Even in the best of times, processing invoices and payments is difficult in the healthcare industry due to the complex nature of operations. Providers, such as medical practices, outpatient service centers, dental support groups (DSO’s), and others, often deliver services at multiple locations, requiring AP teams to search for invoices across the organization. Once they are retrieved, AP often has to process lengthy, detailed bills containing pages of medical supplies. Tracking down approvals can also be challenging because many approvers are frontline medical practitioners who focus primarily on patient care.
As post pandemic-related issues linger, these issues become even more acute because of AP’s strategic role in paying vendors on time and ensuring access to critical supplies and resources. In our recent State of Healthcare AP report, we surveyed 150 respondents from healthcare organizations regarding the specific challenges, trends, and opportunities impacting healthcare finance organizations. We saw six big themes emerge:
Manual processes continue to bog down finance operations
Many healthcare organizations still rely on manual invoice and payment processing, a time-consuming, costly, and error-prone process that often results in delays, as well as late payments and penalties. Consider the amount of time it takes AP to manually enter invoice data and physically track down invoice approvals, which as mentioned, is often even more time-intensive for healthcare facilities. Ardent Partners’ ePayables Technology Adoption in 2022research found that it costs organizations 40-90% more to manually process invoices vs. using automation. This added expense is a heavy burden on healthcare facilities already operating under razor-thin margins.
Greater reliance on checks
Similarly, manual check processing is costly and time-consuming, adding unnecessary problems and delays. The AP team has to prepare checks and obtain authorizations and signatures – as well as stuff, seal and mail them. Then it takes days or even a week for vendors to receive the checks by mail.
Our researchfound that healthcare teams rely on checks to a much greater degree than those in other industries. In fact, 42% of healthcare AP teams issue more than half of their payments by check, compared to only 31% of their counterparts. A mere 3% of healthcare teams have moved away from checks completely. That said, healthcare teams are making progress. 41% of healthcare organizations made fewer check payments in 2022 than they did in 2021.
Remote/hybrid work is here to stay
Today’s hybrid and remote work trends exacerbate an already difficult manual AP environment. Consider the extra time and delays caused by requiring staff to pick up invoices and check paper stock in the office, and then physically route them around for approvals and check signatures. Then consider how much added time and stress it takes to do these manual tasks if the AP team, approvers and authorizers are all working remotely.
69% of the healthcare finance leaders we surveyed expect their AP staff to work in a fully remote or hybrid capacity in 2023, suggesting the trend is here to stay.
Greater invoice volume
On average, healthcare AP teams process a greater volume of invoices and payments than their peers. For example, our research found the number of healthcare AP teams processing more than 2,000 payments per month (13%) is more than double that of other industries (6%). This forces overworked teams to track down more invoices and associated documents, route them for review and payment authorization, as well as respond to any related vendor inquiries.
Major staffing issues
The staffing supply/demand crisis highlighted by the Great Resignation has lessened to some degree, but many companies are still finding it difficult to find qualified finance professionals at a time when invoice volumes and workload continue to increase. 56% of healthcare facilities that are planning to hire AP staff in 2023 expect challenges and delays. Exasperating the problem is that direct service roles take priority over positions like AP. And even if AP teams can hire more staff, it isn’t enough to overcome the inherent inefficiencies, costs and errors caused by manual AP processing.
Supply chain vulnerability puts more focus on vendor relationships
Supply chain instability has caused additional problems for healthcare AP teams. Our research found that invoice processing challenges and delays due to supply chain disruption are 10 percentage points higher in healthcare (53%) than other industries (43%). This volatility has interrupted the flow of essential equipment, medicine and other supplies needed by healthcare organizations to provide quality, uninterrupted care to their patients. So, no surprise that 75% of healthcare AP teams say that the importance of vendor relations has grown. This means healthcare organizations will need to do more to meet their vendors’ desire for faster, more accurate payments.
AP automation provides an effective way for healthcare finance teams to overcome these challenges. Digitizing the AP process enables work from anywhere, so AP teams can operate effectively in remote and hybrid work environments. In addition, by relieving the burden of tedious manual tasks, removing inefficiencies, and digitizing the approvals and authorization workflow, AP automation increases staff productivity and eliminates many internal delays. In addition, automating the payment process further increases staff time savings, facilitating faster payments, reducing operational cost savings, increasing fraud protection and ensuring stronger vendor relationships.
Elizabeth (Elle) Kowal
Elizabeth (Elle) Kowal is Chief Operating Officer at MineralTree, a company focused on creating frictionless accounts payable (AP) and payment processes. She has spent over 18 years in banking, finance, payments and business technology providing solutions for organizations of all sizes in multiple industries, including healthcare.