How to streamline healthcare expense management

Whether you work for a large hospital or a small practice, you know healthcare systems face complex financial challenges that impact day-to-day operations and long-term outlook.

Healthcare providers, administrators, and finance leaders recognize that costs continue to rise for essential items, including equipment, staffing, research, and continuing education. But while the world of healthcare is unique, all businesses have one thing in common: If you don’t get a handle on your expenses, things can quickly get out of hand.

In this article, we provide practical strategies for healthcare expense management, discuss industry-specific challenges, and offer actionable tips for streamlining your process.

Challenges in healthcare spending

All businesses incur expenses regardless of industry. However, some unique cost drivers within healthcare fuel specific challenges:

• High equipment and technology costs
• Staffing and labor expenses, including overtime, contract labor, and CME budgets
• Regulatory compliance requirements, such as the Sunshine Act and HIPAA
• Rising costs of medical supplies and pharmaceuticals

All of these work together to create a complex financial landscape within healthcare. And when certain expenditures are a moving target, it makes budgeting and expense management more challenging.

Spend management and cost controls

Spend management is the comprehensive process of managing, monitoring, and optimizing expenses to enhance your business’s financial health. In healthcare, this includes strategic planning to ensure financial sustainability and operational efficiency while supporting patient outcomes and your overall level of care.

It’s crucial to have proactive strategies for managing cost control initiatives in these specific areas:

• Pharmacy oversight and medication management
• Staff training and continuing medical education (CME)
• Inventory and supply chain management

Clear business expense policies can help because they set clear guidelines around who can make purchases, what they can buy, and how you reimburse employees for expenses.

You also need real-time visibility into your spending. You can do this manually via spreadsheets, but you run the risk of human error or delays in identifying budget issues after it’s too late to take action.

For this reason, most healthcare practices can benefit from automating their reporting process to run weekly or even daily. This improves transparency into your spending, so when you spot a budget variance, you have time to cut back elsewhere or find funds to fill the gap.

Pharmacy and medical supplies

Among the most significant cost drivers in healthcare are pharmacy and medical supplies. As the population ages, there's a larger demand for prescription drugs for chronic conditions. But the cost of new drug development continues to rise, which, in turn, increases the cost of these medications.

In both the pharmaceutical and medical supply industries, complex supply chains can lead to delays or unexpected price increases for the tools healthcare professionals need to do their jobs. Shortages of drugs and supplies can lead to price fluctuations that are hard to predict. And ever-changing regulatory requirements can have unexpected impacts on your bottom line.

For example, at the beginning of the COVID-19 pandemic, the supply chain was blocked, leading to supply shortages that threatened patient care. But it doesn’t take a global crisis to set things off; several factors beyond your control could disrupt supply chain management.

The best way to manage these costs is to stay proactive. Look ahead when you can and build a buffer into your budget to account for potential changes. Automated expense management software can help you forecast, allowing you to optimize your budget. It will also provide real-time reporting, enabling you to understand how any changes impact your cash flow.

How to streamline healthcare expense management

At a high level, there are three key ways to make your expense management process more efficient:

• Centralize expense policies and approvals
• Leverage software for tracking and reporting
• Ensure compliance with healthcare regulations

Healthcare organizations are complex and often rely upon multiple departments to support quality care. Even at a small family practice, there are different expenses for administrative staff, nurses, and doctors. Regardless of the organization's size, no expense management program can be successful without cross-departmental collaboration and consistency.

8 tips for streamlining healthcare expenses

The good news is that you can take steps to manage your expenses a little easier, whether you run a medical office, hospital, clinic, rehabilitation center, urgent care facility, or provide outpatient or in-home services:

