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Comdata, Inc is registered with the National Association of State Board of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors.
State boards of accountancy have final authority on the acceptance of
individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through it website: www.learningmarket.org.
For more information regarding administrative policies such as
registration, complaint, CPE program refund and cancellation, please contact Suzanne Busby at 615-370-7000.
Continuing Professional Education Credits
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• Course Title: Payment Optimization • Description: In this session, we will present on the topic of “Payment
Optimization” and outline how organizations automate their accounts payable departments and manage expenses to streamline internal processes. We will highlight the use of electronic payables to drive supplier discounts opportunities and maximize the procurement process.
• NASBA Credit - CPE: One (1) • Subject Matter Area: Management Advisory Services • Program Level: Basic • Program Prerequisites: None • Advanced Preparation: None • Delivery Method: Group Live
Continuing Professional Education Credits
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• Introductions • Corporate payments landscape • Understanding the options and associated value • Thought Leadership Presentations
• Keys to business transformation • Best Practices
• Summary
Agenda
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• Define today’s current payment landscape and emerging trends
• Identify the key components of an
effective payment optimization program • Identify strategies and implementation
best practices
Learning Objectives
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Bob Sneed | SVP of Corporate Payments Tony Grayson | Director of Disbursements
Tom Dean | SVP, Financial Services
Introductions
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• 40+ years experience • Productivity
improvement, cost reduction and expense management
• Payment expertise, technology innovation and solutions for AP automation
• Provide strategy, implementation and support services for multi-card programs
Comdata is a leading provider of innovative, value-added payment and information solutions
Overview
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Payment Optimization
A frontier in value creation
New advances in payables technology enables organizations to migrate paper-based transactions, to higher-value electronic payments - with complete confidence.
“We are focused on achieving quantifiable
bottom line results through AP automation.”
CFO
AP Automation Electronic Invoice
Presentment Workflow approval
Expense Management
Payment Optimization
Electronic Payment Corporate Card Fleet | Purchasing
and Travel
2012 Ceridian Corporation. All rights reserved.
“Manual, paper-based accounts payable departments are eroding the bottom line of large and mid-market enterprises by an order of millions of dollars each year….and the stage is set for a major financial makeover.”
The Challenge
11 Sources: Kaiser Associates, RPMG P-Card Benchmark Survey 2010, TowerGroup, Aite Group, MasterCard *All commercial product segments – large, mid, small, public sector)
Commercial Payment Landscape
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Reduce Cost Enhance Control Streamline Processes Margin Improvement
Electronic Payments AP Virtual MC ACH and wires
Pre-Paid Payroll | Incentive
Commercial
card solutions Fleet |T&E and P-Card
Designed for value creation
Payment Optimization Electronic Payment Applications
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• Cost savings : $1.61 - $8.12 • Administration, bank fees, print stock, toner and
postage , lost checks, fraud, positive pay
• Efficiency improvements through automation • Streamlined procurement with card program • Online expense reporting with approval • Employee/contractor payments delivered via debit card • AP goes electronic with virtual MC payments and ACH
• Discount optimization
• Virtual payments deliver additional discount revenue of 1%-1.5%
Why Leave the Paper Check Behind?
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What % of the payment landscape is still occupied by check?
A. 57% B. 70% C. 76% D. 82%
Question 1.
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Case Study Privately Held
$2.6B in revenue 80% brand penetration
in US households
Pinnacle Foods Group
Program Goals Reduce cost, streamline business
processes and generate additional revenue
Provide a “one-card” solution for effectively managing all discretionary expenses related to travel and general purchasing
Ensure compliance to policy through an online expense reporting tool
Migrate to an e-payables solution to reduce the number of check disbursements
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Case Study
Avg. Cost savings per report ($19.24) $19.24 Actual # of reports (24) 5,400 Avg. Transaction Size $125.00 Transaction $/Year $3,500,000 *Rebate (1.25%) $43,750 Process Cost Savings $103,896 Total Return $147,646
Travel & Entertainment $3.5M annually 225 cardholders 28,000 transactions
Pinnacle Foods Group
Purchasing Card $16.5M annually 150 cardholders 38,750 transactions
Avg. Cost savings per item ($40.00) $40.00 Actual # of items 38,750 Avg. Transaction Size $425.80 Transaction $/Year $16,500,000 *Rebate (1.25%) $206,250 Process Cost Savings $1,550,000 Total Return $1,756,250
* Example only - based upon billing and payment terms
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Summary
Pinnacle Foods Group Virtual Card AP
* Example only - based upon billing and payment terms
Avg. Cost Per Check ($5.43) $5.43
Actual # of virtual cards/ Year 10,000 Avg. Transaction Size $2,850 Transaction $/Year $28,500,000
*Rebate (1.25%) $356,250
Check Elimination Savings $54,300 Total Return $410,550
Program Value Overview
Process Savings Value $1,708,196
Revenue Share* $606,250
Total Program Return $2,314,446
“Comdata provided active support throughout the vendor enrollment process,” said Parnell. “They were able to offer a solid methodology and industry best practices to help our program ramp up quickly. As a result, we saw an impact to our bottom line almost immediately.” Wayne Parnell Corporate Finance
* Example only - based upon billing and payment terms
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Which of the following are benefits of leaving the check behind?
