Automation Opportunities in Healthcare Receivables and Payables

According to the well-regarded CAQH Index, one-fifth of spending on high-volume healthcare administrative transactions could be cut through fully electronic processing. The current savings estimate totals $16.4 billion.¹ Two significant categories offering considerable opportunity to reduce spending through automation are receivables and payables.

This article delves into the subject and evaluates trends sparking urgency for change. It also highlights solutions that offer rapid and substantial benefits, as well as critical success factors that all organizations should consider on the automation journey.

Automation: Room for Growth

Many financial processes in healthcare continue to be executed manually, on paper, and using multiple, non-integrated information systems. Despite progress, adoption of fully digital transactions varies widely, standing at 88% for remittance advices, 73% for claims payments, 31% for prior authorizations, and 29% for attachments.² Automation in revenue cycle management (RCM) can be accelerated. A recent survey saw 34% of organizations saying they have fully automated between 10% and 25% of their RCM operations, while 28% have automated 25% to 50%. Over half of the executives polled expressed disappointment with their current automation technology.³

An important observation is that many health systems, hospitals and physician groups include in their usage calculations business software tools such as spreadsheets that represent limited forms of automation at best.

Industry Forces Driving Need for Automation

Three powerful forces are substantiating the need for all providers to pursue the benefits that accrue from automation. (Figure 1)

• A major emphasis on the patient financial experience. Manual financial processes frequently trigger frustrations among patients, a situation that runs counter to rising “consumerism” and demands for greater convenience. Studies suggest that patients regard their payment encounters as worsening.⁴ Improving the patient financial experience is a priority for healthcare providers, and the need for greater implementation of automation is a top obstacle to overcome. 
• Shift to value-based care (VBC). Migration to value-based reimbursement models, such as managed care and shared savings, shifts risk to providers and places downward pressure on margins. VBC coverage is estimated to grow from 43 million lives in 2022 to 90 million by 2027.⁵ The ongoing recovery from the pandemic’s financial disruptions is driving further emphasis on profitability, while insurance company use of prior authorization and denials is constraining both margins and cash flow. Operating more efficiently with a sharp focus on improving processes and workflows becomes imperative.
• Growing competition. Recent years have witnessed the emergence of a host of non-traditional healthcare providers. Many are well-capitalized companies with major brand recognition, extensive retail reach, and considerable technological capability to deliver consumer-friendly services. Health systems, hospitals and practices must attain higher levels of efficiency and convenience at all stages of the patient journey to compete effectively with these new entrants.

Further Automation Impetus

Beyond the long-run industry influences, several current strategic and operational factors make the return on automation investment even more compelling. Among the most important:

• Fostering growth through telehealth. Steadily increasing use of telehealth is anticipated for many types of encounters, particularly if supportive insurance reimbursement policies remain in place. Telehealth management carries financial workflows that need to be digital, integrated and convenient. 
• Remote workforce support. Most revenue cycle departments have adopted a hybrid or fully remote workforce. Many providers plan to maintain these models, making automated processes a long-run requirement for efficiency, flexibility and alleviation of staff stress.
• Increasing penalty for lack of automation. CAQH reports have been charting a widening gap over the years between the cost for electronic transactions and the cost for partially electronic or manual transactions. The most recent average total transaction cost was calculated at $7.19 for manual versus $3.45 for fully electronic.⁶ As digital transactions attain increasing efficiency, delaying automation will only get more costly and difficult.
• Regulatory push. New industry mandates for information system interoperability and data-sharing promise to remove barriers to automated workflows erected by siloed data.

Automation Solutions

Fortunately, abundant automation opportunities exist. Three high-volume financial processes offer a fast track to success. 

RECEIVABLES MANAGEMENT

Remittance processing technology is available that supports paperless, exception-based workflows to automate insurance and patient receivables. The ideal system is cloud-based and focuses on electronic processes such as payment posting, unbundling aggregated remittances with posting to the proper system, and automated reconciliation. This technology reduces workload, decreases costs and improves accuracy, yielding ongoing automation benefits. The attractiveness of these returns is evident in the fact that accounts receivable is a leading focus of the one-third of healthcare systems planning automation of at least two RCM or finance functions in 2024.⁷

PATIENT PAYMENTS

A convenient, digitally enabled patient payment process will span the entire patient journey including pre-service, point-of-care and post-service. Successful organizations incorporate patient financing options which leverage credit line issuances based on pre-service estimated charges, electronic application and enrollment, and automatic credit approval. Patients also expect the process to offer electronic payments and simplified digital alternatives for receiving refunds. By using automation to streamline the payment process, providers can give patients immediate peace of mind regarding the financial cost of medical services. The upshot is substantial patient satisfaction gains and solid cost savings.

PAYABLES

Centralized invoice automation can significantly enhance management of an organization’s high volume of supplier payments regardless of payment mode (credit card, EFT, check). Both scheduled and one-time payments can be automated, as can the reconciliation process. It is critical that invoice automation seamlessly integrates with different information systems, accommodates existing and future banking relationships, and minimizes operational disruption to the workforce. Additional benefits can be derived by making supplier payments with a virtual credit card that includes revenue-share.

It should be noted that rapidly emerging technologies in artificial intelligence, data analytics, mobility and e-payments promise further downstream enhancements in these and other critical areas, with the potential to unleash substantial benefits for healthcare providers.

Automation Critical Success Factors

There are four factors that should be considered when optimizing receivables or payables process automation.

A STRONG FINANCIAL PARTNER

A well-capitalized financial institution with healthcare experience brings several advantages to the automation effort:

• Size and stability that is valuable in a sector populated by many startups.
• An integrated array of solutions to meet evolving requirements.
• Full service to help consolidate multiple vendors for tighter coordination of efforts.
• Commitment to robust security standards.

EFFECTIVE SUPPORT STAFF

The implementation and support staff can make the difference between automation success and failure. They should help drive adoption and change throughout the organization. They should also address any questions or potential issues that may arise post-implementation.

ONGOING SURVEILLANCE

Sustainable gains from automation are the objective. Achieving long-term benefits requires consistent monitoring to ensure maximum usage and adherence to exception-based workflows. Helpful modifications can be proactively recommended based on learning from this surveillance.  

STANDARDIZATION COMBINED WITH FLEXIBILITY

Automation should adhere to industry standards while retaining flexibility to handle an organization’s specific needs, priorities and changes over time. That approach simplifies implementation and future upgrades, avoiding pitfalls that frequently plague fully custom solutions. Before adopting any type of automation, providers should first conduct or request a workflow analysis to ensure an automation solution will achieve the desired goals with minimal disruption to operations or staff.

Conclusion

The opportunity to unlock benefits through financial process automation is substantial, achievable and essential. The receivables and payables solutions highlighted in this article represent proven ways to take immediate action and begin realizing these benefits swiftly. These strategies, and the success factors that guide them, merit consideration by all healthcare providers.

Resources

1. CAQH, 2023 CAQH Index, January 30, 2024.
2. Ibid.
3. J. Ray, “Rev Cycle Leaders Double Down on Their Dissatisfaction with Automation and Payers,” HealthLeaders, November 9, 2023.
4. Experian Health, The State of Patient Access: The Digital Front Door, 2023.

5. McKinsey & Company, “What to Expect in U.S. Healthcare in 2024 and Beyond,” January 5, 2024.

6. CAQH, 2023 CAQH Index, January 30, 2024.

7. Healthcare Financial Management Association, “New Report Projects Robust Investment in Healthcare Revenue Cycle and Finance Solutions, Despite Economic Headwinds,” August 16, 2023.