Aligning Payment Choice with Cost Reduction | GHX

Matt Houston

Executive Director, Product Management, Hospital and Financial Services Products
Tuesday, April 18, 2017

Aligning Payment Choice with Cost Reduction

Healthcare suppliers want to offer choices for payment processing and providers need options, but what is the real cost on both sides?

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.

If a supplier doesn't have a common payment platform in place, all of these different payment choices require entirely different back end data sources and processes. For example, when the supplier’s accounts receivable (AR) person receives a credit card payment, he/she often has to visit the credit card company’s website, manually pull down the information and load it into the supplier’s system. This is a totally different process than when the supplier receives a check payment, where the AR person must go to a bank file and input it into their system. With credit card payments, a supplier also incurs transactions fees and runs the risk that its customers are “double dipping” (see our blog post on cost reduction).  

So a supplier can say to a provider customer, “I offer six ways that you can pay me. Isn’t that great!” But the reality is that the supplier has six ways to process payments, which can increase labor and transactional costs as well as fragment the alignment among desired customer contract terms, accounting and finance objectives, and AR processes. Choice in itself isn’t bad, but without a comprehensive strategy that aligns business, commercial and technical considerations in the approach to AR, the notion that more choice equals less friction in timely receipt and processing of payments is misleading and often false. 

If you are a provider, how do you react to external changes that impact your business processes?

If your suppliers stop accepting a mode of payment, how do you minimize its impact on your organization, including disruptions to your workflow? Let’s say you used to pay your supplier via credit card but now that company only accepts checks. Whereas before your accounts payable (AP) person would simply click to make a credit card payment, now he/she has to perform a check-run process that could include all the manual steps to cut a check, pick it up off the printer, make sure it’s correct and stuff, stamp and mail it. If you don't have a standardized way to deal with supplier changes, then every change could add labor and costs. Furthermore, if it takes longer to generate payments, you can miss out on discounts and rebates, and even run the risk of late fees. 

It is in all parties’ best interests to have a consistent and streamlined payment process in place. Given these market changes, suppliers and providers should ask themselves:

  • Do I deploy systems and processes that help everyone (me and my business partners) stay predictable and consistent in our operations?
  • Am I able to respond to change in a way that is standardized and predictable and delivers positive economic outcomes regardless of what happens within my business environment?

Learn more about GHX invoicing and payment automation solutions for providers and suppliers.

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