As a healthcare provider or owner, what’s your constant battle and challenge in the business side of your healthcare? Receiving a payment for your service? The Revenue Cycle of your healthcare ends here, right, which means it’s your responsibility to get paid for the service you provided.
Healthcare providers without a dependable collection method are in trouble as healthcare costs move to the patient in the form of rising deductibles and copays. Poor cash flow and lost revenue are the results of poor Accounts Receivable Management.
How can you streamline the process to improve your collection rates? In this blog about Healthcare Accounts Receivable Management, let’s see why it is important, how to measure it, and steps to improve it. Anyways, let’s start from the basics.
Accounts Receivable Management – What It Means?
Receivable Management in healthcare refers to the process of effectively managing and collecting outstanding payments from patients, insurance companies, and other third-party payers for healthcare services rendered. It involves monitoring, tracking, and optimizing the collection of Accounts Receivable to ensure timely and accurate reimbursement for healthcare providers.
In the healthcare industry, Account Receivable Management is crucial for maintaining financial stability and cash flow for healthcare organizations, including hospitals, clinics, medical practices, and other healthcare facilities. Effective Accounts Receivable Management helps healthcare providers maximize revenue, minimize bad debt, and improve overall financial performance.
In the healthcare industry, Account Receivable Management is crucial for maintaining financial stability and cash flow for healthcare organizations, including hospitals, clinics, medical practices, and other healthcare facilities. Effective Accounts Receivable Management helps healthcare providers maximize revenue, minimize bad debt, and improve overall financial performance.
Why Accounts Receivable Management is Important & Why Should You Improve it?
Many practices have been compelled to focus more on their Accounts Receivable administration as a result of the increased popularity of high-deductible insurance policies. Moreover, paying for the best care is often expected from patients. These adjustments necessitate renewed focus and creativity in the practice’s billing and collection processes.
To Improve Your Cash Flow
The likelihood that the practice may experience a cash flow crisis rises as patients are required to pay more. This is particularly true when deductibles reset in the first few months of the year. One of the best ways to prevent a cash flow shortage in the healthcare industry is to enhance the Accounts Receivable Management Operations.
In the healthcare sector, managing your cash flow can be challenging. Knowing in advance how much money you will make each month, how much will be written off, and when you will be paid, might be challenging. Smoothing out those variations through your Accounts Receivable procedure can help you more precisely predict the company’s cash balance.
Hidden Costs
The cost of interest and inflation is the unrecognized expenses related to an Account Receivable balance. Since these expenditures aren’t actual expenses that you incur, they won’t appear on your income statement. However, it’s crucial to acknowledge that these expenses do, in fact, exist.
Administrative Costs
The salaries you pay your employees to mail statements and call patients for follow-up are administrative costs related to managing Accounts Receivable. Postage costs and any other supplemental costs paid when handling AR are also included. On your monthly financial statements, you can see these actual expenses.
Your overall balance will rise along with the administrative charges associated with managing your AR. You wind up spending more money on postage to resend billing statements, and time for your personnel to contact delinquent patients when payments aren’t collected the first time.
Pay particular attention to the insurance company receivables that are due. Follow up with the carriers if balances are 30 to 45 days old. Basically, insurance firms must pay claims within 45 days of receiving a “clean claim”.
Insurance companies are eager to deny claims for a variety of reasons, despite having a duty to pay. Just a few examples include incorrect coding, missing information, and invalid insurance.
Bad Debt Expense
All invoice write-offs that the practitioner considers to be uncollectible are included in the bad debt expense. This occurs when a patient is unable or refuses to pay their bill.
The chance of recovering your entire debt diminishes over time when payments are late. Due to this, we advise concentrating on your patient responsibility Accounts Receivable balances using the aging buckets listed below:
- 0–29 days (Current)
- 30 to 89 days
- > 90 days
Steps to Improve Your Accounts Receivable Process to Boost Your Healthcare Cash Flow
1. Maintain Open Patient Communication
Providers with clear payment terms are less likely to experience delays with AR. Ensuring the patient is aware of the payment expectations before any services are provided can help reduce the incidence of late or unpaid invoices in many cases. A written statement of financial responsibility that new patients sign at their first session provides a clear understanding of what is anticipated in terms of payments.
2. Ensure Consistent Follow Up On Outstanding Accounts
With medical receivables, late payments are given. However, unpaid, open accounts must be properly managed. A total of 93 percent of businesses deal with late payments, and 1.5% of all businesses have bad debt written off. The longer unpaid accounts go unpaid, the less probable it is that they will be reimbursed. Ensure that patients are informed frequently via phone calls and letters, and where required, pursue more aggressive collection methods.
3. Practice often A/R Reports
Keeping A/R days low is the overarching objective since it improves Revenue Cycle Management. This necessitates close monitoring of AR. To identify troubling trends or persistent problems with collecting payments, it is helpful to thoroughly examine AR data from month to month. These analyses should look at issues like:
- Average AR cycles
- Delays between services rendered and invoicing
- Aged accounts
- Collection rates
4. Collect Payments for Co-Pays and Services
Patients paying co-pays or bills in-office help medical practices reduce their Accounts Receivable. For some operations or treatments, some offices even demand upfront deposits or percentage payments rather than waiting until after the procedure or treatment to ask for payment in full. This approach might not reduce the total number of accounts, but it might reduce the amount of money owed. The revenue received in advance helps the provider’s financial flow.
5. Considering Outsourcing Accounts Receivable Management
Medical billing needs to be accurate and effective to reduce AR days as low as possible. Simple claim mistakes can cause payments from payers to be delayed by weeks or even months. Consider outsourcing Medical Billing Services if your internal system isn’t operating as effectively as possible.
6. Increase the Frequency of Billing
The faster payers are invoiced for services, the faster those unpaid accounts can be settled. The fact that many providers only deliver bills once a month, however, might cause delays with Accounts Receivable. It doesn’t harm to think about raising the frequency of billing to speed up operations. For instance, you may mail or submit insurance or patient invoices every week.
7. Considering A/R Workflow Automation
Automating the A/R workflow saves time by caring for some of the more demanding A/R-related chores. Numerous programs increase the possibility of automated A/R. An illustration. Benefits verifications, making claims, and producing A/R reports are all handled by Revenue Cycle Management (RCM) solutions.
Invoicing and payment collection become prompter thanks to this kind of automation, which also lessens issues with forgotten A/R accounts or claims denials.
Frequently Asked Questions
What Is The Role Of Accounts Receivable Management In Healthcare?
Accounts Receivable Management in healthcare is crucial for ensuring timely and accurate reimbursement for healthcare services provided. It involves activities such as billing, claims submission, insurance verification, denial management, and collections to optimize the revenue cycle and maintain the financial stability of healthcare organizations.
What Are The Common Challenges In Accounts Receivable Management In Healthcare?
Some common challenges in Accounts Receivable Management in healthcare include dealing with complex billing and coding requirements, navigating insurance claim denials and rejections, managing different payer policies and regulations, addressing patient billing inquiries and disputes, and staying updated with ever-changing healthcare reimbursement rules and guidelines.
How Can Healthcare Organizations Handle Patient Collections While Maintaining Positive Patient Relationships?
Healthcare organizations can handle patient collections effectively by adopting a patient-centric approach. This includes providing clear and transparent communication about patient financial responsibilities, offering flexible payment plans or financial assistance programs, and employing trained staff to address patient billing inquiries and concerns. Maintaining open lines of communication and treating patients with empathy and respect during the collection process can help preserve positive patient relationships.
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