Thursday, September 30, 2010

Healthcare Payables: From Bad to Worse?

By Amer Khan ( of eGistics (

Effectively managing the payables process is a big job for most companies, but for healthcare organizations, it is a particularly tall order -- and it's about to get a lot more challenging.

The problem in managing healthcare payables stems from the byzantine network of buyer and seller relationships employed by most healthcare organizations, combined with the increasingly complex procurement processes and contracts that healthcare organizations use to purchase goods and services. Every day, the typical healthcare organization receives a mountain of invoices from many different suppliers, most under different contracts with potentially different payment arrangements.

When you mix in the unusually high number of suppliers that most healthcare organizations use -- a hospital might have thousands of suppliers compared to a few dozen for a big law firm -- you can see how the payables process can quickly become complicated. For instance, on a given day, a hospital might receive invoices for everything from Band-Aids to the pricey cardiology equipment it leases.

The healthcare industry's attempts to address the inefficiencies of the payables continuum have delivered mixed results. Several years ago, group purchasing organizations (GPOs) started sprouting up, allowing healthcare organizations to buy a range of goods and services from a single entity, rather than dealing with multiple vendors. While GPOs have enabled their customers to maximize discounts and reduce the number of vendors they do business with, there are still many cases where healthcare providers must source goods and services directly (such as buying from local suppliers), meaning they still must maintain a high number of supplier relationships.

Here's the scary part: the problem is likely to get worse. Every innovation in the healthcare industry -- whether it's new technologies, new devices or new drugs -- may create more suppliers, generating more invoices, contracts, payment arrangements, and, in some cases, acquisition channels. With our nation focusing like never before on innovations in healthcare, providers have no time to waste.

And while healthcare organizations are focusing tremendous amounts of time and resources on "big issues" such as meeting new requirements for electronic health records (EHRs) and ICD-10, driving down the costs associated with payables can deliver significant benefits as well, and in short order.

So, how can healthcare organizations accomplish this?

Since manual processes don't scale, the healthcare industry will need to rethink its approach to payables. The answer starts with eliminating paper at the earliest point possible in the process.

Whether it's converting paper invoices to electronic images, or convincing business partners to provide electronic invoices in the first place, eliminating paper simplifies and automates the payables process. It allows healthcare providers to apply automated rules for processing, and to initiate an electronic payment with detailed remittance information so the supplier can automatically post the receivables. With these types of solutions, providers can solve their current business challenges and lay a solid foundation to manage the increasingly complex payable environment that is sure to come.

What do you think?

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