There are many moving parts to your practice’s revenue cycle management (RCM). But one of the most critical components is your accounts receivable, or A/R. Tracking and improving accounts receivable in healthcare is crucial for building a thriving, financially strong practice.
Let’s dive into some essential knowledge and best practices around healthcare accounts receivable.
What Is Accounts Receivable in Healthcare?
Accounts receivable in healthcare (A/R) are the invoices or reimbursements owed to a medical practice, hospital or other healthcare organization. These unpaid accounts may include outstanding patient invoices or insurance company reimbursements.
Once your practice bills a patient or submits a claim to a health insurance company, the A/R process begins. After the patient pays the invoice or the insurance company reimburses your practice, the account is no longer in A/R.
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
Why Is Healthcare Accounts Receivable Important?
Accounts receivable is a normal part of the medical billing and healthcare RCM process, but it’s not something you can ignore. The more accounts you have in A/R, the less money your practice collects. And unfortunately, the longer an invoice or claim stays in A/R, the less likely your practice will get paid in full.
When your practice’s A/R piles up, you have less cash flow to maintain operations and pay staff. Eventually, you may have to write off patient payments that are late or unpaid (also called “bad debt”), which is lost revenue for your business. Reducing and maintaining your A/R will help your practice thrive and avoid financial hardship.
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.
How to Improve Your Accounts Receivable
If you’re noticing your practice’s accounts receivable creeping up, don’t panic. You can take several steps to improve cash flow and keep your A/R in check.
Streamline Insurance Verification
Incorrect or unverified patient insurance is a significant threat to your accounts receivable, revenue cycle and overall cash flow. If you’re not verifying insurance before a patient encounter, you could end up with denied claims and lost revenue.
A real-time eligibility (RTE) tool will ensure you can quickly and accurately check patient insurance before the appointment. You may also consider creating a process for batch checking patient insurance every week, so you can catch and resolve issues before the patient comes into the office.
Send Estimates and Collect Upfront Payments
Another way to improve your A/R is to avoid it altogether with upfront patient payments. Collecting at the time of service avoids the post-appointment invoicing that can often take months to resolve.
Sending cost estimates before the appointment can also help increase timely payments, as patients know what to expect before going into an appointment. Plus, pre-appointment estimates can also improve patient satisfaction and retention.
Track A/R Regularly
Keeping track of your healthcare accounts receivable is crucial for the financial well-being of your business. If you don’t stay on top of this number, you could miss out on revenue and opportunities that increase collections.
Monitoring your A/R can also reveal trends with particular patients or payers, highlighting areas where you can improve the claims process to avoid delayed payments. For example, if you notice the A/R for Payer A is 60+ days, but others are in the 30-day range, it’s time to look at claims and contracts for Payer A to see if you can find a way to reduce A/R time.
Automate Your Claims Process
Many healthcare practices have tedious, manual billing processes. Not only are these processes more time-consuming, they are also more prone to errors.
Automating claim submissions and claim scrubbing can reduce mistakes, rejections and denials, which means claims spend less time in A/R and insurance companies reimburse your practice faster.
Lean on Experts When A/R Grows
If you’re feeling overwhelmed by your healthcare accounts receivable, it might be time to call in an RCM team. These experts can work through your A/R and help your practice get paid while reducing your overall days in A/R.
At Gentem, we have a highly experienced RCM team who will work with your practice to improve the reimbursement process. Using industry knowledge and a suite of AI-powered tools, they’ll help you increase collections so you can build a thriving medical practice.
Learn more about Gentem’s RCM and medical billing services by scheduling a quick intro call.