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Did you know an increase in accounts receivable days means that your medical collections are not going well? There are various steps and methods involved in implementing an optimized environment for accounts receivable management.
This blog will explore them in detail. We will also look at the impacts and benefits of AR management. The blog discusses the accompanying challenges as well. Continue reading further and learn how you expertly decrease your accounts receivable days.
Furthermore, boost cash flow with expert accounts receivable management services for your medical billing needs. Optimize revenue effortlessly.
What Is Accounts Receivable Management?
Accounts receivable management process is a process in healthcare organizations that manages pending reimbursements for their medical services. These receivable accounts are reserved for unpaid payments of outstanding patient invoices and insurer reimbursements.
The accounts receivable process is initiated once you submit reimbursement claims to insurance companies for your healthcare procedures and treatments. It is completed once those companies reimburse you for the services availed by your patients.
The Impacts And Benefits Of AR Management
Accounts receivable management can have a significant impact on medical billing. And those aspects derive several benefits for healthcare organizations. We have covered those areas in detail below:
1. Faster Payments
Hospitals can receive their payments faster if they effectively manage their accounts receivable. Insurance companies pay healthcare organizations based on the invoices generated for their patients. So, you should create accurate invoices so that they are not sent back for correction. This practice saves you from payment delays as the accounts receivable days are less.
2. Reduced Bad Debts
You can get affected by bad debts as they reduce your organizational cash flow. That is also why hospitals have to properly manage their accounts receivable. By efficiently processing your accounts receivables, you can eliminate the issues that lead to those bad debts.
3. Better Decision Making
Hospitals are also able to monitor their patients with proper accounts receivable. It enables them to track those patients whose payments have been timely and accurately received. With this data, you can make better decisions about providing your services to specific patients.
4. Pending Payments Recorded
It is also important for you to track your pending payments by keeping a check on the relevant insurers and patients. It is easier for you to first sort them out and then initiate their collection procedure. By doing this, you can maintain the records of all such payments. Moreover, you can also get paid properly by those patients and insurers.
5. Sufficient Revenue Maintained
You should also have sufficient revenue to allocate proper resources for your processes. These funds can also be used in uneven circumstances. With enough capital, you can easily analyze your capabilities to improve performance.
Steps in Healthcare Accounts Receivable Management
Accounts receivable management in healthcare is a step-by-step process in which you must implement certain steps to optimize your medical billing.
The steps involved comprise claim submission, claim follow-ups and patient collections. Other steps are included, like payment posting and collection management.
1. Claim Submission
The first step in medical AR management is claim submission, in which you generate medical bills and submit their reimbursement claims. These claims are primarily submitted to your patients’ insurance providers.
The purpose of claim submission is to receive appropriate reimbursements from those providers for your medical services. You must ensure that accurate details are provided in complete and accurate reimbursement claims to prevent denials.
In addition, the medical codes assigned to your healthcare procedures and treatments should also be accurate. You may also provide any supporting documentation to help the relevant insurance companies approve your claim submission.
2. Claim Follow-ups
Healthcare organizations should also focus on following up with insurance companies about their reimbursement claims. This step can enable you to identify and fix any irregularities or discrepancies before your claims are denied.
Furthermore, you can also prevent partial and unpaid payments within the timeframe conveyed by the insurers. You should also monitor your accounts receivable so that you are always in a better position to address overdue payments.
You can implement additional follow-up measures like reviewing the aging reports of your patients to identify any overlooked collections. Hospitals and clinics also tend to consistently reach out to their patients to optimize collection efforts, which maximizes their revenue.
3. Patient Collections
Accounts receivables management involves patient collections as well as collecting sufficient reimbursements for medical services. This step is only applicable if the relevant patients have any deductibles, co-pays or any other out-of-pocket expenses.
These options enable you to bill your patients directly, and you can report it by involving any third party for insurance verification. You can work with such patients to ease their reimbursement process by providing flexible options and payment statements.
You must include key details about viable payment methods, including the recipient of reimbursement checks, in those statements. Moreover, you should consistently communicate with your patients about their overdue payments to enable timely reimbursements.
4. Payment Posting
The process of account receivable management services continues in healthcare organizations even after they receive the appropriate reimbursements from insurance providers. You have to post them to their respective accounts in your medical billing system.
Payment posting involves reconciling the reimbursed payments with their relevant claims. This step enables you to make appropriate adjustments and offer discounts to your patients. You can use it to accurately record your reimbursed payments and address any discrepancies.
In this way, you can consistently review your payments to maintain records about their reimbursements and other financial elements. You can also efficiently manage your accounts receivable so that your medical services are appropriately reimbursed in the future.
5. Collection Management
This step includes a constant review of your accounts receivable to analyze their aging and identify the overdue ones among them. You can use several conventional methods to review them, such as letters and phone calls.
You can also work with specific collection agencies that specialize in collecting pending reimbursements from patients. They can also convey the payment terms on your behalf and follow up with your patients to speed up their payments.
These measures can simultaneously ensure timely payments and patient satisfaction for hospitals and clinics. They also put you in a better position to appeal any denied claims so that they can be reimbursed in a timely manner as well.
