Step Up Accounts Receivable Management and Boost Your Bottom Line

by | Published on Jun 7, 2024 | Medical Billing

How AR Management Boosts Your Bottom Line
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Accounts receivable (AR) in medical billing is the total amount of money owed to a healthcare provider by patients, insurance companies, or other third-party payers. In a complex environment with ever-increasing federal regulations, efficient healthcare receivables management is challenging but critical to maintain financial stability. In fact, delayed, underpaid and denied claims are common issues that healthcare systems face. The good news is that AR management is an important component of the services provided by a medical billing company to help ease the burden. Experts can help you implement actionable steps to collect balances and ensure that your AR stays healthy.

This post discusses the concept of AR, how reducing days in AR enhances financial performance, and strategies to improve AR management.

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Understanding AR

Ideally, a medical claim should be submitted within 72 hours after the service has been provided. Clean claims submitted electronically could be paid within two weeks. However, many factors can lead to delayed claim payments. In November 2022, the American Hospital Association noted that half of hospitals and healthcare systems reported $100 million in receivables for claims over 6 months old. An efficient A/R process ensures that you get paid in a timely manner.

If your collections are getting delayed and overdue payments are piling up, it increases days in AR – the average time taken for a claim to be paid based on average daily charge volume. To assess your practice’s overall financial health and identify areas for improvement, you need to measure days in AR.

Days in AR is calculated by dividing the total accounts receivable by the average daily charges for your practice. The American Academy of Family Physicians (AAFP) recommends that Days in AR should stay below 50 days at minimum, though 30 to 40 days is preferable. Tracking Days in AR helps you understand how long it takes, on average, to collect payments so that you can take steps to improve collections and your revenue cycle.

The common reasons for increasing days in AR are:

  • Delays in filing claims
  • Lack of proper insurance eligibility verification
  • Incorrect coding
  • Data entry errors
  • Increased claim rejections
  • Inefficient appeals process
  • Credentialing delays
  • Incorrect posting process
  • High out-of-pocket costs and fall in patient collections

Managing accounts receivable efficiently is an important element of billing success. AR management involves tracking unpaid accounts, assessing payment action, and taking steps to secure payment, which can reduce days in AR.

Best Practices to Improve Accounts Receivable

Best Practices to Improve Accounts Receivable

Following these best practices can ensure that your AR stays healthy:

Verify Patients’ Insurance Benefits before the Appointment

Understanding the patient’s current insurance information helps identify the patient’s coverage as well as their financial responsibility. Insurance verification specialists obtain and verify details such as insurance, demographic and contact information, providing a clear idea about:

  • How much of the expected treatment cost the insurance will cover
  • What the patient is responsible for paying

Patient records should be updated before the appointment so that the insurance verification specialist can confirm the patient’s insurance coverage with the payer. Verifying patient eligibility at each visit can identify if there are any outstanding balances from previous encounters that the patient needs to settle.

Educate Patients on Responsibilities and Follow Up

Educate patients about their insurance benefits as well as the portion of healthcare costs that they are obligated to pay out-of-pocket. The best way to do this is to develop and implement a clear-cut policy that spells out your payment expectations. Payment policy essentials should include:

  • When payment is due (such as the date of service)
  • Who is responsible for payment (patients who don’t have coverage would have to pay the entire amount of the bill, while those with coverage would be responsible for any amount not covered by their insurance)
  • How co-pays and deductibles will be handled – patients would need to pay copays and/or their responsibility at check-in
  • Forms of payment your practice accepts
  • Fee implications, interest/service charges, discounts and refund for overpayments, old debt collection, and collection fees

Best practice to improve days in AR is to collect all the copayments, prepayments, and outstanding payments at the time of service. Post appointment, follow-up with patients about payment by sending statements that include the due dates for payment, payment modes, and contact information for billing questions. Offer multiple options for payment. Check patient aging reports on a regular basis, reach out to patients who have outstanding balances. Develop strategic plans for patients who pay in a timely manner and for patients with larger dues.

Communicate with Payers

Monitoring and managing payments from carriers is essential for managing the financial health of your practice. To ensure you are receiving expected payments in a timely manner, identify and address problems and trends that are slowing down the reimbursement process. MGMA recommends analysis of collections by payer – identifying which insurance companies are slower to pay and which ones have a higher volume of denials. A medical billing company can help you track payer reimbursements by developing a monthly report with AR cycles for different time periods. This will help you understand how much a payer owes you, how much of that money has not been collected, and if that amount is increasing. They will also track every claim, so denials and rejections can be corrected and resubmitted.

Assess Frequency of Errors that Delay Collections

MGMA recommends that practices note of repeated errors in gathering patient data, coding, billing, or other processes. These are indications of the areas in which changes need to be made.

Leverage Medical Billing Software

Effective software can notify your staff when accounts are past due so that follow-up action can be taken. They automate tasks, reduce manual interventions for faster claim resolution save time, and standardize processes to minimize errors.

Expertise Counts

Ultimately, efficient AR management is about have the right people and processes in place. Partnering with an experienced medical billing company will ensure that the process is handled by experienced professionals. By implementing comprehensive procedures and internal oversight controls, experts can help you collect outstanding payments and avoid AR backlogs.

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Natalie Tornese

Holding a CPC certification from the American Academy of Professional Coders (AAPC), Natalie is a seasoned professional actively managing medical billing, medical coding, verification, and authorization services at OSI.

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