Welcome to new readers! This newsletter is the place we cover news, trends, and topics of relevance to anyone working in and around healthcare revenue cycle, payments, collections, treasury operations, HSAs, patient financing, and many related areas. This issue we write about virtual cards, which have quietly become a large part of the U.S. commercial card mix, and a new global payments report. Surprisingly no healthcare payments deals of note to report in the past two weeks (reminder to access our Healthcare Payments Deal Trackerhere).
Please share any ideas for topics you'd like to see us cover, and reach us anytime at info@finmedpartners.com.
PAYMENT TRENDS:
Virtual Card spending will soon exceed Purchasing Card spending for U.S. businesses
In the evolving landscape of healthcare finance, the adoption of Virtual Credit Cards (aka virtual cards or VCCs) is gaining momentum. These digital payment tools offer a streamlined, secure, and efficient alternative to traditional purchasing methods. As healthcare organizations face increasing financial pressures, understanding the benefits of virtual cards could significantly enhance their accounts payable (AP) processes.
What are Virtual Credit Cards?
Virtual credit cards are similar to traditional credit cards in that they have 16-digit numbers, an expiration date, and a CVV code. What makes virtual cards different though is that they have unique card numbers, which can be designated for one-time use or multiple uses. They can also be set up with controls (e.g., specific dollar amount, specific merchant or MCC) which help with budgeting and fraud.
In terms of day-to-day use, virtual credit cards can be used for many of the same purposes as Purchasing Cards that are often issued by companies to certain employees to help manage procurement spending. (Corporate Cards can also be used for a wide range of purchases and are typically issued to employees who spend in travel and entertainment categories.)
Source: Javelin Advisory Services, North America Commercial Credit Card Review & Forecast
The popularity of virtual cards is on the rise. According to Javelin Advisory Services, U.S. virtual card volume reached $294 billion in 2023, nearly equaling the $297 billion in purchasing card volume (corporate cards generated $90 billion of volume). The forecasted growth rate for virtual cards, at 11.7% annually from 2022 to 2027, significantly outpaces that of purchasing cards (4.4%) and corporate cards (9.3%).
How are Virtual Cards used in healthcare?
In the healthcare sector, virtual cards are already utilized by insurers to pay medical and dental claims. When a claim is processed, the payer generates a single-use virtual card number linked to its credit account, which is then sent to the provider for electronic payment processing. This ensures prompt payment to the provider and simplifies transactions.
While some healthcare providers have begun using virtual cards to pay their suppliers, there is substantial potential among accounts payable teams in hospitals, health systems, medical practices, and other healthcare organizations. Once a supplier invoice is approved, the buyer can issue a virtual card by submitting a payment instruction file to the bank. The bank then generates a one-time-use card number, which is emailed to the supplier for processing. Virtual cards provide a compelling value proposition when there is still a high volume of paper checks. But they also make a great option for all digital payments since the average cost to process a virtual card is estimated to be 15-20% less than ACH/ EFT.
Why are Virtual Cards growing so quickly?
Several key benefits help explain the rapid rise of virtual cards, particularly with respect to supplier payments:
Cost reduction: virtual cards can bring meaningful per-transaction savings when compared to legacy methods.
Optimized process flows and increased efficiency: fewer physical hassles compared to check payments, and easy integration into existing payment systems which leads to less friction in transaction processing.
Automatic reconciliation and transparency: additional data provided with virtual card transactions provides clearer visibility into cash flows and expenditures.
Enhanced security: data shows a 29% lower fraud risk on virtual cards compared to ACH, which was once considered the safest payment method (checks present the greatest fraud risk, at 63% higher than virtual cards).
Accelerated payment cycles: suppliers benefit from faster payments, helping them manage operating expenses and maintain a steady cash flow.
Guaranteed funds: suppliers receive guaranteed funds for transactions, providing them with financial security to manage their operations.
Leveraging Virtual Cards to improve financial operations
As healthcare organizations navigate the complexities of financial management, virtual card use can bring meaningful improvements in accounts payable processes. The benefits of efficiency, security, and cash flow optimization make virtual cards an attractive option for healthcare purchasing teams.
FinMed Partners will continue to bring you data and perspectives on virtual cards as this payment type gains a greater hold in the healthcare space.
