Complex sectors like healthcare tend to be change averse, a tendency that has extended across the fragmented industry as a whole. Healthcare finance teams specifically, have gotten too comfortable relying on traditional operational systems. However, this overreliance leads to long-term issues with not only operational efficiency but financial stability.
This is the reality for many large U.S. hospitals. Specifically, one finance team from a large nonprofit medical center, had been using the same spreadsheet-driven process for manual reconciliation processes and transaction matching from six different sources for over 15 years. This finance team isn’t the only one relying on spreadsheets. Spreadsheets remain the dominant tool for most financial planning and analysis (FP&A) professionals with 96% using them for planning and 93% using them for reporting purposes daily, according to the Association of Financial Planning. As healthcare finance teams continue carrying out processes this way, it creates challenges including standardization, visibility, risks, and errors. And because healthcare finance and accounting is typically seen as a back-office function, it has not been a high priority to modernize through digitization and automation.
The Complexities of Healthcare Finances
The impact of these manual processes is magnified when you consider the current financial landscape in healthcare. From the moment a patient checks into a hospital to the time when payment is made for goods and services rendered, a significant volume of transactional detail is captured—often across disparate systems. Hospitals receive payments from numerous parties including different state providers and individuals. Not to mention the complex payment forms and the large volume of incoming payments. Since the volume is so large and related services are often delayed, payments are frequently recorded in a suspense account until they’re reclassified appropriately. It has become typical for healthcare providers to wait 47 days on average to receive B2B payments and 32% of them are waiting for over $100,000, highlighting the complexity and inefficiencies of current financial processes in healthcare.
Manually reconciling these transactions takes up a disproportionate amount of effort and time. Yet, a timely and accurate process is required for working capital, cash flows, and collections opportunities. Since it’s important to make sure these details are precise across spreadsheets, these tasks are being completed by highly trained finance and accounting professionals who could be spending their time on activities that require more judgment, analysis, and critical thinking that could help resolve any operational issues in a more strategic way.
Completing these tasks manually is not only exhausting for finance teams but it increases the potential for errors, which brings its own set of challenges that trickle down to financial performance, regulatory scrutiny, and potential for scalable growth.
The Cost of Spreadsheet Reliance
The challenges brought on by outdated processes have a big impact on risk management. Going back to the large nonprofit medical center mentioned earlier, it was common for unauthorized changes to be made on spreadsheets. This was an audit disaster waiting to happen and significantly increased the risk of misreporting, which can bring costly fines, reputational damage and reduced government funding.
Not only can these manual processes bring on additional costs, but it completely hinders any growth opportunities. Financial leaders are stuck analyzing aging reports and lack the visibility into up-to-date financial data that can help make informed business decisions for scalable growth opportunities. This limited view makes it hard to know which market opportunities are worth jumping on.
Moreover, a well-run revenue cycle, above all else, depends on the ability to collect complete and timely payments. But manual processes slow this down and increase the risk of operational challenges that can hurt the overall financial health of the institution. Diminished collectability and inefficiencies in settling payments can drive up days sales outstanding (DSO), slow vital cash flow, impact working capital and result in write-offs.
From Manual Mundane Tasks to High-Value Decisions
To relieve the pressure of delivering timely and accurate financials as healthcare CFOs start to step into a more strategic leadership role, digitizing and automating finance processes is the first step to modernize, strengthen and streamline financial controls.
Automating large volumes of manual work and centralizing financial data allows healthcare accounting teams to move beyond tedious tasks and focus on higher-value activities. It enables teams to analyze missing entries, any errors, or timing differences. It also helps to break down silos across the organization by providing timely, meaningful insights to the front office and management. By shifting focus to activities that require judgment and actively tracking key performance indicators (KPIs), such as net days in accounts receivable, cash collection as a percentage of net revenue, claim denial rate, and cost to collect, can help finance teams take on a more proactive and strategic role.
Through automation, finance and accounting teams can build on their success and achieve measurable outcomes. They can spend fewer hours on reconciliations, decrease manual journal entries, and reduce audit time. Done right, modern F&A tasks can empower overworked finance teams to be more productive in closing the books and deliver the financial transparency that healthcare organizations need today and into the future.
Strategies to Modernize Healthcare Finance and Accounting Systems
To modernize healthcare accounting systems to increase the productivity of your finance teams and reduce compliance risks, healthcare CFOs should look to implement the following strategies:
- Address Spreadsheet Challenges: Get rid of spreadsheet driven processes that drive fragmented systems and replace them with unified software that can deliver better utilization of accounting resources.
- Connect Disparate Systems: To increase the visibility of financial data and make sure that it maintains accuracy and consistency, CFOs should look to implement an automated system that can seamlessly integrate with numerous enterprise resource planning (ERP) systems.
- Tackle Manual Transaction Matching: To save time every month and reduce the risk of error prone processes that come with complicated high-transaction volume processes, such as credit card payments to settlement statements, healthcare CFOs need to automate transaction matching over all data sources.
- Compliance Ready Reporting: To ensure that financial reporting is ready for compliance and audit documentation, healthcare CFOs need to improve the accuracy of their financial data. This can be done by automating end-to-end financial close processes, such as account reconciliations, journal entries, task management, intercompany transactions, and variance analysis. Automating these processes will minimize risks of errors in the financial data.
- Unlock the Full Value of Technology: Ensure that your finance teams are taking full advantage of the benefits that these automated systems can offer by choosing a software vendor that makes the integration smooth and easy to master for employees. Spending less time on troubleshooting can ensure that the software delivers faster value.
Saving Time, Reducing Errors
Leading healthcare organizations have already started to implement these strategies and are seeing impactful results. Consider the benefits obtained by a large nonprofit medical center, staffed by more than 2,000 physicians and nearly 3,000 nurses. By implementing software that would automate transaction matching across all six of their data sources they saved two days on transaction matching every month, spending 87% less time on refund-related matching. What once took 16 hours to complete was cut down to two hours. They automated matching of over 1,500 credit card transactions, simplified reconciliations of specific bank accounts, eliminated unauthorized changes to spreadsheets, and ensured scalability of matching processes without increasing people hours—or errors. Modern accounting systems in healthcare finance are feasible strategies that can bring measurable returns.
The continued success of healthcare organizations depends on engaged, effective accounting and finance teams that can help businesses to meet their overall objectives. By embracing modern accounting technology solutions, healthcare finance teams can create resilient growth and remain competitive in the industry, without risking financial stability.
By Tammy Coley, Chief Transformation Officer at BlackLine