Hospitals Do Have Options for Profitability

Hospital Administrators are always seeking ways to increase their number of days of cash on hand (DCOH).

“One of the biggest factors in how hospitals are run in the US comes down to how quickly they pay their bills” explains healthcare finance expert Nancy Fragus, President of TRI Healthcare, Inc., in Bakersfield CA. “The vast majority of hospitals in the United States could be saving a great deal of money if only they were inclined to pay their vendors on time. We believe this is one of the most significant factors as to why healthcare costs are skyrocketing currently and why rates for hospital finance contracts and agreements are on the rise.”

Through a program currently called Vendor Insta-Pay offered thru Security Capital, LLC, hospitals, surgery centers and medical organizations and larger medical practices can have their vendors paid in full, immediately by Security Capital. The best part is, it doesn’t cost the hospital or medical organization one extra cent. “The program actually pays for itself and in some cases can become a profit center” explains Fragus. “The vast majority of hospital and med center vendors offer fairly significant discounts that are rarely taken advantage of because of immediate cash concerns. With the instant payment program, the vendor is paid within one day by Security Capital. The prompt pay discounts realized, covers the cost of the overall program. The medical organization then reimburses Security Capital with extended terms, likely an additional 60 days.

Amazingly the program requires no additional costs to the healthcare organization, does not require any additional overhead, and can be implemented within days, explains Fragus. “We work with the hospital to define who the vendors are that will be offered the program, offer them the program and then new payment terms are established,” she says.

Many of the hospitals that the program currently works with across the country had approached their banks to offer develop similar product. While the banks were willing to offer a somewhat similar program, there was a substantial cost involved as well as a significant decrease in profitability because the bank treated the program as a ‘lending line.’ “With the Security Capital program, there is no cost to the hospital because the program is unsecured,” explains Fragus. “The program is a Win-Win for all involved!”

MDNG had a chance to speak with Fragus directly. Below are her responses:

5 Questions with Nancy Fragus, Healthcare Finance Specialist for Tri Healthcare, Inc.

1. What factors contribute to hospitals’ inability to pay, or want to pay, vendors on time?

Reimbursement issues and daily cash on hand, building a stronger Balance Sheet and P&L. Keeping their cash on hand longer due to extended terms. Cost of contracts and financing due to a stronger D&B rating.

2. How easy is vendor instant-pay to use? Any training involved?

Very easy. No additional staffing or overhead. Training, not really too much, just some re-invoicing.

3. What if the vendor refuses to use the program? (Any statistics on how many vendors accept vs. decline use of the program?)It's not a problem if a vendor does not opt in but most will. They love the concept of prompt payment. They are becoming an excellent sales force to us...they are telling other hospitals about the program because their cash-flow increases so much.

4. Who is your biggest competitor on the market?

We do not have any competitors at this point.

5. Please provide some examples that prompted the development of this product (eg, hospitals with slow reimbursement).

1. Understanding of the factoring market.

2. Understanding reimbursement and Daily Cash on Hand.

3. Increasing cash flow to the hospitals and medical organizations

4. Building of an additional profit center where warranted for larger hospital or medical organizations.