A. Cost Savings B. Streamlined business processes C. Incremental margin improvement D. All of the above
Question 2.
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The e.Payment Alternative
An Introduction to Virtual MasterCard Accounts
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• Design your “ePayment” strategy
• Stratify the vendor master • Leverage a variety of payment modalities
– Commercial Card – Virtual MC payments – ACH with a discount – Check (extended term)
• Collaborate and Communicate • Ensure ongoing vendor enrollment
Program Framework
“The move from check-to-electronic payments
requires a disciplined approach with effective execution on a
sustained basis.”
Structuring Your Electronic Payments Program
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Understood Value Proposition Cost savings | Revenue generation | Efficient business process
Program Strategy Executive Sponsorship Organizational Commitment Communication Strategy SMART Goals Integrated systems approach Vendor management
The Move to Electronic Payments
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Which of these is important when launching an e-payables program?
A. Executive sponsorship B. Communication Plan C. Effective Supplier Segmentation and Management D. All of the above
Question 3.
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Start the Discussion Cost savings Revenue generation Efficient business process
Complete a supplier analysis of your file Introduce a “Game Changer!” Start the journey and path to wealth creation
Next Steps
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If you are seeking CPE credit hours for this session, please:
• Sign in on the designated sign-in sheet • Turn in your completed quiz/survey sheet to
the Room Monitor to obtain your certificate.
CPE Credit Hours
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Bob Sneed Senior Vice President of Corporate Payment Solutions, Comdata Bob Sneed is responsible for business development and growth of corporate
payment solutions into large markets. During Bob’s 20 year tenure with the organization, he has used his extensive experience with business development and systems integration to enable Comdata to capitalize on emerging trends, and he was instrumental in the design, deployment and sale of Comdata’s MasterCard Multi-Card Payment Solutions with particular emphasis on the emerging trend of e-Payables. Bob is a member of NAPCP, AP Network and IOMA and is a frequent speaker at various industry conferences.
Recent speaking experience includes: Institute of Financial Operations Fusion Conference – 2012 National Association of Purchasing Card Professionals (NAPCP) Annual Conference –2011 Healthcare Financial Management Association (HFMA) Conference – 2011
Biography
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Vanderbilt University Background Information
Vanderbilt University founded 1873 in Nashville, Tennessee
– http://www.vanderbilt.edu
Presently ranked among the top 20 universities (U.S News &
World Report) in the United States
– Undergraduate and graduate student population totals 12,795
– 3,672 faculty and approximately 21,000 staff
– 234 buildings covering approximately 330 acres
– Operating budget is nearly $4.0 billion and endowment nearly $3.3 billion
– Second largest private employer in the State of Tennessee
Vanderbilt University encompasses the following schools
– Arts & Science, Music, Divinity, Engineering, Law, Medicine, Nursing,
Management and Education
– Vanderbilt University Medical Center (VUMC) includes 985-bed teaching hospital
– Monroe Carell Jr. Children's Hospital at Vanderbilt
– Vanderbilt Stallworth Rehabilitation Hospital
Medical Center Demand Check
Paper Checks Have Historically Dominated Disbursements Representing 93% of Payments
Represents results from
12 months April 2012
through March 2013.
($ In millions)
Count
$ Amount
% of Payments
Paper
Checks
240,000
575.9
______
93%
Electronic
Payments
18,993
1,245.0
______
7%
Total
Payments
258,993
1,820.9
______
100%
Accounts Payable
Totals
138,969
167.8
______
57.1
University Demand Check
Totals
58,127
142.7
______
24.7
f
Count
$ Amount
% of All Paper
Checks
Count
$ Amount
% of All Paper
Checks
Count
$ Amount
% of All Paper
Checks
Totals
42,904
265.4
______
18.2
High volume of paper checks represents diverse population of recipients such as employees,
students, vendors, athletes, subject participants.