1. Create a clear, organization-wide expense policy: As a business owner or manager, it's your responsibility to establish policies for your practice and educate your employees about them. This could include an expense policy, reimbursement policy, corporate card policy, or travel expense policy. They should list clear guidelines on spending limits, who can make purchases, the approval process, and common expense examples.
2. Digitize and automate expense tracking: One way to make things more efficient is to automate your expense approval process—or at least certain parts. Some areas you might consider automating include expense categorization, receipt collection, mileage tracking, and reporting.
3. Set real-time spend limits and alerts: Using expense automation software, you can build your expense policy, including spend limits, directly into the platform. That means if someone tries to make a purchase that exceeds your limits, you receive real-time alerts to ensure you’re not going over budget.
4. Standardize vendor and supply purchasing: Establish uniform and consistent purchasing policies and requirements. This could mean consolidating vendors, creating new cross-departmental processes, and setting standard requirements for products across your business.
5. Monitor travel and continuing education expenses: Travel costs for conferences and training can add up. Set limits to avoid going over your budget. Also, look for virtual CMEs, which are often more affordable because they don’t require business travel.
6. Conduct regular audits for compliance: Laws and regulations change frequently. Establish a regular audit schedule for your policies to ensure compliance with new healthcare, tax, and other regulations. Depending on your corner of the healthcare industry, quarterly or yearly audits are likely appropriate.
7. Take advantage of real-time reporting: If you manually process expense reports on a quarterly or monthly basis, it's challenging to determine how closely you're tracking against budget projections. This creates the risk of finding an unexpected budget variance when it’s too late to take action.
8. Review and negotiate contracts regularly: Depending on the nature of your healthcare business, you may have contracts or subscriptions with multiple software vendors for services such as electronic health records, scheduling, or telemedicine.

A vendor audit can help you understand your usage rates for each software, how much you’re spending on each contract, and even help you uncover ways to save, like consolidating multiple contracts into one or negotiating during contract renewals.

How automation supports healthcare expense management

When you work in the healthcare industry, you already know the impact expenses can have on your business and how frustrating it can be to manually track expenses when your attention could be put to better use elsewhere.

According to an HFMA survey, 63% of healthcare organizations are already using automation in their revenue cycles. And this number is only expected to grow in the years to come, so if you’re not thinking about automation, you may find yourself struggling to catch up with those who are.

A fully manual process for medical expense tracking can open you up to a number of risks, including budget overruns and reporting errors. Failure to properly track medical expenses could also lead to tax or compliance issues, especially if you’re subject to Sunshine laws and other regulations requiring transparency and recordkeeping.

Automation helps mitigate those risks and save you time in the process. These are some of the benefits:

• Faster reimbursement and approval cycles: With an automated process, your expense reimbursements will be processed and paid out more quickly
• Improved compliance tracking and reporting: Automated expense management tools provide tracking and reporting at the click of your fingers, as you can easily understand your budget and spending in real time, alongside built-in flags for compliance
• Integration with healthcare systems: Healthcare-specific automation tools can integrate seamlessly with your EHR, procurement, accounting, HR, and other systems, providing ease of use throughout your entire workflow. Make sure you are working with a HIPAA-compliant platform to optimize your workflow fully.

Expense management involves tracking and reporting costs, as well as analyzing your spend data to better forecast future budgets. Healthcare expense management differs in scope and complexity due to its diverse revenue streams—patient payments, insurance, Medicare reimbursements, and government funding—and specific regulations, such as HIPAA.

In the healthcare industry, common expenses include:

• Medical equipment or supplies
• Staff costs
• Training and continuing education
• Conference travel costs, such as meals, airfare, and registration

The key components of an effective healthcare expense management process and system are:

• Reporting: The ability to track your expenses offers transparency and accountability
• Compliance: Clear expense policies help prevent financial risks
• Data-driven decisions: Visibility into your spending allows you to use data effectively to plan for future spending
• Engagement: When you have the proper process in place, your team can focus on caring for patients and not on expense paperwork

Speak with a healthcare finance expert

No two healthcare systems or practices are exactly alike. So, always consult with a healthcare accounting specialist to discuss your financial needs. A consultation with an expert can be beneficial for many reasons, but these are just a few takeaways you can expect:

• A personalized assessment of your financial and operational needs
• Guidance on regulatory compliance and risk management
• Recommendations for new technology solutions and training

Ramp makes healthcare expense tracking easy

Expense reporting for healthcare doesn’t need to be a headache. Implementing even a few proactive strategies will help you gain a better understanding of your business’s expenses, allowing you to spend less time in spreadsheets and more time caring for patients.

The right tools, combined with expert guidance, can help. With Ramp, you get expense management automation, corporate cards, bill payments, accounting automation, and real-time reporting—all in one integrated platform.

By providing detailed insights and real-time visibility, Ramp simplifies medical expense tracking while offering ongoing optimization to ensure you adhere to best practices and gain the necessary insights.

With Ramp, you can take the next step toward a stronger financial future, so you can focus on what matters—improving patient care and outcomes. Try an interactive demo to learn more.