Healthcare spending in the United States amounts to approximately 20% of gross domestic product (GDP), a far higher percentage than in other Organization for Economic Cooperation and Development (OECD) nations. There are several explanations for this gap, but inefficiency and ineffectiveness in purchasing and payments are among the most significant.
This is an issue not only for the sector but for the entire economy. Healthcare expenditures account for more than 7% of payroll costs, money that could otherwise be used for employee or shareholder discretionary income. Furthermore, public sector healthcare expenses account for 24% of government spending, imposing a corresponding business and consumer tax burden. In addition, every employee is a patient.
While suppliers prefer ACH and direct deposit payments, their consumers still make up to 85 percent of their payments via check or other paper-based means, according to the B2B Payments in Healthcare Tracker, a collaboration between PYMNTS and American Express.
The Tracker discovered that this is due in part to “healthcare being different.” A significant portion of healthcare purchases is made through group purchasing groups (GPOs). These buying intermediaries, which are mostly absent in other industries, add an additional layer of complication to the digitalization equation.
Healthcare is a “must-have,” not a “nice-to-have,” which, combined with the moral hazard of third-party payment (60 percent of which comes from the public sector), means there has been less pressure on the industry to modernize, digitize, and automate back-office functions such as purchasing and payments.
Because of the ubiquity of third-party payment, a significant portion of transactions between providers and patients are financially disintermediated by B2B transactions with payers such as Medicare, Medicaid, and a plethora of commercial insurers like Blue Cross Blue Shield, Humana, and Aetna. Each of these enterprises has its own set of rules and regulations.