2014 Goal: Eliminate 60,000 Paper Checks
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Progress as of: January
Projected Target Δ
Absolute Check Volume Reduction: 62,643 60,000 2,643
Percentage Reduction y-o-y: 26% 25% 1%
Month FY13 FY14 Projection
July 20,466 21,486 8,533 0 0 0 (1,020)
August 20,375 17,120 12,312 0 0 0 2,235
September 16,769 18,253 16,587 0 0 1,061 751
October 22,070 16,192 19,650 0 0 0 6,629
November 20,607 13,214 21,212 0 0 118 14,022
December 19,056 11,968 23,263 0 0 200 21,110
January 22,787 15,894 25,777 0 0 0 28,003
February 17,392 13,202 26,277 2,190 2,000 0 32,193
March 19,327 13,496 26,777 2,231 2,200 (1,400) 38,024
April 21,499 13,351 27,577 2,298 2,200 (3,650) 46,172
May 20,587 12,372 28,377 2,365 2,200 (3,650) 54,387
June 19,065 10,809 28,877 2,406 2,200 (3,650) 62,643
Total 240,000 177,357
Cumulative
Reduction Count
FY14 Disbursements Check Reduction Projection
Projected
Cumulative
Annual
Reductions (ACH)
Projected FY14
Monthly
Reductions from
ACH
Projected FY14
Monthly
Reductions from
Travel
One-Time Events
& Project
Reductions:
More / (Less)
Checks
A Comprehensive Payment Strategy is Best Practice
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• Repetitive payments
• High dollar payments
• International payments
ePayables ACH/Virtual
Card
• One-off payments
• Emergency low-dollar payments
Checks
• Travel & Expense
• Procurement
• One-off payments
Physical Card
Wires
• Payments requiring same day settlement
• Int’l payments if ACH can’t be used
Optimal Payment Mix
Wires
ACH/EFT Cards
Payment Channel Optimization Begins with Employees
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• Payroll
– Payroll cards are viable option for unbanked employees
– Easily reloadable for employers with broad flexibility for employees
– Paper checks no longer an option for new employees at Vanderbilt
• Direct deposit for all employee reimbursements
– Leverage existing payroll processes and banking information
– Vanderbilt started with travel and has expanded into all employee
reimbursements
– Change management issues were significant in the beginning
– Resulted in reduction in refund cycle time for employees
• Payment cards work well to minimize employee out of pocket
expenses while traveling
– Cards don’t commit fraud, people commit fraud
– Requires management wherewithal to address inappropriate behaviors
• Payment strategy begins with Procurement
– Negotiate electronic payment as part of contracts and confirm with purchase
orders
• Change in tone from Disbursements
– We no longer make payments via paper check……….absolute last resort
– Some vendors will resist anything except a paper check!
– Obstacles & Change Management- “I’m hesitant to give out my banking
information”
• What are ePayables Solutions?
– ACH (Automated Clearing House) • Typically stem from your financial ERP
• Funds deposited directly into vendors bank account & includes remittance information
• Benefits vendor by reducing cash flow cycle
– Virtual Card Programs • Payments are “pushed” to vendors utilizing virtual credit card transactions
• Can significantly extend your cash flow cycle & revenue sharing opportunities can be significant
• Many providers will offer to enroll vendors into card program for you….take them up on the offer!
– Obstacles & Change Management • Some vendors may not be able or willing to accept fees associated with card programs….but you
might be surprised!
We lead with
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ePayables Solutions Form the “Foundational” Channel
8,533 12,312
16,587 19,650 21,212
23,263
25,777 26,277 26,777
27,577 28,377 28,877
627
869 1,082
1,317
1,493 1,806
2,144 2,294
2,444 2,594 2,744
2,894
0
500
1,000
1,500
2,000
2,500
3,000
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Cumulative Check Reduction & Conversions to Electronic Payment
Reflects 338 conversions to
electronic payment including:
• Tennessean, Google Inc.,
Music City Tents, Nashville
General Hospital
Vendor Conversions to Electronic Payments Continue to Grow
Progress Through January
Checks Eliminated: 25,777
Vendors Converted: 2,144
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Year-to-Year Comparison of Monthly Paper Check Volumes
Reflects the cumulative,
annualized reduction in
vendor check volume based
on FY13 volumes.
July August September1 October November2 December3 January February March April May June Totals
FY13 Actual 20,466 20,375 16,769 22,070 20,607 19,056 22,787 17,392 19,327 21,499 20,587 19,065 240,000
FY14 Act./Fcst. 21,486 17,120 18,253 16,192 13,214 11,968 15,894 13,202 13,496 13,351 12,372 10,809 177,357
FY 13 Cum. Count 20,466 40,841 57,610 79,680 100,287 119,343 142,130 159,522 178,849 200,348 220,935 240,000 240,000
FY 14 Cum. Count 21,486 38,606 56,859 73,051 86,265 98,233 114,127 127,329 140,825 154,176 166,548 177,357 177,357
62,643
Note 1: September FY14 includes 1,061 checks for one-time FICA payments.
