The Hidden Costs of Manual AP in Healthcare: Why Outdated Processes Hurt Profitability and Patient Care
by The Ottimate Editorial Team
The healthcare industry is often regarded as a leader in innovation, and for good reason. From lifesaving technologies to cutting-edge treatments and data-driven approaches to patient care, healthcare organizations are continually pushing the envelope to improve outcomes and deliver exceptional patient care.
But behind the scenes, a much different story often plays out.
Many healthcare organizations, including hospitals, primary care centers, and assisted living facilities, still rely on outdated, manual processes to manage critical financial functions, such as accounts payable (AP). These antiquated systems may seem pretty harmless, with no real impact on patient care. But in reality, manual AP is quietly chipping away at your margins, wasting your resources, and negatively impacting your ability to provide timely, high-quality patient care.
In part one of this healthcare-focused blog series, we’ll explore the hidden costs of manual AP in healthcare and why modernizing these processes is critical to protecting profitability and maintaining excellence in patient care.
Labor-intensive workflows are draining your resources
Manual AP processes are notoriously time-consuming and labor-intensive. Staff are buried in tasks like routing invoices, chasing down approvals, and correcting errors, among other work.
These administrative duties might seem routine, but they come at a high cost.
It’s estimated that manually processing a single invoice can cost up to $40, with labor accounting for a bulk of that figure. Multiply that across hundreds of invoices, and it’s easy to see how these accounts payable efficiencies affect your organization’s profitability.
Additionally, manual workflows introduce AP bottlenecks that slow down the entire process. Invoices get stuck in inboxes, approvals are delayed, and paperwork goes missing. These accounts payable inefficiencies are frustrating, and they prevent your staff from focusing on high-value work that drives growth and improves patient care.
Human error is inevitable – and expensive
When AP is handled manually, human error isn’t merely possible—it’s inevitable. Perhaps someone made a simple typo in an invoice amount, or maybe they unintentionally duplicated an entry.
On their own, these healthcare finance challenges may seem minor. But the financial impact may be larger than you think across hundreds or even thousands of transactions.
Some studies estimate the error rates of manual AP to be more than 3%, and around a third of businesses experience duplicate payments. This can result in thousands of dollars in avoidable losses for a large health system.
Correcting these errors is expensive, too. Staff must spend time and effort tracking down vendors, sorting through paperwork, and correcting discrepancies, often after the transaction has been completed.
And that’s if the error is even caught.
These errors often go unnoticed until they’re flagged during an audit. By then, you may have been losing money for months, or even longer, without realizing it.
Outdated AP processes are straining vendor relationships
Strong relationships are essential in healthcare. Whether it’s pharmaceutical suppliers, medical device companies, or service providers, these relationships are key to delivering high-quality, timely patient care.
Good vendor relationships are built on trust and reliability. But manual AP in healthcare often jeopardizes the trust you’ve worked hard to earn.
Invoice processing delays, errors, and slow approval cycles can frustrate vendors and damage long-standing relationships. Over time, these issues can have significant implications, including less favorable terms, shorter payment timelines, and reduced flexibility.
If a vendor gets frustrated often enough, they may decide not to do business with your organization. This will leave you scrambling to find alternatives and risk disruptions to patient care.
Furthermore, some vendors offer discounts for early payment. However, outdated systems make it nearly impossible to capitalize on these cost-saving opportunities.
The bottom line? You’re spending more money than you need to and damaging your reputation.
Patients feel the impact of manual AP in healthcare
It’s easy to assume that accounts payable inefficiencies are just a back-office problem with little relevance to patient care. After all, AP specialists aren’t the ones performing medical procedures or assisting patients with their daily living activities.
But this assumption couldn’t be further from the truth.
The truth is, relying on manual AP in healthcare can have far-reaching consequences that directly impact the patient experience. When payments are delayed or mismanaged, supply chains are disrupted, and finance teams are burned out, your patients are the ones who suffer.
For example, a patient’s procedure may be postponed because equipment or supplies didn’t arrive on time. Patient-facing staff may be required to juggle administrative tasks, which diverts their attention away from patient care.
When manual AP in healthcare fails, it’s not just a back-office problem. It impacts the front line, too, and it’s your patients who pay the price. When a patient has a negative experience, you’re likely to lose their trust and loyalty.
It’s time to modernize your outdated AP processes
Healthcare organizations are often at the forefront of innovation. But for many of these organizations, manual AP processes are a blind spot.
At first glance, outdated AP processes may seem like a minor inconvenience. However, the truth is that it presents a significant healthcare finance challenge, with hidden costs that impact your bottom line and hinder your ability to deliver exceptional care.
Now is the time to modernize your outdated accounts payable (AP) processes. By upgrading your approach, you’ll reduce costs, improve efficiencies, and free up your teams to focus on what matters: delivering outstanding care that meets the needs of each patient.
Curious how automation can transform AP for the better? Stay tuned for part two of our healthcare-focused blog series. Ready to see Ottimate in action? Let’s set up a time for a demo with one of our experts.