The healthcare industry in the United States is rapidly transforming by adopting advanced technologies to improve patient care and navigate increasing complexities. To keep pace, the industry’s finance and accounting teams must innovate as well. Many financial processes in this sector are still being manually completed, and it’s putting financial stability for these companies at risk. These outdated systems are impacting the country’s healthcare administrative efficiency and it’s being reflected in national rankings. The latest Commonwealth Fund report ranks the U.S. healthcare administrative efficiency ninth out of 10 high-income nations, only ahead of Switzerland. By modernizing and transforming financial processes in the healthcare sector, the industry can be well-equipped to improve operational efficiency and business outcomes.
A driver of administrative costs and inefficiencies
Outdated financial processes are fueling administrative costs in the healthcare sector. In 2023 alone, U.S. hospitals spent $57.4 billion on administration, which is a 23 percent increase from 2018. Fast forward to 2024, a report from the American Hospital Association found that administrative costs account for more than 40% of total hospital expenses.
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A major contributor to surging administrative costs is the inefficiencies of manual and fragmented financial processes. Financial processes are complex in the payments and claims landscape and doing these complicated processes manually is draining valuable resources and time from strategic initiatives that can help to alleviate these costs. Reconciliation and monthly closing processes can take up to a week to complete with outdated systems. Not only do bank accounts and credit card transactions need to be matched, but patient refunds must also be reconciled, all while navigating regulatory compliance requirements. Another layer of complexity that drives administrative inefficiencies further is the world of insurance and claims. Standardizing revenue cycle workflows is increasingly challenging when each payer and state program have unique rules, authorization forms, and timelines.
All of these financial processes require extra staffing hours as they are labor intensive when completed manually, further impacting administrative costs. Additionally, these tasks are prone to errors when employees are working in outdated excel sheets across siloed IT systems, which can be expensive to fix and often leads to compliance issues.
Hindered growth opportunities, increased risk
Outdated financial systems have an impact that goes beyond administrative inefficiencies and costs, they also hinder growth for healthcare companies. In fact, a 2024 PYMNTS Intelligence report found that 84% of healthcare organizations report financial losses due to outdated accounts receivable (AR) processes. This is because financial leaders can’t make real-time decisions that can aid in financial growth opportunities when they’re faced with limited data on financial performance. Instead of analyzing the data that is being incorporated in reconciliation and month-end close processes to identify what factors are driving up costs and how to reallocate resources to help improve profits, finance teams are forced to just focus on completing those lengthy processes, leaving no time or bandwidth for strategic efforts. This makes companies vulnerable to falling behind in competition compared to those that are embracing innovation to create more efficient workflows and operations.
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Limited visibility also brings significant compliance risks and potential costly fines and audits. Without a clear view into financial activities, teams struggle to collect accurate, real-time up-to-date information for audits, meaning that it becomes easy to misreport. Excel sheets can get accidentally overwritten, formulas can be misapplied, and inaccurate data can be entered. These errors will require costly reworks but will also contribute to reputational scrutiny. Once that happens, government funding can be harder to secure.
Empowering CFO leadership
These challenges underscore the need for healthcare companies to shift to automated financial processes. The operational inefficiencies that are caused by doing these tasks manually tie up critical resources that make it hard for healthcare CFOs to focus on strategic initiatives. As the industry is facing economic pressures, digitizing these efforts can free up the time that was spent on tedious, redundant tasks to allow financial leaders to implement cost saving efforts as well as strategies to increase profits and meet business growth goals.
Enabling real-time visibility into financial performance allows healthcare CFOs to be agile and flexible as inevitable market changes happen. This allows finance teams to change course during slow growth periods to achieve better results. Healthcare companies who have decided to embrace digital transformation within their finance teams have already seen impactful results. They’re reducing the time spent on labor intensive tasks, streamlining what were once resource-draining operations, and improving the accuracy of their financial data. These benefits have started to shape the future of healthcare finance reporting. It has changed the way leaders work and has allowed CFOs to start stepping into a more strategic role that is focused on higher-value decisions that will ultimately drive better financial performance.
Critical steps to financial automation
To drive stronger financial performance and allow healthcare CFOs to step into a growth-oriented leadership role, finance leaders should follow these strategies when automating financial reporting processes:
- By utilizing unified platforms, financial leaders can replace the traditional fragmented systems that have caused hiccups with reporting, making a better use of accounting resources.
- To ensure that financial data is accurate and stays consistent across disparate systems, it’s important for finance teams to implement a cohesive platform that can be seamlessly integrated with multiple enterprise resource planning (ERP) systems.
- To save time every month on tedious transaction matching, finance teams should automate transaction matching over all data sources. Doing so will also improve the accuracy of complicated high-transaction volume processes, such as credit card payments to settlement statements and the bank.
- To shorten close cycles and reduce the risk of errors, healthcare companies should automate account reconciliations, journal entries, task management, intercompany transactions, and variance analysis. By automating these end-to-end financial close processes, financial data remains accurate and ready for compliance and audit documentation.
- To help streamline digitizing financial efforts, it’s important to utilize user-friendly software that is easy to learn. This can minimize the time spent training employees on the new systems and allows for a quick ramp up, receiving faster value from the tools.
From fragmented systems to strategic advantage
If healthcare companies implement these tools and systems, they can emerge as leaders in improving administrative efficiency in the U.S. Fragmented finance systems have long caused operational challenges. By addressing this, CFOs can optimize and streamline many finance processes to improve compliance readiness and create time for business-driven decisions that support business objectives. This is the first step towards controlling administrative costs and achieving scalable growth. By automating error prone processes and implementing unified platforms that can seamlessly integrate with ERPs, financial data becomes more accessible, making data-driven decisions in reach, empowering CFOs to help drive stronger outcomes.
It’s time for healthcare companies to address their operational inefficiencies in finance. As the industry moves forward with innovative practices, finance processes need to catch up or risk exposing themselves to depleting resources and missed opportunities for growth.
Photo: sorbetto, Getty Images
Tammy Coley is a visionary accounting leader with a deep understanding of how accounting processes intersect with modern technology. As Chief Transformation Officer, she brings that vision and experience to Blackline’s customers as they transform their Finance & Accounting operations through the use of the company’s cloud software tools.
Formerly Executive Director, Enterprise Accounting and Internal Controls Governance at leading broadband communications company and long-time BlackLine customer Cox Communications, Tammy brings deep industry and product experience to BlackLine. Implementing a Continuous Accounting model, Tammy transformed the monthly accounting cycle at Cox generating more timely financial statements with greater consistency and accuracy, while reducing costs. Prior to Cox, Tammy began her career in public accounting with Ernst & Young. She also spent 12 years in progressive positions including controller at Sloan Financial Group.
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