REGULATORY NEWS
Gov. Newsom vetoes bill targeting virtual card use
Speaking of virtual card use in healthcare, California's legislature recently passed Senate Bill 1369. The proposed legislation would have required health plans in California to default to a "non-fee based method of payment" to dentists. The bill was targeted at virtual card transactions used by dental insurers to pay dentists.
On September 22, Gov. Newsom vetoed the bill. In his letter back to the legislature explaining his decision, he wrote "Currently, a dental provider and a plan determine the method of reimbursement during contract negotiations. A provider may opt into direct payments or payments through a contracted vendor. While I appreciate the author’s intent to increase dental providers’ reimbursements through changing the default payment method, this should be addressed during contract negotiations."
According to the Senate analysis of the bill, the California Association of Dental Plans said SB 1369 would delay reimbursement and increase the cost and administrative burden on providers and plans. The association indicated that:
issuance of payment may be delayed if a provider opts to receive a paper check or set up EFT as an alternative form of payment over VCCs
information related to reimbursement methods is currently made accessible to providers on plan websites and portals, including alternative payment methods, instructions, and associated fees.
CEO CHAT
Arad Levertov, Co-Founder & CEO, Sunbit
Click here to read our latest CEO Chat with Arad Levertov, CEO of Los Angeles-based Sunbit.
PATIENT FINANCING
Sunbit and Stripe partner on patient financing
And speaking of Sunbit...we noticed that the company just announced a partnership with Stripe to make its patient financing more easily available for patients during an in-person experience. According to the release, "Merchants processing payments on Stripe can make Sunbit technology available to its customers with an easy toggle on their Stripe Dashboard." Sunbit's customers include dental practices, medspa, eyewear, and pet care providers.
BCG report shows declining North America payments growth
According to its recently published 2024 Global Payments Report, BCG believes that the payments industry continues to have significant growth potential. North America is the largest of the five global market segments at $781 billion in 2023. After growing 9.9% annually from 2018 to 2023, the North America market is forecast to grow only 3.3% from 2023 to 2028. This makes it the second lowest market in terms of expected growth, ahead of only Europe's forecast 2.9%. Latin America is expected to grow the fastest, at 8.6%, followed by Middle East and Africa (7.2%) and Asia-Pacific (6.3%).
The report highlights the following points:
Overall global revenue growth will halve by 2028, from 9% to 5%.
Profitability is center stage as the industry's investor base shifts to become more value-based.
Tech modernization is non-negotiable in order to improve unit economics.
GenAI is paying off for early adopters especially in customer service, software development, and coding.
Banks are losing ground to fintechs.
Organizations must become "instant payments ready".
Reducing Fraud, Waste, and Abuse Through Real-Time AI-Based Screening. The HISTalk blog continues to do a great job surfacing examples of AI in healthcare. Thanks to HISTalk for bringing our attention to a study looking at the potential of AI to reduce Fraud, Waste and Abuse (FWA). The study showed the application of real-time AI-based FWA screening for a large population served by a TPA in Texas reduced total spend for the covered population by 1.2% during the study period. (NEJM Catalyst)
WHAT WE'RE READING
Judy Faulkner's succession plan at Epic. Judy Faulkner's arrangements for Epic to stay private and employee-owned after she's gone, including family ownership, a trust and an independent oversight board. (Beckers)
Deal Tracker. Regularly updated list of healthcare payments related transactions since November 2023.
Conference List. Rolling twelve month look ahead at conferences and other events covering healthcare payments, revenue cycle, fintech and related areas. Updated through September 2025.
CEO Chat. Thoughts from healthcare payments CEOs on the problem their company was founded to solve, their right to win, and plans for the next 12 months.
Newsletter Archive. News, trends, and insights from the healthcare payments industry compiled in our bi-weekly newsletter. Last six months of newsletters.
Epic MyChart. Excel sheet with full listing of all Epic MyChart instances as of May 2024, categorized by state, provider type and specialty.
All of these resources can also be accessed at the FinMed Partners Insights page.
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FinMed Partners is a management consulting and advisory business focusing at the intersection of payments/ fintech and healthcare. Our founders have developed deep expertise from decades of experience with health IT companies, healthcare providers and many players within the payments ecosystem. Investors, boards and executive teams work with us to maximize business value through strategic input and tactical execution.
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