Note 2: November FY14 includes 118 checks for one-time FICA payments. Note 3: December FY14 includes 200 checks for one-time FICA payments.
Net FY 14 Check Reduction
Payment Cards Address Subject Participation Payment
Issues
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Current State
• Vanderbilt research community engages in hundreds of subject based participation
studies each year resulting in approximately 20,000 paper checks/year.
• Majority are low-dollar, low-frequency payments to very a diverse population of
recipients.
• Heavy administrative burden given the value of the payment.
• Timing of payment is sensitive topic and not all studies are local to Nashville.
Future State
• Single Issuance Payment Card is the answer!
• Issuance on demand via web-based tool. Huge win for research community.
• Minimizes risk of fraud.
• Reduces Vanderbilt administrative burden. – Lost or stolen, call card provider
– Provider is responsible for any unclaimed property issues
• Great flexibility for subject participant……easily converted to cash.
• Currently in the process of implementation.
• Perfect tool for the job!
Payment Card Solution Addresses Patient Refund Payment Issues
Current State
FY2013 Hospital & Clinic Statistics 57,768 Discharges
307,292 Inpatient Days
1,833,337 Ambulatory Visits
119,225 Emergency Visits
Numerous payors and payment touch points result in patient overpayment.
Majority are low-dollar, low-frequency payments.
Results in significant administration burden to void & reissue checks or escheat unclaimed property.
Future State
Single Issuance Payment Card is the answer!
Direct issuance from our patient accounting system to Comdata.
Reduces Vanderbilt administrative burden: Reduces fraud exposure
Lost or stolen cards are easily replaced
Provider is responsible for any unclaimed property issues
Key Factor: Need to gage patient experience.
Currently in the process of implementation.
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1 Emdeon Proprietary & Confidential 1
Comdata Payment Innovations 2014
Tom Dean SVP Financial Services
Payer to Provider
Payments
2 Emdeon Proprietary & Confidential
U.S. Healthcare Market Landscape
• Estimated $2.6 trillion in annual healthcare expenditures in the U.S.
• Healthcare expenditures growing approximately 6% annually
• Estimated $150 billion spent on billing and insurance administration
• Estimated $396 billion in inefficient care
Unsustainable Growth in Healthcare Costs
Excessive Administrative Costs
National Health Expenditure ($t)
0.02.04.06.0
2010E 2019E
2.6 4.5
Source: CMS, office of the Actuary
% of GDP
Excessive Administrative Costs
17.9 19.3
Source: Council for Affordable Health Insurance
$2.6t
Other Administrative Costs Inefficient Care
86% $2,140b
14% $360b
16% 396b
3 Emdeon Proprietary & Confidential
Lowering Cost has Increased Complexity
Emdeon is in the Business of Simplifying Complexity
Sources: [a] Philliou Selwanes Partners, LLC [b] The Kaiser Family Foundation and Health Research and Educational Trust, 2007 [c] Forrester Research, 2005 [d] Susquehanna Financial Group, 2004
Conventional (1)
POS (2) CDHP / SO (3)
Benefit Design Trends Drive Further Complexity [b]
(%)
Consumerism Generating Bad Debt [c] Government Mandates Drive Administrative Burden
Year Mandate
2006 • Recovery Audit Contractor (RAC) program, HIPAA
2008 • NPI
2012 • X12 – 5010
2013 • ICD 10
Consumer Directed Health Plans (#)
PPO HMO
60% of patient billings result in bad debt [d]
Fewer Payers, Yet Greater Complexity [a]
Notes: (1) Conventional plans refer to traditional indemnity plans. (2) Point-of-service plans not separately identified in 1988. (3) Not included in survey until 2006.
