A Guide to ERP for Healthcare Industry Organizations

Technology is crucial in today’s healthcare industry, but few platforms are as essential to business success and patient care as enterprise resource planning (ERP) and accounting software. Not only do they democratize information, but they also streamline processes across the organization.

In this guide, we’ll explore the power of ERP for healthcare industry institutions and how it can unlock transformational benefits for your practice.

What is healthcare ERP and accounting software?

Enterprise resource planning systems are comprehensive software solutions designed to manage and integrate the key operations of healthcare organizations, including finance, supply chain, human resources, and patient management.

Unlike an electronic health record (EHR) system, which primarily focuses on clinical data and patient care, ERP systems cover a broader range of back-end operations, like hospital accounting. EHR systems are integral to capturing, storing, and managing patient-specific clinical information, while ERP systems help streamline processes, optimize resource use, and improve operational efficiency.

As the healthcare industry evolves, ERP software has quickly become a must-have part of the technology stack.

Why do providers need a healthcare ERP solution?

Many healthcare organizations still rely on outdated financial accounting solutions that don’t integrate with other key systems in their practice. In fact, according to a 2021 survey, 73% of the healthcare industry uses legacy technology.

This leads to manual reporting processes, which are time-consuming and prone to human error. Not only does this make financial analysis inefficient, but it also creates undue risk. Healthcare providers who can’t effectively track costs also can’t identify operational changes that could improve patient outcomes. Ultimately, both parties suffer the consequences.

Likewise, this lack of access to real-time data creates a competitive disadvantage when attempting to respond quickly to the dynamic conditions of the healthcare sector. For example, the shift from fee-for-service to the value-based care (VBC) model requires immediate financial visibility.

Why? Because VBC transfers risk from the payer to the provider. When healthcare professionals enter VBC contracts, they must understand the total cost of providing care to different patient populations. Otherwise, their reimbursements could be significantly less than operational costs.

However, many organizations lack the seamless insight required to analyze costs appropriately. Disparate systems and data sources — particularly server-based legacy systems that are no longer actively updated or enhanced — are too cumbersome to integrate. They also often lack modern functionality and design, making for a poor user experience. In combination, these difficulties create a fractured view that inhibits access to the right data at the right time.

The result? Providers can’t associate clinical data from their EHR with financial data in their accounting system. Fragmented data silos like this make it nearly impossible to calculate the true cost of patient care, especially in real time — which is the level of detail needed to understand the value of alternative payment models (APMs).

Fortunately, that’s where a healthcare ERP system comes in. Modern solutions can help overcome these obstacles by:

• Automating administrative tasks, reducing manual data entry, and improving cross-departmental information flows.
• Optimizing inventory levels, streamlining supplier interactions, and managing human resources more effectively.
• Simplifying compliance with reporting standards, healthcare regulations, and patient privacy laws — most notably, the Health Insurance Portability and Accountability Act (HIPAA).
• Integrating with clinical systems to ensure operational decisions are informed by patient records, care priorities, and outcomes.

How does healthcare ERP work?

Healthcare ERP systems function by centralizing data from various departments, allowing for real-time access and decision-making from one holistic view. They also enforce standardized procedures across the organization, ensuring consistency and compliance with healthcare regulations.

ERPs typically feature modular designs, where each module addresses a specific area of operation, such as finance or supply chain management. They automate routine tasks — like billing or scheduling — to reduce human error and manual intervention.

Although each ERP solution is unique, all fall into three categories based on how it’s deployed in a healthcare business:

1. On-premise ERP systems

With an on-premise solution, the ERP system is hosted and managed directly at the healthcare facility using the organization’s owned infrastructure. This approach affords more control over data and modules and doesn’t require an internet connection to function, making it a good choice for businesses looking for data security, compliance, and customization.

However, on-premise systems also require significant upfront investment. Not only does that include the cost of hardware and software, but also installation, maintenance, and support. Additionally, because they’re managed locally, you need a full IT staff with specialized expertise to keep them running smoothly.

