Boost Your Healthcare Practice’s Financial Health: Strategies for Improving Accounts Receivable Management 31 May 2023
Healthcare revenue cycle management is critically dependent on the management of accounts receivable (A/R). Healthcare providers may increase cash flow, lower the risk of bad debt, and enhance their overall financial performance by managing AR properly.
The revenue management cycle is a significant element that must be maintained in medicine and healthcare, where efforts are crucial. Any healthcare system is immediately impacted by the lag in revenue, which turns out to be a key factor in the derangement of cash flow and the augmentation of accounts receivable days.
Outsourcing accounts receivable is a strategy used by businesses to outsource some or all of their accounts receivable operations to a partner or vendor in the outside world. This outsourcing firm may handle duties including issuing invoices to clients, monitoring payments, pursuing overdue invoices, and doing credit checks on clients, among other things.
Without further ado, let’s discuss in-depth accounts receivable and the different approaches to increasing them in the healthcare industry.
Accounts Receivable: What Is It?
The sum of money owed to a healthcare provider by patients for already-performed services is known as accounts receivable (AR). For healthcare providers, AR may be a major financial burden since it can divert funds that could otherwise be utilized to cover operational costs or make investments in expansion.
In healthcare RCM, we categorize A/R based on age, usually in 30-day buckets:
- 1-30 days
- 31-60 days
- 61-90 days
- 91-120 days
- 120+ days
Managing accounts receivable is important.
There are several reasons why effective AR management is crucial. It can first aid in enhancing cash flow. A healthcare provider’s ability to collect payments more promptly can help them improve their cash flow and lower the amount of money that is held in accounts receivable. This is possible when AR is managed well. Second, good AR management helps lessen the likelihood of bad debt.
Effective AR management increases the likelihood that healthcare providers will get payments on time, which can help lower the amount of bad debt they have to write off. Last but not least, good AR management may enhance overall financial success. Healthcare providers may increase their profitability and return on investment when AR is managed well.
Healthcare Accounts Receivable Benchmarks
Maintaining healthy accounts receivable in healthcare means tracking a few critical RCM key performance indicators (KPIs). These include:
- Average days in A/R: This is the average amount of time it takes for patients or insurance companies to reimburse your practice after the appointment date. Our RCM industry experts recommend keeping your average days in A/R to 35 days or less.
- A/R > 90: This is the percentage of A/R that’s older than 90 days or the percentage of invoices or claims that have gone unpaid for 90 days or more. Our RCM experts recommend keeping this to 10% or less.
Why would you outsource receivables services?
Depending on which services are transferred, outsourcing accounts receivable can also result in several advantages and greater business outcomes. Companies frequently question the advantages of outsourcing accounts receivable; isn’t it preferable to maintain control by doing things internally for such a crucial financial process?
No, not always. Although outsourcing is sometimes associated with a loss of control, it’s crucial to recognize the advantages of accounting outsourcing and what businesses get by partnering with a supplier who has the knowledge and experience to assist firms in more successfully collecting payments:
- Experience: Businesses that specialize in outsourcing A/R operations have the knowledge, abilities, and practical knowledge required to handle the process well. They have devoted employees that have received training in handling accounts receivable, which may result in improved workflows, less waste, and quicker collections.
- Savings: Although there are upfront expenses associated with outsourcing A/R, doing so might be less expensive than employing and training in-house staff. Because of their size and resources, outsourcing companies may deliver services at a reduced cost. This is known as economies of scale.
- Better metrics: Businesses may accelerate the invoicing and payment process by outsourcing accounts receivable. The average time to collect, days sales outstanding (DSO), A/R turnover ratio, and other factors can assist firms in improving cash flow and more easily meeting their A/R objectives.
- Focus on core company operations: Accounts receivable outsourcing enables businesses to free up time and resources for other corporate chores like revenue-generating activities or other CLM duties.
The advantages of accounting outsourcing are summarized above in a simple manner; however, there are many more. When a company’s preferred supplier uses sophisticated accounts receivable automation solutions to increase the value of their agreement, businesses may see even greater benefits.
10 tactics to increase your healthcare accounts receivable (AR)
Establish payment guidelines and collect patient parts on time.
A successful outcome will be facilitated by setting clear payment expectations and then informing patients of the fees they will be responsible for paying. talking about how doctors could experience financial loss if a patient leaves the hospital without having their medical bills paid.
According to a study, when a patient leaves without paying right away, a provider loses a 20% chance of increasing income. Get parts of bills immediately by producing a draft before giving the therapy to avoid needless late payments.
Monitor AR reports.
Providers are required to regularly monitor patient accounts receivable and spot any barriers to bill collection to maintain low A/R days. A monthly analysis of the AR data will help identify the root causes of bad debt and estimate collection rates. The two emphasized factors, collecting rates and aged debtors, help suppliers determine if they are using the proper tactics or moving in the right direction for cash flow.
