Guest blogger Jonathan Addeo, Executive Vice President for F.E.DiBacco, Inc., sheds light on the huge savings companies can gain by combing through the multitude of small bank fees that add up over time. For not-for-profit hospitals that operate on razor thin margins and whose resources have been stretched to the brink by COVID-19, such savings are a welcome relief.
Bank fees. We all pay them – and sometimes without even knowing it.
As technology has evolved and the world of banking has digitized just about every aspect of its business, all sorts of bank fees have insidiously evolved as well. One hospital, for example, could have well over a million bank charges on its bill. There is a fee to deposit each mobile check, followed by a scanning fee for each check, a fee to file with the bank, and a fee to store the image of the check. Multiply these charges by the hundreds of thousands of transactions a hospital encounters in just a week’s time, and you can see how seemingly inconsequential bank fees add up to big bucks.
Why Banks Bank on Fees
Bank fees are a stable way for banks to earn money, particularly during times of volatility. Often, the top 10 most profitable companies in the U.S. are banks. Last year, four of the top 10 were banks. This has a lot to do with fees charged. The Office of the Comptroller of the Currency, an independent branch of the U.S. Treasury Department, charters, regulates, and supervises most banks in the U.S., ensuring that banks operate in a safe manner, comply with applicable banking laws and regulations, and treat customers equitably. But, for the most part, banks are free to charge the fees they deem necessary.
This brings us back to the dilemma faced by hospitals that are transacting with multiple banks. It’s nearly impossible for finance directors to review every item in their hospital system’s bank statements or to even know what charges to look for. This, coupled with inaccurate transaction volumes, unnecessary services, and the cost of keeping inefficient accounts, is a daunting task.
Uncover Hidden Costs and Inefficiencies
Several decades ago, the founder of my company, Fran DiBacco, a banking expert, realized the burden bank fees were to businesses. He developed a proprietary, patented software system to analyze bank accounts. The software finds line item pricing discrepancies, duplicated services, and other practices that cost organizations money. And, all the work is billed on a contingency basis, which means the project funds itself. A few years ago, the analyzer saved one regional hospital $500,000 in the first year and has since saved that hospital over two million dollars on line item issues from just one bank.
Hospitals have incurred extraordinary costs fighting the pandemic. A bank fee review is almost always guaranteed to save hospitals money and is just one step in the process to better financial health. Reducing volume inefficiencies and instituting some operational changes, all connected with the hospital’s banking practices, are other ways to save money. With a report in hand, a hospital finance officer has the choice to approach each financial institution and negotiate better rates or, in the case of my firm, turn to someone like me who will work with the banks and negotiate on behalf of the hospital.
According to the Healthcare Association of New York State, not-for-profit hospitals in New York State have the second narrowest average operating margin in the country. This calculation occurred prior to the pandemic, so margins are probably even worse now.
I think it’s time for a bank fee review.
About the Suburban Hospital Alliance of New York State
The Suburban Hospital Alliance of New York State advocates on behalf of hospitals in the Hudson Valley and Long Island regions. It engages key lawmakers and regulatory decision-makers in Albany and Washington to ensure reasonable and rational health care policy prevails.
The Nassau-Suffolk Hospital Council represents the not-for-profit and public hospitals on Long Island. It works in conjunction with the Suburban Hospital Alliance of New York State to advance legislative and regulatory priorities. NSHC serves as the local and collective voice of hospitals on Long Island.
The Northern Metropolitan Hospital Association represents the not-for-profit and public hospitals in the Hudson Valley region. It works in conjunction with the Suburban Hospital Alliance of New York State to advance legislative and regulatory priorities. NorMet serves as the local and collective voice of hospitals in the Hudson Valley.