4 Emdeon Proprietary & Confidential
A Consumer Centric Portal in Healthcare
Providers
Patients
Payers
Members
Patients
Patients
Providers
Payers
Providers
Payers
Providers
Payers
Step 1 Eligibility and
Benefits Verification
Provider verifies
the benefits available to the Patient and/or ability to pay
Step 3 Claims
Management
Provider bills the Payer for
Services (a.k.a the Claim)
Step 4a Payment
Distribution
Payer sends payment and remittance
information to Provider
Step 5 Patient Billing and Payment
Provider sends a bill to Patient for
remaining balance
Step 4b Payment
Distribution
Payer sends Explanation of
Benefits to Patient
Medical Treatment
Step 2
5 Emdeon Proprietary & Confidential
Industry A/R and A/P Challenges
Further Information: www.hipaasimplified.com http://www.caqh.org/ORMandate_EFT.php
Challenge to comply with MLR mandate1
Disparate EFT systems used
by payers, clearinghouses
Exchanges
ACO’s
Reduce Admin costs
ICD-10
Mandated Healthcare Operating Rules: Second Set - EFT & ERA
• Compliance with
regulations
• Reconciliation, Audit and Control processes related to multiple payment modalities
Payer and Provider
6 Emdeon Proprietary & Confidential
Mandate Compliance 2014 EFT/ERA Mandate Highlights
• Payers must have compliant ACH solution by 1/1/2014
• Payers can still utilize
other Payment tender types unless a Provider requests AHC
• Providers are not mandated to accepted ACH
http://www.emdeon.com/epayment/trace/
http://www.emdeon.com/resourcepdfs/EMDA1040214.pdf
More info at: WWW.HIPAASIMPLIFIED.COM
Goal is electronic distribution using multiple
methods of payment
7 Emdeon Proprietary & Confidential
ePayment: Virtual Credit Card Payments Description • Virtual credit card is a limited
value, single-use payment number
• Remittance is printed and mailed, faxed, e-mailed or distributed via a portal to providers
• Provider is able to enter transaction into an existing Point-of-Service (POS) terminal
• Electronically routes the payment using credit card networks
• Deposits funds into the provider’s existing merchant account
8 Emdeon Proprietary & Confidential
ePayment: Virtual Credit Card Payments Key Benefits • A healthcare claims payment (EFT)
vehicle utilizing the card network
• Replaces checks and is optimized for paper Explanation of Payments (EOPs) –maintains current workflow for the provider
• 99% of providers acceptance
• Does not require enrollment or additional agreement
• A source of revenue generation or cost offset for a payer (especially smaller payers who can not drive EFT adoption)
9 Emdeon Proprietary & Confidential
The vast majority of Provider payments are relatively small which minimize individual interchange fees to Providers
EPN: Value Proposition
Payment Averages: Check: $713 VCC: $203 EFT: 6,442
10 Emdeon Proprietary & Confidential
FUNDS FUNDS FUNDS
SETTLEMENT BANK
BANK
APPROVAL APPROVAL APPROVAL
Provider Keys in Virtual
Card
NETWORK/ SWITCH
ISSUER
BANK
ACQUIRER
BANK
PROCESSOR
AUTH.REQUEST REQUEST REQUEST
SALES TICKET ITEMS ITEMS
PAYER’S BANK
BANK
EOP and Virtual Card Information
Distribution Processor
Assigns Payer
Cardholder Account Number
Payer EOP and Payment file
Payer Payment Distribution: “Paper” VCARD Model
11 Emdeon Proprietary & Confidential
What do our customers say?........ Comparison of two forms of electronic payments
Provider Issue VCC ACH / ERA
Cost of processing fees and remittance posting
VCC means merchant discount fees to the provider which can range in cost. VCC is most commonly distributed as paper or fax which means the provider must manually post the remittance information.
The payment cost is low, but the cost of implementing each payer is high and the cost of reconciling the payment to the remittance is high.
The enrollment process is cumbersome and requires that the provider give their bank information to each payer
This is not an issue with VCC, but the provider pays merchant fees or this convenience.
The reason why providers only enroll with their large payers for ACH is that providers find the process too cumbersome for small payers.
Electronic Remittance Advices (ERAs) are different from one payer to the next
VCCs are mostly delivered as paper or fax so the ERA is not an option, this means there is no opportunity for the provider to automate posting.
This is the other reason that providers can only afford to implement large payers. Each payer requires its own costly implementation because of the differences in the file content.
12 Emdeon Proprietary & Confidential
Payment File
Payment Tender Type Gating
EFT Virtual Card
Closed Loop Check
Delivery Gating
eDelivery Paper Delivery
• Secure Email • ACH • ICL
(Fvtech, Bank Lockboxes) • Portal
(PBPS, Partner Platforms) • Fax
• USPS
Tender Type
Delivery Method
Payment Consolidation
• Payment consolidation so that one payment goes to provider for the Payer
• Manage Provider preferences and ongoing payment modality routing
• Consolidate compose and fulfill selected payment instrument. Comprehensive reconciliation and 1099 service for those who want it
• Distributes payments electronically and physically across a myriad of distribution channels
Challenge - Leveraging this bundle of services in combination and management of both the payer and the provider preference.
EPN EPN Evolution
BI Card