The former element shows how well a supplier collects past-due money within a given timeframe. The second metric, in contrast, is the quantity of ARs in each age group. A comparison of the two will show how much work is involved in collecting debts. A comparison of the two will show how much work is involved in collecting debts.
Performing it correctly the first time
Accuracy is the key to successful billing, accurate coding, and prompt reimbursement. The efficiency of the whole AR depends on the providers gathering accurate patient data from the start, creating clinical information, entering charges, and accurately submitting bills.
From the perspective of the revenue cycle, gathering the right data up front starts with the patient’s registration and scheduling, which creates the framework for the most successful and efficient billing and collection of claims.
Increase the number of billing cycles each month.
The payer will submit unpaid invoices more promptly if you bill them for all the facilities right away. A substantial portion of your patients will agree to pay you if you communicate with them regularly and consistently. Unfortunately, a lot of suppliers only provide fees once a month, which causes issues with cash flow. You will now profit from trying to increase bill frequency to speed up processes.
Charge entrance and capture
For practitioners, inaccurate charge entry has a significant negative impact since you may lose 1% of your annual net income. According to an examination, about 1% of the overall cost could not have been fully documented due to mistakes in the paperwork and the services or missed outlays. Although this 1% loss may seem manageable, a hospital expecting $350 million a year cannot afford to lose $3.5 million as a result of an incorrect charge entry.
Insurance verification should come first.
Eligibility issues, which account for around 8% of all claim cancellations and are the main cause of claim denials, ultimately have an impact on AR, according to research. According to the research study, practitioners failed to ask patients and insurance payers important questions regarding eligibility, which led to an increase in eligibility denials.
each appointment in advance.
Ascertain each patient’s insurance coverage too;
Establish the required co-payment. Verify that the client’s insurance is both excellently maintained and active.
After confirming the patient’s insurance coverage, make calls or use reminders to inform the patient of the amount they will be required to pay for treatment.
Make it simple to pay bills.
It would be great to have a wide range of payment options available, including cash, credit cards, debit cards, checks, money transfer portals, and more so that customers could pay more easily and conveniently.
Create payment schedules.
You must set up an installment program for those who can’t pay right away but are willing to pay in full to improve their accounts receivable. For this, draft a contract document that clearly outlines the consequences for patients who skip any payments and obtain their signature. Making such a strategy can lessen the anxiety associated with not receiving the cash.
Outsourcing is a novel way to increase your accounts receivable. Working with a reliable medical billing company with the skills and knowledge to handle the revenue cycle for several clients and links with the payment processor will help you speed up denial management procedures and AR.
Streamline the format of your bills.
The medical facility must simplify the patient billing procedure. In response to criticism that the medical terminology and frequent requests for reimbursement made the healthcare billing structure overly complex, the Department of Health and Human Services took action. Streamline the format of your bills.
The medical facility must simplify the patient billing procedure. In response to criticism that the medical terminology and frequent requests for reimbursement made the healthcare billing structure overly complex, the Department of Health and Human Services took action.
Automate your archival process.
Every step that involves manual scheduling, appointments, patient data, coding, and claim reimbursement is laborious. It requires a lot of time and effort, delaying income and lengthening AR days significantly. Utilizing dependable software can help you complete each phase quickly and cut down on the number of days AR lasts.
Benefits of automating your ARS department
- Reduces the possibility of disputes because the patient may get all supporting paperwork, including a letter of receipt for the delivery.
- The process may be optimized, enabling the person in charge of accounts receivable to boost cash flow, enhance customer service, and reduce costs.
- Patient payments are quicker since all the documentation is easily accessible.
- Using trustworthy software to instantly gather records eliminates the need for scanning or printing paper documents.
- When automated notifications and processes are managed, tracking overdue invoices may be done more quickly.
Patient payment collection
Collecting amounts due from patients at the time of service, or at the point of care (POC), offers numerous benefits to practices, such as reducing accounts receivable, increasing cash flow, reducing medical billing and back-end collection costs, decreasing the administrative burdens of tracking and writing off bad patient debt, and managing the growing portion of practice revenue generated from patient payment collection.
Importance of Insurance Verification and Eligibility in Account Receivable
Insurance verification and eligibility are crucial aspects of healthcare accounts receivable management. They play a significant role in ensuring the financial stability of healthcare providers and optimizing revenue cycle operations. Here are some reasons why insurance verification and eligibility are important:
Insurance verification allows healthcare providers to confirm the patient’s coverage, benefits, and eligibility before rendering services. This ensures that accurate billing information is obtained, reducing the risk of claim denials or delayed payments. By verifying insurance details upfront, providers can bill the correct payer and avoid billing errors.
