHI data or personal health information that may need to accompany the payments for claims reconciliation.”

By automating virtual card acceptance, providers shield themselves from data breaches, radically reduce check and credit card payments, and reduce their DSO on receivables.

B2B virtual card use is on the rise in healthcare for all these reasons, Masko said, as it gets teams away from manual data entry to focus on more important aspects of healthcare operations.

“As more healthcare payers turn to a virtual card solution, the demand for the providers to accept is only going to increase,” he said. “I would recommend they strongly review their pricing, implement an automation solution like straight-through processing with enhanced reporting, focus on improving working capital and eliminating security concerns.”