2. Cloud-based ERP systems

Instead of physically installing it themselves, many organizations opt to leverage the flexibility of cloud-based ERPs. With this approach, vendors host the software on their own servers and license access to it over the internet, allowing providers to use it anytime and anywhere. Plus, they receive automatic updates and dedicated support, reducing the need for in-house resources.

As of 2023, 70% of IT professionals in the healthcare industry said their organizations had adopted cloud solutions, with another 20% planning to do so in the near future. According to PwC research, many healthcare leaders have noted measurable results since their cloud migrations:

• 65% improved decision-making.
• 58% enhanced customer experience.
• 53% improved productivity.
• 53% increased profitability.

However, some businesses may be reluctant to relinquish total control over their financial and patient information. Others prefer not to stake their ERP environment on a stable internet connection.

3. Hybrid ERP systems

Hybrid systems offer the best of both on-premise and cloud solutions. In this case, a healthcare facility can choose to host and manage certain processes themselves while others are handled in the cloud.

This offers them the flexibility to keep sensitive data on-premises while still leveraging the flexible nature of cloud computing. Ultimately, the cost of maintaining a hybrid ERP solution can vary depending on its configuration. Although it’s a more complex approach that requires careful planning, most organizations will have no trouble realizing its advantages with the help of an expert technology advisor.

Key components of healthcare ERP systems

At a high level, healthcare ERP systems synchronize data through an array of specialized modules. Each module provides a suite of tools to help manage and automate critical tasks. Altogether, they form an integrated ecosystem in which information flows seamlessly between departments.

Some of the most essential ERP capabilities include:

Electronic health record integration

EHR integration is an essential piece of the medical ERP puzzle. When used together, they can augment operational efficiency and bridge the gap between clinical and financial operations. This ensures billing and financial records are directly linked to patient information, enabling accurate and timely invoicing, reducing errors, and improving revenue cycle management.

It also facilitates real-time access to comprehensive medical records, thus streamlining administrative processes and leading to better financial decision-making. More simply, alignment empowers healthcare providers to achieve a more cohesive and efficient operational environment.

Patient management

The patient management module streamlines and automates various aspects of patient care, from admission to discharge. It ensures an efficient workflow, reduces wait times, and improves the overall experience by providing real-time access to patient information for healthcare providers. Additionally, it integrates with other modules such as billing and EHR, facilitating seamless data exchange and enhancing the accuracy of patient records and financial transactions.
 
 

Financial management

This module oversees an organization’s core financials: billing, invoicing, accounting, budgeting, and reporting. It accurately tracks revenue, expenses, assets, and liabilities through a cohesive dashboard, providing a comprehensive view of the organization’s financial health.

Critically, it also supports alternative payment models like activity-based costing (ABC) by tracking the direct and indirect costs of patient care (medical procedures, use of medical supplies, staff time, etc.). By allocating these resources accurately to different activities, the module helps identify the total cost of the provider’s services. This enables precise pricing, budgeting, and financial planning.

Supply chain management 

Like all ERPs, healthcare systems are equally rooted in supply chain management. This module helps organizations manage the logistics involved in procuring, storing, and distributing medical supplies, equipment, and other assets.

It ensures the right products are available at the right time, thus optimizing inventory management. This works by tracking inventory levels in real time, automatically reordering supplies, and monitoring usage patterns — thereby preventing stockouts and inefficiencies.

Human resource (HR) management

This component automates many HR functions, including employee records management, benefits administration, and more. By automating routine tasks, the module reduces administrative burdens, ensures compliance with labor laws, and improves employee satisfaction through accurate and timely payroll. It also aids in strategic workforce planning by providing insights into staffing needs and employee performance, supporting better decision-making and resource allocation within the healthcare organization.

Business intelligence and analytics

The healthcare sector collects and manages an unprecedented amount of data. By some estimates, healthcare accounts for over 30% of the world’s data volume and is growing faster than any other industry.

