In healthcare, managing accounts receivable (A/R) effectively is crucial for your organization’s success. Tracking outstanding payments is challenging, and the complexities of healthcare billing can make it seem even harder. We'll cover common reasons why A/R in medical billing can be tough and share best practices to help you improve your revenue cycle management.
Handling accounts receivable is a key part of your hospital billing system. It refers to the total money you’re owed by patients and their insurance companies. Simply put, it means dealing with overdue accounts or pending invoices. In the busy world of hospitals, with changing insurance rules, managing accounts receivable well is crucial for your financial stability. Common issues include delayed payments, underpayments, and denied claims. To tackle these challenges, you need a clear understanding of accounts receivable.
Understand the concept of classifying hospital accounts receivable:
You should submit claims within 3 working days after providing services. Ideally, for a clean claim, you should expect the payment from a patient’s insurance company within approximately two weeks. However, in 2022, the American Hospital Association revealed a shocking fact that almost half of the total hospital in the United States were dealing with significant amount of debt. Can you guess the total debt amount? It was almost $100 and overdue accounts aged more than 180 days old were the prime reason behind this huge debt.
If you’re dealing with late collections and growing overdue payments, your hospital will see more days in AR. "Days in AR" means the average time it takes to get paid based on your daily charges. To improve and keep your finances stable, it’s important to measure and manage these AR days.
You can measure days in AR by dividing your total accounts receivable by your daily charges. The American Academy of Family Physicians suggests keeping days in AR under 50 days. Ideally, you should aim for 30 to 40 days.
Another practical way how you can classify accounts receivable is based on their real-time age. There are 4 age buckets that hospital accounts receivable services consider for classifying delinquent accounts-
- 0-30 days
- 31-60 days
- 61-90 days
- 91-120 days
The truth is that the chances of receiving payments fade away as your accounts grow aging. For example, you can only expect to receive 10 cents per dollar owned from an account aged 120 days or more.
Keeping track of AR days is important for knowing how long it takes to collect payments. This helps you find ways to speed up collections and improve your revenue cycle. For example, if you see that your AR days are rising, it means payments are being delayed. By looking at this data, you can find problems in your billing process and make changes to fix them, which can reduce AR days and boost your cash flow.
To implement a robust hospital accounts receivable management, first you need to recognize the common pitfalls of AR.
The common challenges of hospital accounts receivable management includes:
1) Complex nature of insurance claims:
To manage your hospital accounts receivable efficiently, you need to deal with the complex nature of medical billing and various insurance claims. It requires you to work on a plethora of medical codes and claim submission formalities, making the process further cumbersome for you.
2) Poor cash flow and delayed payments:
Most healthcare practices face cash flow issues because of delayed payments from patients and their insurance companies. The gap between provided services and getting paid can cause increased AR for your hospital.
3) Compliance and regulatory requirement:
The healthcare industry has many rules and regulations. It’s very important for you to follow these laws and policies to ensure you collect payments effectively.
4) Substantial operational costs:
Managing AR, especially with denied claims and follow-ups, can be costly for you. These expenses can lower your overall profitability.
5) Requirement for integrating new technology and providing staff training:
Using new technology is key for improving AR. By adopting the latest tech and providing your staff with thorough training, you can make the switch to more efficient and effective AR management systems.
6) Limited mode of payments:
Limited payment options can slow down your revenue collection. By offering more payment methods and using modern, flexible solutions, you can improve the patient payment experience and speed up your revenue cycle.
7) Bad debts and more out-of-pocket payments for patients:
Uncollected debts and the financial stress on patients are big challenges. By using strategies to cut down on bad debts and offering financial assistance programs, you can ease the financial pressure on both yourself and your patients.
The good thing is that you can still implement a very efficient hospital accounts receivable management service by following the strategies mentioned below:
Powerful strategies to improve your overall accounts receivable services:
1) Patient insurance verification:
To fully understand a patient’s insurance coverage and their possible out-of-pocket payments, you must know their existing insurance information.
Your front-end staff should get and check information like insurance, demographics, and contact details. Make sure to update this information before the appointment.
Focus on patient-education: Make sure to educate your patients about their insurance benefits and out-of-pocket costs. Create a clear payment policy that outlines what you expect. Include these key points:
- When payment is due (like at the time of service)
- Who is responsible for payment (patients without insurance pay the full bill, while those with insurance pay what isn’t covered)
- How co-pays and deductibles are handled (patients should pay these at check-in)
- Accepted payment methods
- Information on fees, interest, discounts, refunds for overpayments, and handling old debts
To improve AR days, try to collect all co-pays, prepayments, and outstanding balances when the service is provided.
Make multiple payment options available: Offering multiple payment options, like online portals or payment plans, makes it easier for you to get paid and keeps patients happy. Some patients might prefer getting and paying invoices through the mail, while others might like paying online. Since every patient is different, having more options increases your chances of getting payments on time. Make sure to keep the process as simple as possible and provide a variety of choices to suit all your patients.
Clear communication with providers: Managing payments from insurance carriers is key to keeping your practice financially healthy. To get paid on time, you need to find and fix any issues causing delays. MGMA recommends analyzing collections by payer to identify slow payments and high denial rates. A hospital billing company can assist by creating monthly reports on your AR cycles. These reports will show how much a payer owes, how much is still unpaid, and if the amount is increasing. They’ll also track every claim to address and resubmit any denials or rejections.
With the right team and efficient processes, you can set up the best AR management practices. By partnering with one of the best accounts receivable companies like Sunknowledge, you can focus on patient care while they handle all your AR management needs. An effective AR management partner will make sure you collect outstanding payments and reduce AR backlogs.
Comments