Reduced Claim Denials:
Insurance eligibility verification helps identify any potential issues that may result in claim denials. This includes verifying the patient’s coverage limits, pre-authorization requirements, and any specific exclusions or limitations. By addressing these issues early on, providers can prevent claim denials and avoid costly rework.
Verification of insurance eligibility helps providers determine the patient’s financial responsibility, such as deductibles, copayments, or coinsurance. This enables an accurate estimation of the patient’s out-of-pocket expenses and facilitates timely collections. By obtaining the necessary insurance information beforehand, providers can streamline the reimbursement process and reduce payment delays.
Improved Patient Satisfaction:
Verifying insurance eligibility before providing services helps manage patient expectations regarding their financial responsibility. Clear communication about insurance coverage and any potential costs allows patients to plan their healthcare expenses and prevents unexpected bills. This transparency enhances patient satisfaction and trust in the healthcare provider.
Effective insurance verification processes streamline the workflow within a healthcare organization. By ensuring that the necessary insurance information is obtained early on, providers can focus on delivering care without interruptions. It minimizes administrative tasks related to claim rework and reduces the need for lengthy appeals and follow-ups with insurance companies.
Insurance verification and eligibility play a vital role in maintaining the financial stability of healthcare providers. By reducing claim denials and improving reimbursement efficiency, providers can optimize revenue cycle management. Timely and accurate payments contribute to the overall financial health of the organization, allowing for investments in better healthcare facilities and services.
In summary, insurance verification and eligibility are crucial components of healthcare accounts receivable management. By verifying insurance details upfront, providers can ensure accurate billing, reduce claim denials, improve reimbursement timelines, enhance patient satisfaction, optimize workflow efficiency, and maintain financial stability.
Best Practices in Healthcare Accounts Receivable Management
Here are some best practices for healthcare accounts receivable management:
Verify Insurance and Eligibility: Implement a robust insurance verification process to ensure accurate billing and reduce claim denials. Verify patient coverage, benefits, and eligibility upfront to avoid billing errors and improve reimbursement rates.
Efficient Documentation and Coding:
Ensure accurate and detailed documentation of patient encounters, procedures, and diagnoses. Proper coding based on the documentation is crucial for accurate billing, avoiding claim denials, and maximizing reimbursements.
Clear and transparent patient communication:
communicate with patients about their financial responsibility, including deductibles, copayments, and coinsurance. Provide clear explanations of billing processes, potential costs, and available payment options to manage expectations and prevent surprises.
Streamlined Billing and Claims Submission:
Establish streamlined billing processes to submit claims promptly and accurately. Utilize electronic claim submission whenever possible for faster processing and fewer errors. Regularly monitor claim status and follow up on any delays or denials.
Effective Denial Management:
Develop a robust denial management process to identify and address claim denials promptly. Analyze denial patterns to identify root causes and implement strategies to minimize future denials. Ensure timely resubmissions or appeals of denied claims.
Timely Follow-Up and Collections:
Implement a proactive approach to follow up on unpaid or underpaid claims. Establish efficient processes for collections, including sending out timely patient statements and pursuing collections following regulatory guidelines.
Regular Financial Reporting and Analysis:
Monitor key performance indicators (KPIs) related to accounts receivable, such as average days in accounts receivable (AR), denial rates, and collection rates. Regularly analyze financial reports to identify trends, areas for improvement, and opportunities to optimize revenue cycle management.
Staff Training and Education:
Invest in training and education for staff involved in accounts receivable management. Stay updated with industry regulations, coding guidelines, and best practices. Continuous education ensures that staff members are equipped with the necessary skills and knowledge to navigate the complex landscape of healthcare revenue cycle management.
Utilize Technology and Automation:
Leverage technology solutions, such as revenue cycle management software and electronic health record (EHR) systems, to streamline processes, reduce manual errors, and enhance efficiency. Automate tasks like claim submission, eligibility verification, and payment posting to optimize workflow.
Regular Performance Evaluation:
Continuously assess the performance of your accounts receivable management processes. Monitor key metrics, identify areas for improvement, and implement corrective actions as needed. Regularly review and update policies and procedures to adapt to changing regulations and industry trends.
When A/R increases, rely on the pros.
It could be time to bring in an RCM team if your medical accounts receivable are making you feel overburdened. These professionals can process your unpaid accounts and assist your practice in receiving payments while lowering the overall number of days that you have unpaid accounts.
A highly skilled RCM team at Velan will collaborate with your practice to enhance the reimbursement procedure. They’ll assist you in raising collections so you can establish a successful medical practice by utilizing their industry expertise and a set of AI-powered tools.
Learn more about Velan’s RCM and medical billing services by scheduling a quick intro call.