Business intelligence (BI) is how organizations extract value from raw data. With a BI module, healthcare providers can automatically collect and process information from various sources, transforming it into actionable insights through dashboards and visualizations. By integrating patient records with financial data, the BI module can also generate reports on the cost-effectiveness of various treatments.

Quality management

In a healthcare solution, “quality management” means ensuring compliance with industry standards while continuously monitoring and improving patient outcomes. It tracks performance metrics, patient safety indicators, and compliance requirements, identifying potential risks and areas for improvement.

This module facilitates incident reporting, root cause analysis, and corrective action plans to address quality issues. By providing real-time insights and data-driven recommendations, the quality management module helps healthcare organizations enhance patient safety, maintain high standards of care, and achieve continuous quality improvement.

Benefits of healthcare ERP and accounting software

There are many reasons why healthcare organizations leverage ERP and accounting systems. Here are some of the top advantages you can expect from the right solution:

• Enhanced patient care: Integrating clinical platforms, like an EHR, with back-office systems can immediately yield tangible benefits. By connecting the dots between medical and financial data sources, you can ensure real-time access to patient information across departments. Analyzing data in tandem with financial metrics will allow you to spot process improvements that impact patient outcomes and promote operational efficiency.
• Lower operational costs: The right accounting software can help with allocating indirect costs to the appropriate areas so organizations can understand the entire cost of providing care. In many instances, providers work under the assumption that increasing the number of patients they see or cases they perform will result in a better financial outcome. However, if the cost of performing those services exceeds the reimbursement, they can quickly find themselves in financial hardship. In other words, increased revenue doesn’t always equal profitability.
• Simplified compliance: With a HIPAA-compliant ERP system, you’ll have a much easier time managing regulations, safeguarding patient records, building trust, and avoiding costly penalties. By deploying a platform built to protect privacy, you can foster a culture of accountability and responsibility in managing sensitive data.
• Greater financial visibility: The role of the financial suite is evolving from “keepers of the past” to “trusted custodians guiding the future.” ERPs eliminate information silos, thus offering greater insight into financial performance, allowing administrators to make data-driven decisions about staffing, contracts, services, and more. Better yet, granular reporting provides reassurance by helping them understand exactly how decisions will impact the business as a whole.

Want to learn more about the power of cutting-edge ERP software? Check out this case study and see how Hawaii Dental Service leveraged Sage Intacct to uplift its business.

ERP implementation best practices for the healthcare sector

Whether deploying your first solution or choosing a new system, the ERP implementation process isn’t always easy. Let’s talk about a few best practices to point you in the right direction:

Work with a technology advisor

More than just a vendor, healthcare organizations need a technology partner that will understand their needs from a holistic viewpoint. Unfortunately, many providers lack the in-house resources or technological expertise to select, roll out, and manage the right solution.

Oftentimes, they just aren’t aware of their options or how technologies have changed over the years. Or, they may not understand which approach is best suited for their business or how to align ERP implementation with strategic vision — and that’s okay. Their focus is understandably on providing the best patient care, not honing their IT skills.

That’s where an advisor like Net at Work comes into play. We meet your practice where it is today, providing a strategic roadmap to your optimal digital transformation. That way, you can focus on patient outcomes while we coordinate the rest.

Take a phased approach

You must consider many factors before starting the journey. At Net at Work, we suggest a systematic approach that involves assessing your current technology portfolio and creating a framework in alignment with your strategic goals and objectives. This will provide you with a plan that you can use to factor in your budgetary requirements, track performance, and adjust in light of organizational change.

Look for a tailored solution

Ideally, your partner will offer a range of ERP and accounting solutions so you can decide which solution best fits your unique organizational needs. The last thing you want is to be forced into a system that isn’t compatible with the rest of your technology stack. With Net at Work, we’ll identify the optimal software to match your business landscape.

Unleash savings across your organization

The healthcare sector is always changing, but ERP systems will always be a vital part of your IT environment. With deep industry expertise and extensive experience, Net at Work can simplify your next ERP implementation and set you up for success long into the future.

Learn more about how Net at Work’s portfolio of healthcare accounting software can unlock efficiencies in your organization.