Digitize Healthcare AP Processes

By Ken Congdon, editor in chief, Health IT Outcomes

The ERP (enterprise resource planning) system is a fundamental business tool for most organizations. Hospitals are no exception. However, many of these ERP systems have difficulty incorporating and accommodating document processes. Take, for example, hospital AP procedures. In many facilities, AP routing and approval is highly decentralized. In other words, invoices are sent directly to a specific hospital or clinic in a healthcare system where they are approved by key staff before being manually routed to the AP department for data entry into the ERP system. This approach can be prone to significant time lags and potential errors — just think about how long an invoice can sit on an executive's desk waiting for approval, or the invoices that can potentially be lost in the routing process. This time and error can result in exorbitant costs for your healthcare facility. In fact, it can cost a hospital between $10 and $25 to process each invoice it receives. Much of this cost is wrapped up in the amount of administrative labor necessary to manually process invoices.

With so much focus being placed on reducing healthcare costs today, streamlining your hospital's AP processes may be an area where you can realize significant savings relatively quickly. The key is to digitize as much of the AP documentation as you can at the front-end of the process. For example, leveraging a "digital mailroom" solution or service will allow you to centrally scan invoices as they enter the facility. Next, intelligent capture software can be deployed to extract key data off of an invoice and automatically upload that information into the ERP system. Electronic workflow technologies (complete with customizable alarm functionality) can also be deployed to electronically route scanned documents throughout your facility to obtain appropriate approvals. Finally, these documents can be stored in a digital repository (and in many cases linked directly to the ERP record) to ensure quick and reliable invoice retrieval for future reference or audits. In essence, the key is creating a paperless AP process.

Greg Bartels, president and CEO of IPS, a document imaging and conversion service provider, has implemented systems similar to those described above for several hospitals and healthcare systems, including Continuum Health Partners. The results he cites from these technology solutions are quite compelling.

"Through integration of digital mailroom, intelligent capture, electronic workflow, and digital repository technologies, we've been able to cut the cost of processing AP documents from $25 per invoice to less than $5 per invoice," he says. "No matter how effectively a manual AP process may be structured, you can't move this type of information around in an analog fashion and approach the results generated when the information is digitized."

"While cost savings is surely one key driver to implement a digital AP system in your hospital, another is control. Remember that paper invoice sitting on a clinic executive's desk? Well, think about hundreds of similar invoices sitting on the desks of several key executives at different locations throughout your healthcare system. These invoices could take a week or two to even reach the ERP system for data entry — that's potentially hundreds of thousands, or even millions of dollars, in liability that you have no visibility into. With a digital AP process, these invoices are accounted for in the ERP system almost immediately. You have complete visibility into all hospital invoices (paid and unpaid) to more accurately and effectively dictate your financial planning.

With all of the federally-mandated IT initiatives currently affecting your healthcare facility (e.g. EHR adoption, ICD-10 compliance, HIPAA 5010 compliance, etc.), AP digitization may not be a top priority in terms of technology projects. However, if your core objective is to cut healthcare costs, and your AP processes are largely manual, then this technology initiative could provide a substantial and speedy ROI.

Have a comment or feedback for Ken on this article? He can be reached directly at ken.congdon@jamesonpublishing.com.