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AP Automation: The Inflation Buster, Labor Extender Health Systems Need

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Key takeaways:
  • To address ongoing financial pressures, forward-thinking health system leaders are looking to new areas of their organizations for solutions, revenue and cost savings – including accounts payable (AP).
  • By reimagining their AP department and automating outdated supply chain purchasing and payment processes, health system leaders can jumpstart their organizations’ rebound from the pandemic and embark on a path to improved solvency and profitability.
  • Premier’s automated AP solution is enterprise resource planning (ERP) and group purchasing organization (GPO) agnostic and can work with a health system’s existing platform.

During the COVID-19 pandemic, U.S. health systems took a significant financial hit as elective procedures came to a screeching halt. As they attempt to recover, health systems are now faced with labor challenges, rising inflation in the cost of goods and services, and persistent supply chain disruptions. As a result, it’s no surprise healthcare finance executives and supply chain leaders are burning the midnight oil to find ways to improve margins and rebuild their organizations’ financial stability.

One important catalyst not to be overlooked in regaining financial footing is efficiency in accounts payable (AP). That’s right – healthcare supply chain AP – the final step of the procure-to-pay (P2P) process that includes requisition, ordering, receiving and paying for products and services. But the opportunity is not to address healthcare supply chain AP in the traditional sense; rather it’s healthcare supply chain AP reimagined.

Here’s what AP reimagined looks like and how adopting it in their own supply chain organizations can help health systems relieve financial pressures as inflation and workforce issues continue to grow and margins continue to shrink.

Bringing AP Processes into the Modern Age with Technology

Reimagining healthcare supply chain AP starts with embracing automation. Not just the idea of automation, but actually embracing and implementing it. Newer technologies like robotic process automation (RPA), application program interface (API) integrations, optical character recognition (OCR), and electronic invoicing and payments are being used in a variety of industries (e.g., retail1 and manufacturing2) to successfully drive AP efficiencies and savings.

The problem? Healthcare, as an industry, talks a lot about technology but often uses only a fraction of what’s available today. The fact is the healthcare industry lags behind other industries in widely adopting game-changing AP technologies. For example, PINC AI™ data as of February 2022 shows that healthcare providers, on average, are still utilizing paper checks for between 68 to 82 percent of their payments to suppliers. That’s in contrast to 73 percent of organizations transitioning their payments from checks to electronic payments (80 percent for publicly owned firms in other industries), according to one study3.

Ditching paper in favor of automating back-end processes like purchasing supplies, processing invoices and paying suppliers helps health systems reduce labor costs and enable administrative efficiencies that ultimately lead to better care and improved patient outcomes.

  • AP automation helps to eliminate human error that often occurs when manually processing piles of paper-based invoices and checks.
  • These errors can lead to price match exceptions between suppliers’ invoices and health systems’ purchase orders (POs), causing delays in payment to suppliers and delivery of supplies to health systems until the exceptions can be resolved.
  • Resolution requires considerable time, resources and money – all of which detract from the core mission of healthcare: to improve patient care.

Error management. Cost savings. Supplier and patient satisfaction. Three benefits of AP automation that positively impact a health system’s bottom line. Let’s dive into two more: workforce optimization and expense reduction.

Leveraging AP Automation to Mitigate Workforce Challenges and Reduce Expenses

According to the Premier 2022 C-suite survey of over 100 hospitals and health systems, nearly eight in 10 healthcare executives indicated “labor” (i.e., “workforce shortage/resources”) as their number one concern. AP automation can help alleviate the staffing shortfall healthcare executives are facing. The technology acts as a labor extender in a health system’s supply chain, helping to increase staff productivity so that AP teams can do more with less and organizations can hold off on the expensive process of hiring additional staff.

Time spent on manual, repetitive tasks is drastically cut when AP automation is utilized4, which frees up staff to focus on more value-add activities that contribute to the overall financial health of the organization. Resources can be reallocated to:

  • More strategically address match exceptions.
  • Build stronger supplier relationships.
  • Source new prompt-pay discounts and rebates.

For example, Remitra™ data garnered from a 2021 prospect opportunity analysis shows a health system that processes 60,000 invoices annually and pays its suppliers via virtual card could yield approximately $718,000 in cash back rebates on average over three years. Combined with the average annual hard cost savings of eliminating those paper invoices ($840,000, which doesn’t include the reduction in labor costs), this could lead to a total net gain of over $1.5 million.

Potential savings might help unlock hundreds of millions of dollars that could be used to acquire new practices (competitive or synergistic health systems), to expand profitable practices or to make investments in new geographies. These options truly beat the alternatives of fighting for nickels and dimes on every product purchased, and the automated systems can be implemented in less than eight weeks.

The Remitra™ Solutions Difference

With Remitra™, Premier’s AP automation solutions, we’re technology-enabling outdated processes and helping health systems reimagine AP. Both enterprise resource planning (ERP) and group purchasing organization (GPO) agnostic (i.e., it can work with a health system’s existing platform), the Remitra™ platform is the first of its kind built for providers and the suppliers they work with to help reduce overall costs, create greater efficiencies and positively impact financials on both sides of the supply chain.

Looking Ahead

As the healthcare industry continues to transition into post-pandemic reality, removing inefficiencies in the supply chain AP process will be paramount, and will separate those looking at this as a strategic opportunity versus another cost savings measure.

AP automation can seem daunting; however, it is possible with Remitra’s technology today. We are no longer waiting for the possibility of this. We, as an industry, must now implement it.

Between soft and hard cost savings, and greater patient and supplier satisfaction – all enabled by a technology-driven P2P process – AP automation is one of the few strategies health systems are utilizing to effectively create a competitive advantage and promote financial stability.

It’s time to shift healthcare AP to an area of strategic importance for the C-suite.

For more:

  • Discover the power of Remitra™ AP automation – the first data-driven, integrated system designed for healthcare that encompasses each step of the procure-to-pay (P2P) process – and see how it’s helping one health system transform their AP department into a competitive advantage.
  • Join us on Nov. 2, 2022 at 2 p.m. ET/11 a.m. PT for a webinar where you'll learn how Remitra™ Cash Flow Optimizer (CFO) can help unlock cash flow by extending payment timelines while reducing friction in the AP process.

Sources cited:

  1. 6 KPIs to Monitor in Your Retail AP Automation System. Comarch. (2021, November 16). https://www.comarch.com/trade-and-services/data-management/news/6-kpis-to-monitor-in-your-retail-ap-automation-system/.
  2. Five Ways AP Automation Saves Manufacturers Money. PairSoft. (2021, April 22). https://www.pairsoft.com/blog/how-manufacturing-companies-can-save-money-with-ap-automation/.
  3. AFP Survey Finds Major Shift to Electronic B2B Payments. Nacha. (2022, February 3). https://www.nacha.org/news/afp-survey-finds-major-shift-electronic-b2b-payments.
  4. PYMTS Intelligence: Projected 4X Surge in Digital Invoicing Demands Automation. PYMTS.com. (2022, May 17). https://www.pymnts.com/accounts-payable/2022/pymnts-intelligence-how-invoice-processing-automation-works-to-streamline-workflow/.

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