Day Sales Outstanding (DSO). It's on the minds of a lot of healthcare suppliers as of late. That's because the timeliness of your accounts receivables directly correlates to cash flow, which reflects the health of your business and ability to invest in more inventory, parts and people. Essentially, the number of days it takes to receive payments from customers can impact your ability to grow and invest in your business.
Adding complexity to the matter is that oftentimes healthcare providers would like to hang onto their cash as long as possible in order to improve their own cash position. Not to mention, the healthcare industry is navigating significant changes that can be felt in a number of ways. Many suppliers are feeling the pressure in cost containment, payment automation, credit card fees, provider demands and expectations, and the need for more efficient processes.
Perception vs. Reality. Is it negatively impacting your healthcare organization? According to Paystream Advisors, electronic payments could help your organization achieve greater financial health, as well as its broader mission of providing value-based, cost-effective, high quality patient care.
PayStream Advisors reports that nearly three-quarters of invoices handled between healthcare suppliers and healthcare organizations are received in paper format or email. When it comes to payments management, research shows that checks are most often used to make payments. Manual, paper-based payment processes are time-consuming and labor-intensive, resulting in delays, missed early payment discounts and poor provider-supplier relationships. Additionally, high volumes of paper checks can lead to significant processing costs, payment processing errors, and a risk of fraudulent or improperly authorized payments.
In my two previous blog posts, I covered lessons learned on our journey to GHX ePay implementation, and steps we took to gain executive support for the transition. In this post, I’ll cover another challenge that we successfully overcame – securing customer buy-in for the switch from manual credit card payments to automated electronic payments.
In the first blog post of this series, I briefly described CryoLife’s work to implement the GHX ePay solution, the results we have achieved - including a 94 percent reduction in payment processing fees – and the top three lessons learned on our journey. In this next post, I delve deeper into one of our top success factors – securing executive support for the transition.
Like most manufacturers, CryoLife has been challenged to increase operational efficiency and cut costs without negatively impacting product and service quality. Upon examining our processes, we identified accounts receivable (AR) as a significant area for savings.
We manually processed a wide range of payment forms from customers: credit cards, automated clearing house (ACH) payments, wire payments and checks. Payment processing was time consuming, labor intensive and costly. We spent $1.4M annually in credit card processing fees, budgeting $100k per month – that caught the attention of the C-suite.
Epayable solutions are widely accepted in many industries as the standard for business-to-business transactions. The healthcare industry, however, has been slow to adopt this payment method. The delay in adopting electronic payments has resulted in inefficiencies that make it more challenging for healthcare to deliver against its mission to strip waste from the system.
During the past year, GHX has worked with providers and suppliers to drive greater efficiency across the payments cycle. GHX ePay has gained traction and acceptance in the market due to the tireless efforts of so many employees and partners.
While there is much discussion about the industry being primed to go paperless, many of us know that while bringing greater levels of automation to the payment cycle promises great rewards, it does not come without complexity.
As we look ahead 2018, three objectives have become clear in regard to payments.
As we head into the new year, it’s an appropriate time to say, “out with the old and in with the new.” That’s certainly true of the healthcare industry. It’s high time for us to evaluate “old ways” of thinking for supply chain payment and leverage technology that establishes a common, standards-based payment platform that reduces waste and provides maximum efficiencies for both healthcare providers and suppliers.
Although the majority of payment processes in healthcare remain paper intensive, there’s a growing commitment across the industry to bring increased levels of automation to healthcare payables processes.
That’s because automation can effectively address two of the primary ‘pain points’ faced by suppliers and providers: spiraling payment acceptance costs and lack of visibility across all trading partners.
Efficient payment processes benefit both providers and suppliers – leveling the playing field and helping to create more productive relationships among all trading partners. However, electronic payments, the most efficient payment method, remains an elusive piece of the payment puzzle.
Is a “how we’ve always done it” mindset interfering with your progress toward better invoice process efficiency?
The number of challenges coming against invoice and payment processes are many but sometimes the pain is self-inflicted – like if you are holding onto old ways of doing things just because they have been in place for a long time.
Suppliers want to improve receivables performance, while providers need to manage payment flow and access all available discounts and rebates. Is there a way for both sides to win?
In life, and in business, enduring relationships require a commitment to transparency and trust.
When it comes to buyers and sellers, the bond can be delicate, especially in matters of cash and working capital performance—or payment. In fact, there is no bigger priority for healthcare suppliers over the next year than improving receivables performance, according to a recent survey of 100 financial leaders at major healthcare suppliers by Institutional Investor Custom Research Lab. It is also the hardest area to influence.
“The check is in the mail.”
When it’s time to be paid, few refrains produce more unease than this one. For healthcare suppliers working to improve receivables performance, ambiguity in payment processing is problematic. As competition intensifies and interest rates rise, the pressure on suppliers to create more predictability around payment processes is climbing sharply, according to a recent study by Institutional Investor Custom Research Lab.
When it comes to payment options, the more choices the better right? Healthcare suppliers want to get paid fast, and healthcare providers want to take advantage of early pay discounts and rebates, and avoid late fees. So why not have a variety of payment methods in place: check, wire, credit card, Automated Clearing House (ACH), etc.?
But choice can add costs.
In healthcare we typically operate in silos, with the right hand blind to what the left hand is doing. Take for instance finance in both provider and supplier organizations. While accounting and accounts payable/collections might communicate regularly with treasury and engage in all-team meetings, their structures, business processes and policies are often disjointed. Without an integrated approach throughout its financial functions, an organization cannot fully assess its activities and identify opportunities for cost savings.
Whether you are a healthcare provider or supplier, your supply chain and finance teams put a great deal of time and effort into the negotiation, enactment, management and governance of contracts, not only with your customers and vendors but across your own organizations.
But how effective are you at both getting what you are promised and also delivering what you promised? How balanced are the puts and takes — in other words, is there enough governance in the process and is control in the right place(s) to facilitate the most balanced and mutually beneficial actions in support of agreed-upon terms?
As a healthcare supply chain professional, when was the last time you strategically collaborated with your colleagues in accounts receivable (AR) or accounts payable (AP)? Think back to your last customer or vendor contract planning session - did you carefully consider fulfillment obligations around terms, such as payments – and how this would impact the financial health of your organization?
You don’t wake up one morning and just say, “I’m going to run a marathon today”. No, you have a plan to get ready. The winners of GHX Best 50 all started somewhere and developed a plan for getting where they wanted to be – on the stage receiving their award!
Most healthcare industry challenges are not one sided. The challenges are felt by both providers and suppliers, paper invoicing being a good example. There are the tangible costs in postage, ink, time to receive mail, to open mail, remove exceptions and route for approval. Then there is the invoice mystery - did the customer receive the invoice and is it ready for payment?
Since GHX was founded 16 years ago, we have always looked for ways to leverage provider and supplier connectivity and collaboration to take waste out of the healthcare supply chain. I’m pleased/happy to announce GHX’s acquisition of Hap-X, a healthcare focused payment network that shares that sensibility. Like GHX, Hap-X serves both providers and suppliers. They use the Hap-X platform to take costs out of the payment process and provide better visibility around payment reconciliation, while still allowing customers to decide with their trading partners what is the best payment mode based on specific business transactions. I like to think of it as “Automation with choice.” That’s also a concept that GHX has strived to provide since our founding in 2000.