PYMNTS recently met with two of the players in the health sector.
On the purchase side, Huntington Healthwhich is affiliated with the Cedars-Sinai Health System in California, shared how faster and more efficient delivery of vital medical supplies is occurring despite limited supplies and other recently exposed system weaknesses.
From a financial point of view, American Express shared his perspective on the history, status quo and future of digitization and automation of payments in the healthcare sector, which accounts for nearly 20% of gross domestic product (GDP).
Read more: B2B Payments in Healthcare Tracker®
The buy side
Like many other health systems, Huntington Health faces payment issues when purchasing medical supplies, seeking faster and more efficient payment processes instead. Embracing technology and trusted financial partnerships can ease friction.
Huntington buys about $100 million worth of supplies and equipment a year – even bandages. The pandemic has tested purchases with a mad rush for specialized types of equipment, such as N95 masks and ventilators, which are not normally stocked in bulk or available in large quantities from medical supply suppliers. trusted or even government stocks.
The pandemic presented a unique day-to-day scenario where the hospital needed to be prepared to write a check or quickly transfer money outside of its normal purchasing systems, which required manual billing, shipping, and Accounts Payable (AP) .
Slowly, this is changing as hospitals are beginning to see the benefits of using enterprise resource planning (ERP) solutions to streamline different processes and work towards achieving overall organizational efficiency. Still, it takes time to implement new technologies in large healthcare organizations, and Huntington is about three years away from full adoption.
The use of electronic payments is also growing. The number of ACH healthcare payments in the second quarter of 2022 was 113.7 million, an increase of 5.3% compared to the 108 million ACH healthcare payments in the second quarter of 2021, according at Nasha.
Yet while providers prefer ACH payments and direct deposits, their customers are making up to 85% of their payments by check or other paper-based methods, as shown in the B2B Payments in Healthcare Tracker, a collaboration between PYMNTS and American Express.
The healthcare industry is also facing staffing shortages in many different disciplines. Huntington is working to adopt artificial intelligence and robotics technology that can help reduce the need for human effort.
The Financial Sector Perspective
American Express believes that automation can improve medical supplies procurement and supplier relationships. The shape of things to come implies a future in which automation will continue as procurement ensures supply chain efficiency.
Healthcare is particularly sensitive to pandemic issues, and many back-office employees are still inclined to work from home. Digital access to physical assets, such as ledgers, invoices and checks, widely adopted during shutdowns, continues to enable this trend, helping to address labor shortages while reducing workforces by maximizing efficiency and effectiveness.
Remote back office work also frees up facility space for clinical and wellness revenue generating uses.
See also: Health accounts for 20% of GDP which desperately needs payment efficiency
Automated billing creates a backbone of supply support to deliver critical medical supplies on time. Fully automated AP and Accounts Receivable (AR) processes with electronic invoicing can eliminate friction by correcting discrepancies.
Hospitals have embraced AP automation solutions, which conversely have vendors looking for AR solutions and payment portals to maximize receivable collection rates and treasury applications while using solutions supply chain finance.
The challenges of travel
The journey to the promised land necessarily requires a trek through the desert. Supply is challenged by a myriad of factors, especially when visibility into hospital inventory is poor.
Internally, data management can be difficult when working on decentralized legacy systems. Teams that can still take very manual steps to place orders will cause delivery delays, further blurring visibility into inventory levels, orders, and delivery schedules.
Externally, ongoing changes in regulatory requirements are impacting on-demand medical supplies that need to be stocked. Additional tension occurs when demand spikes, bidding processes lack transparency, and supply chain procurement logistics come to a halt.
Concentration remains a problem. While nothing focuses the mind quite as wonderfully as the prospect of a pandemic, hospitals and healthcare systems are still focused on other priorities, including clinics, compliance, revenue cycle management, and consolidation. after the merger and acquisition.
A common goal
Huntington looks forward to the time when direct payments to overseas suppliers can be made by machines that can instantly account for supply chain delays. By using pre-authorized payment methods such as virtual cards, machines can ensure a steady flow of supplies and pay for them in local currency.
Meanwhile, American Express envisions the convergence of buyers and suppliers under the umbrella of automation. FinTechs and financial institutions will be instrumental in providing the healthcare industry with the payment digitization and automation solutions it needs to succeed in this matter of life and death.
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