The B2B Payment Strategy To Stronger Hospital-Vendor Relationships

The paper check has been a B2B payments staple for organizations across verticals, but in the healthcare arena, the check has played an even more important role than in other arenas. That’s because not only has the check facilitated vendor payments, but it has also been key to enabling transactions between insurance and healthcare providers.

With the check so deeply ingrained in such vital workflows within their back offices, hospitals have had a particularly difficult time migrating toward electronic payment methods to facilitate digital transactions.

It’s not due to a lack of desire to modernize, however. Bill Clausen, executive vice president of Business Relations at Prelude Software, explained that the systems that have been in place for years within healthcare facilities are so complex and oriented toward the unique needs of the vertical, that they frequently lack the flexibility required to not just support electronic transactions, but streamline the payment process.

“There is some complicated infrastructure,” he told PYMNTS in an interview, discussing the challenges of digitizing payments within industry-specific portals. “There are systems in place that are important to specialized capabilities. They all have very special, very focused, robust capabilities for what they do best. But the payment piece, that’s different, and not often the priority in a highly specialized core system.”

For hospitals to embrace B2B payments digitization, they need technology partners that can support the flexibility and integration required to not only create efficiencies, but actually add value by strengthening the hospital-vendor relationship, he said.

The Value of Integration

According to Clausen, the healthcare industry is actually quite eager to embrace modernization in its back offices.

“Hospitals are yet another key industry that is desperate for capabilities that are beyond just paper check,” he said.

Historically, however, tight budgets and resource constraints have held them back from being able to make the leap. As Clausen explained, an investment in an electronic payments technology does not add much value to a hospital’s financial or accounts payable (AP) team. Simply adopting a third-party solution can sometimes merely add to a finance professional’s workflow, having to toggle from one platform to another, manually enter data between systems and reconcile across the back-office ecosystem.

Take, for instance, the opportunity of a hospital to adopt commercial or virtual card payments.

“That’s very appealing to a hospital that wants a better way to make payments, to reduce costs and possibly even generate a revenue opportunity,” Clausen noted. “But that desire to do that often comes at a trade-off. It means they may have to manually process, go into a separate system and extract data.”

Healthcare providers need FinTech and B2B payment solutions that can seamlessly imbed themselves within those existing, complex, industry-focused platforms like enterprise resource planning (ERP) systems. Otherwise, the efficiencies and value gained from digitizing payments can quickly be lost.

Tightening the Hospital-Vendor Relationship

Deriving value from a digital B2B payments strategy isn’t merely about boosting efficiencies in the back office, either. Particularly in the healthcare space, Clausen said a robust program can deepen the relationship between buyer (hospital) and suppliers — a relationship that the pandemic has proven to be paramount to the successful operation of a healthcare provider.

Digitizing transactions won’t boost the buyer-supplier relationship by itself, however. Just as it’s important for B2B payments technology to be flexible enough to fit within complex hospital systems, it must also be flexible enough to present choice to both ends of the transaction, allowing for hospitals and suppliers to mutually benefit from a variety of payment methods.

As a result, it’s also imperative for hospitals and other healthcare service providers to work with FinTech partners that can continually service the customer by understanding which vendors want to be paid in which method, and by supporting hospitals in having potential discussions with their supplier partners about how to migrate away from checks toward a more value-added solution.

“There are some vendors that have already declared in advance they want to be paid by virtual card,” Clausen said. “There are some that say they absolutely never want to be offered a virtual card. And it’s important to know the difference, so there’s no friction in that relationship.”

There are some suppliers that find themselves in the middle, however, and identifying those businesses willing to discuss payment methods are a key opportunity for hospitals. With virtual cards, for example, hospitals must be able to display the value to the vendor, either through faster or early payments, or by applying a portion of cash back rewards toward the interchange costs.

Unlocking true value in B2B payment transformation is an end-to-end process. That means supporting automation and digitization from when a transaction originates in an AP or ERP system, as well as supporting the needs of both buyer and supplier as that payment moves from start to finish.

“Vendors are, in some ways, the lifeblood of hospitals’ success,” he said. “If you have a good relationship with your vendors, paying them can mean a major difference in that relationship.”