When Provena Health and Resurrection Health Care merged to form Presence Health in 2011, the new company saw an opportunity to update their payments capabilities. After a strategic assessment, Presence decided to streamline processes and reduce costs by implementing a comprehensive automated payments program. Their goal was to leverage multiple payments solutions, with card as the preferred payment method.
Recognizing an opportunity
Presence Health has more than 150 locations in Illinois, including 11 hospitals and 27 long-term care and senior living facilities. The merger motivated the new company to seek ways to do business in a more cost effective manner. Presence explored their end-to-end approach to payments, with the goal of eliminating checks and fully automating processes. “Cost savings were a major driver for us, along with reducing errors through switching to paperless solutions that offer greater oversight,” says Robert Banwart, accounts payable system director, Presence Health.
Presence wanted to design a more efficient system that could:
• Maximize payment integration
• Confirm data accuracy
• Streamline processes
• Optimize cash flow
Moving toward a fully electronic solution
Pre-merger, both Provena and Resurrection leveraged some forms of electronic payments, using different systems and tools, but neither organization fully optimized their electronic options. To make necessary changes, the new company initiated a PeopleSoft conversion, giving Presence a unified accounts payable (AP) solution. At the same time, when the two legacy companies began to merge operations, they expanded their use of electronic payments and encouraged all suppliers to accept card payments.
Attracted by robust security features, increased efficiency and potential cost savings, Presence implemented solutions such as BofAML’s Virtual Payables, a virtual card program that integrates seamlessly with existing AP processes. “It allowed us to easily consolidate the different methods the legacy companies were using to process payments, giving us a centralized system,” says Banwart. For suppliers not accepting cards, Presence offered alternative electronic payment methods, prioritizing BofAML’s Paymode-X® Connect solution. This payment option replaces paper checks by electronically sending payments and remittance information.
Presence’s preferred payment option
Promoting electronic payments with suppliers
In addition to replacing two legacy AP systems and introducing PeopleSoft, Presence rethought how they work with suppliers. “Suppliers are key to any successful payments strategy,” says Jeannette Bugg, senior product manager, Virtual Payables, at Bank of America Merrill Lynch. “Thinking strategically about what type of payments methods they wanted to promote allowed Presence to put the right systems and processes in place early on and help make certain supplier adoption.”
Work began on introducing a new supplier process and streamlining payment terms. “Reconciling the differences between the legacy companies’ files was critical, but it wasn’t something we could easily do alone,” says Banwart. “That’s why we leveraged a third-party organization to help research supplier information for us.” Additionally, dedicated Bank of America Merrill Lynch specialists worked with Presence to help shape their supplier enrollment strategy.
The process began with detailed data analysis on payment types, suppliers and solutions. These efforts helped create a robust database and a fluid and consistent supplier on-boarding process, beginning with every new supplier completing a questionnaire on their payment capabilities. This allows Presence to segment by payment type, designating regular suppliers who opt to receive card payments as “preferred suppliers,” and offering more favorable terms. Card acceptance language is now required in new supplier contracts, and suppliers benefit from the opportunity to get paid faster and receive detailed remittance information.
Source: Kaiser Associates Study, 2013
Company-wide support is key
Implementing a new payments strategy requires high-level backing within a company — including department heads and key managers — that will help drive desired payment behaviors and supplier adoption. “Presence had support right from the top, including the CFO, VP of Treasury, and Director of Accounts Payable, as well as buy-in from supply chain,” says Katie Steinfeld, senior treasury product sales specialist at Bank of America Merrill Lynch. “Without this momentum, the program may not have been as far-reaching or successful.”
This high-level buy-in also helped streamline the company’s approval processes, saving time, energy and effort. “Because the guidance we’re following comes right from the top, we’re able to make decisions at a relatively low level on issues such as supplier payment methods and terms,” Banwart comments. “It’s rare that we run into issues we can’t deal with ourselves.”
A long-term plan is coming to fruition
Presence is already experiencing the rewards of their payments evolution. “The program has been a real success,” says Banwart. “We focused our efforts on suppliers we spend the most with, and have seen a big uptick in card acceptance among these organizations.” Recent data shows that 23% of Presence AP spend is by card or ACH, amounting to $291M annually, a figure that looks set to rise.1
The company is also benefitting from their work on the supplier database, with greater transparency into their transaction behavior at the individual supplier level. Additionally, leveraging card solutions fully across the entire organization has brought working capital benefits. Electronic transactions cost less to process, and improve visibility into and control over payments.
Forward planning pays off
Presence is a great example of how an electronic payables strategy evolves. Although they had to address a range of issues and disruptions related to a merger, they still thought very carefully about how to best create and deploy a successful strategy. “Forward planning was critical for us, and it’s where BofAML had a real impact,” says Banwart. “Having someone to coach us through all the details has been indispensable.”
In the four years since the merger, Presence has made significant progress with payment automation. The company now has everything in place to expand their program to drive down costs and improve processing efficiencies.
1Presence Health supplier payments from 1/1/2016 through 9/30/2016.
Case studies are for illustrative purposes only and are intended to demonstrate the capabilities of Bank of America Merrill Lynch. You should not consider these case studies as an endorsement of Bank of America Merrill Lynch. Case studies do not necessarily represent the experiences of other clients, nor do they indicate future performance. Results may vary.