The healthcare industry is undergoing enormous changes with unprecedented levels of international healthcare mergers and acquisitions (M&A), which presents unique challenges for medical financial management. One of the tasks that’s impacted by the evolving nature of the healthcare industry is financial consolidation. Despite hesitancy to adopt new technologies, modern accounting software can simplify the process of consolidating your financial statements and empower your healthcare organization to overcome common limitations and barriers.
Provider consolidations are a global trend
There is an explosive trend internationally towards consolidated and integrated healthcare organizations. As with any other industry, all multi-companies are required to consolidate their finances. Whether it’s a multi-practice clinic or a chain of hospitals, consolidated financials are essential for a period end to close your accounting records and for stakeholders to understand service lines, allocate capital, and fund the organization.
Digital transformation is changing accounting methods
In a 2019 annual report by the Financial Executives Research Foundation and Robert Half, 48% of all U.S. companies and 40% of all Canadian companies still use manual accounting practices. While these percentages are significant, in 2018, the numbers were even more astounding at well over half for all Canadian and U.S. companies.
The trend towards implementing digital transformation is not random—it gets results. The average time it takes annually to complete financial reports went down between 2018 to 2019, from 31 to 24 working days in the U.S. and 42 to 20 working days in Canada. Automation reduces the potential for human errors and frees up staff to focus on value creation initiatives.
Unfortunately, healthcare tends to lag other industries when it comes to adopting technological solutions. Most healthcare organizations are not positioned to reap the benefits of accounting software, like enterprise resource planning (ERP) systems, and continue to deal with inefficiencies due to not adjusting their processes along with their systems. These inefficiencies stack up and contribute to health spending consuming large shares of public expenditure.
An evolving industry presents challenges to financial consolidation
The international push for provider consolidations and integrations means that healthcare financial management increasingly requires financial consolidation. The evolving landscape of the healthcare industry coupled with the sheer scale and complexity of handling a healthcare organization’s financial accounts presents unique limitations and barriers that manual accounting practices can’t overcome.
Below are 4 common conditions that cause financial consolidation to be a challenge for multi-entity healthcare providers:
1.) Emphasis on business growth demands agility
2.) Rapid geographic expansion strains infrastructure
3.) Intercompany activity complicates financial statements
4.) Financial reporting timelines are compressed
Read more: 6 essential financial consolidation software features for your company
Emphasis on business growth demands agility
Healthcare organizations are focusing on growth to keep up with the explosive number of M&A opportunities in the industry. To accommodate these integrations, your finance department must have the capacity to rapidly establish records that align with the rest of the company. Low quality or inaccurate data caused by manual entry errors or bottlenecks caused by using multiple systems that do not fully integrate are unfortunate problems that can be solved with the implementation of a system that automates the grunt work for you. However, to truly optimize your operations for agility, investing in software that offers real time consolidated reporting will revolutionize finance’s role from a mere preparer to the analyzer and reviewer—freeing up leaders to decisively carry out quick pivots based on better business intelligence.
Rapid geographic expansion strains infrastructure
The prevalence of integrations and consolidations means that your organization needs to be able to seamlessly add virtual and physical entities, like new services or multiple care facilities. These additional entities often exist in a different region, enabling your company to expand into new territories; although, traditional accounting and finance systems struggle to adapt to these changes. Modern accounting software leverages a centralized database, which enables you to seamlessly add new business entities and access financial information across geographic jurisdictions. You will be able to see patients and vendors across all entities housed within your organization. They can also be programmed to handle multiple currencies and remain compliant as you scale.
Intercompany activity complicates financial statements
Increasing the number of facilities or entities also increases intercompany activity, which can complicate financial statements. Consolidating your finances eliminates all intercompany activities and balances to report transactions with external third parties as if the entire group of companies was operating as a single entity. The centralized database offered by accounting software does away with siloed data so that corporate accounting staff have all the data from every geography, business line, or specialty at their fingertips. Some software solutions also offer a centralized environment for transaction processing allowing you to complete intercompany transactions in an instant rather than over the course of a few weeks. This can be a huge time saver that also saves a complete record of historical transactions.
Financial reporting timelines are compressed
All healthcare organizations are under pressure to tighten their reporting deadlines with improved transparency for stakeholders, as well as industry and government regulators. There is a need to adhere to a well-documented and strictly controlled consolidation process that enhances financial reporting integrity. Accounting software allows you to meet your reporting goals by automating time-consuming tasks and centralizing your data for better decision-making. You can also meet your deadlines with the confidence that your data remains secure if you opt into scalable security features that include SSL encryption, two-factor authentication, advanced firewalls and automated notifications for new sign-ins.
Further reading for healthcare administrators:
- The complete guide to financial management for healthcare
- The rise of administrative challenges healthcare faces
- Why security is key when it comes to your healthcare ERP
- Creating a culture of compliance in your healthcare organization