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How Healthcare Suppliers Can Head Off a Cash Crunch with AR Automation

Key takeaways:
  • Financial pressures on healthcare providers and suppliers are at an all-time high.
  • Inflation, interest rates, supply chain disruptions and more are cutting into cash flow, impacting business in a myriad of ways.
  • Remitra™ Cash Flow Optimizer (CFO) technology can unlock significant working capital to help address these unprecedented challenges and drive business forward.

Today’s market realities – including record-high inflation, soaring interest rates and tightening margins – are creating financial stress on both sides of the healthcare supply chain.

Some providers are further burdened with Medicare reimbursement cuts and penalties associated with the recoupment of COVID-19 Accelerated and Advance Payments (CAAP) Program funding while suppliers are under pressure to increase prices as the costs of raw materials, manufacturing and transportation continue to rise. The risks to healthy cash flow are greater than ever before and even the most financially sound organizations can find themselves cash starved amid these challenging times.

In a recent webinar, a team of Premier experts spoke with healthcare suppliers about the current business landscape and shared how accounts receivable (AR) automation – and a new game-changing technology – can help unlock working capital to not only head off a cash crunch, but also put organizations back on the path to financial solvency and growth.

Introducing Remitra™ Cash Flow Optimizer (CFO)

Remitra™ CFO is the first solution in healthcare to manage electronic invoicing and guarantee on-time invoice payment for suppliers. For providers, Remitra™ CFO can make payments within suppliers’ contract terms and extend payables timelines by up to 30 days. Its launch represents Premier’s next step in vertically integrating and evolving our capabilities to build an end-to-end, technology-enabled supply chain that delivers efficiencies and savings across healthcare.

Craig McKasson, Chief Financial Officer and Chief Administrative Officer of Premier, discussed the launch of Remitra™ CFO coming at such a critical time and why its capabilities are so important to healthcare supply chain.

“Right now, any headline you read is about the challenges facing the entire macro-economic environment. Each of you is feeling the impacts of rising inflation, supply chain issues and labor challenges on your margins. And I’m pretty sure that as supplier organizations servicing healthcare, there are very few of you that wouldn’t benefit from guaranteed cash flow that’s paid on time, every time,” said McKasson.

While the Timing of Payments Matters, Remitra™ Data Shows It’s Drawn Out

Businesses rely on on-time payments to maintain their cash flow management, yet for healthcare suppliers participating in a Remitra™ supplier survey, it surfaced as their number one pain point. In fact, nearly 70 percent of surveyed suppliers said they aren’t getting paid on time.

When providers were asked about their payables timelines in a separate Remitra™ provider survey, results revealed that, regardless of bed size, most respondents have days payables outstanding (DPO) that exceed their contract terms.

Through the automation capabilities of Remitra™ CFO, this timing problem can be resolved. Providers gain extra bandwidth to maximize working capital rather than paying suppliers by the contract date, and suppliers gain fast-term, aggregated payments that contribute to healthier cash flow for meeting current financial obligations and future growth opportunities.

On-time payments can mean the difference between having needed funds on hand to keep operations running smoothly and looking outside to borrow capital that’s getting more expensive by the day due to rising interest rates.

Chaun Powell, Group Vice President of Remitra™, said: “When you look at the cost of capital for the past 20 years, our health systems as well as our suppliers have had access to inexpensive capital. And while inflationary pressures are changing some of that access to capital, the cost of capital is increasing. We’re launching Remitra™ CFO as a platform to create value for our partners in terms of guaranteed payments, optimized payment cycles and aggregated payments.”

Remitra™ CFO in Action

Powell continued the discussion by offering up examples of how Remitra™ CFO might work from both a provider’s perspective and a supplier’s perspective and the advantages to each party. His examples are summarized below.

Provider Example: A provider works with 10,000 suppliers, has 30-day payment terms on average and $2.4 billion in annual spend through supply chain. The provider may want to open a new oncology treatment center, stand up a population health initiative or make an acquisition, and needs a way to raise capital to do so. Using Remitra™ CFO, the provider can extend payment terms from 30 to 60 days, unlocking a full 30 days of working capital equating to roughly $200 million for expansion plans.

Like providers, suppliers may be looking to raise capital, and Remitra™ CFO can help unlock dollars for their business strategies as well.

Supplier Example: A supplier has $1.2 billion in sales working with 10,000 hospitals on 30-day payment terms on average and 45-day days sales outstanding (DSO) on average. The supplier may want to build a new onshore manufacturing facility, improve production or accelerate a new product’s entry into the marketplace. Using Remitra™ CFO, the supplier can benefit from guaranteed payments on 15-day terms, unlocking $100 million in working capital.

Addressing Today’s Challenges and Tomorrow’s Opportunities

To close the webinar, Andy Brailo, Chief Customer Officer of Premier, re-emphasized the financial challenges our nation’s healthcare system is up against.

“If we look back at the last quarter, with a few rare exceptions, it was arguably the worst quarter for most health systems in over two decades,” Brailo said. “This is due to a number of things including inflation, margin compression and labor costs. At Premier, we’re laser-focused on developing capabilities for what they can do to alleviate today’s market pressures on providers and suppliers, but also for what they’re going to do in the future to improve margin, drive revenue enhancements and create labor efficiencies for the long term. We’ve got an incredibly robust and valuable platform with Remitra™ and the new Remitra™ CFO technology.”

With Remitra™ CFO, Premier is automating and streamlining the healthcare supply chain payments process, helping providers and suppliers work better together and potentially uncover hundreds of millions of dollars each can use to drive business forward. It’s a bold, new approach in healthcare finance; one that comes at a time when our healthcare system needs it most.

For more on this topic:
  • View the complete webinar, Introducing Remitra™ Cash Flow Optimizer (CFO).
  • Learn more about Remitra™, built for healthcare suppliers to free cash flow while easing labor burdens of accounts receivable.
  • Evaluate your potential accounts receivable savings with our Remitra™ return on investment (ROI) calculator for suppliers.

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