How to Optimize Accounts Receivable Management?
You can implement several techniques to elevate your accounts receivable and optimize their management. Some of the prominent ones are perfecting claim submissions, verifying patient information, and validating insurance coverage.
Healthcare organizations can also focus on setting payment expectations, collecting upfront payments and tracking your accounts receivable. There are some secondary measures as well that can be executed to boost your accounts receivable.
1. Perfecting Claims Submissions
You must ensure that your first attempt at recording details to submit reimbursement claims is perfect. In this way, you can minimize discrepancies to prevent claim denials and reduce your accounts receivable cycles.
A short AR cycle refers to a high turnover ratio and increased revenue as accounts receivable are swiftly reimbursed. It also enables healthcare organizations to maximize their collections on pending accounts.
2. Verifying Patient Demographics
Hospitals and clinics can also prioritize the verification of demographic entries to optimize their reimbursement process. You can also focus on verifying accurate details of key medical processes like patient registration and scheduling.
It is beneficial for your revenue cycle as you can efficiently bill and collect your reimbursement claims. It also enables you to close your accounts receivable and generate organizational revenue quickly.
3. Validating Insurance Coverage
You can allocate resources towards validating your patients’ insurance coverage. Any discrepancies can elongate the duration of your revenue cycle. This change is likely to impact your cash flow and accounts receivable as you may lose revenue due to claim denials.
Healthcare organizations can set up an automated eligibility system with which they can accurately validate the insurance details of their patients. This function can be executed before appointments are given to patients so that patient insurance is checked in batches every week.
In this way, you are in a better position to identify any issues before you meet your patients. You can use this advantage to communicate with them better and clarify all insurance matters.
4. Setting Payment Expectations
Hospitals and clinics can also set up payment expectations from their patients. These expectations can reduce the instances of overdue payments by constantly revising the financial responsibility of your patients with them.
You may risk your accounts receivable if you do not keep a check on your patients and collect their co-pays. Your revenue may also take a hit if their insurers take longer to reimburse you after the medical services are availed.
You can also focus on establishing a collection process for your customer invoices. Such a process can quickly release your reimbursements so that you can quickly collect those payments. This outcome results in better accounts receivable management solutions for you.
5. Collecting Upfront Payments
You can elevate your accounts receivable management by introducing an upfront payment system for your medical services. In this way, you are able to receive your reimbursements at the time of service and prevent post-appointment invoicing.
Healthcare organizations can send the cost estimates for their medical services to insurance companies. They are sent before patients avail themselves of the relevant healthcare procedures and treatments. This policy increases timely payments as patients are well-informed beforehand.
6. Tracking Accounts Receivable
This process is one of the best ways to optimize your medical accounts receivable. You must constantly execute AR tracking for its logs and validate the relevant transactions. These methods open up new opportunities on their own for you to increase your revenue flow.
These opportunities can include new trends and practices that can be implemented on patients and their insurance providers. In this way, you can optimize the processing of your reimbursement claims and minimize the prevalence of overdue payments.
You can compare the duration of your patients’ accounts receivable. The comparison can be used to identify patients who have overdue payments. Moreover, you can also determine ways to decrease the duration of their accounts receivable.
7. Automating Claims Processing
The manual medical billing process of healthcare organizations is a major reason for the slow management of their AR process. It makes the AR billing process more time-consuming, which increases the duration of your revenue cycle.
You may make more errors with the manual processing of your reimbursement claims. Hospitals and clinics can counter it by automating the process and extensively scrubbing their claims. Scrubbing minimizes organizational rejections and mistakes in the form of claim denials.
These benefits are also effectively received by insurance companies, which are more likely to process your reimbursement claims.
Accounts Receivable Management Best Practices
The following is a collection of the best practices that can upscale your accounts receivable management services for medical billing:
1. Outstanding Accounts Follow-up
You should always consistently follow up on your outstanding accounts. This practice increases the likelihood of payment collection from patients and insurance companies. Some healthcare organizations develop a comprehensive policy for payment collection.
You can try doing the same for your past-due payments. It can include letters of demand and courtesy calls. In case your patients do not meet their deadlines, you can consider implementing more practical measures.
2. Automated Patient Data Collection
Collecting patient data is an important step to effectively manage your accounts receivable. Keep in mind that outdated and manual collection techniques can make AR management challenging for you. This includes manual tools, spreadsheets, and paper forms. To avoid that, many automated data collection solutions are available now.
They can upscale that time-consuming and error-prone process. Every step of patient data collection including searching and updating can now be automated. You can also ensure that the data is neither duplicated nor destroyed throughout the transition. You may have to update that data in your digital system after transcribing it from paper copies.
3. AR Aging Reports
An aging report for accounts receivable breaks down the number of your patient debts. It also includes their outstanding time. This way, you can distinguish between delinquent and nondelinquent accounts. You can also learn the duration of your delinquencies. This way, you can intervene with the collections at any time. And you can also prevent any issues resulting from regular late payers.
4. Patient and Insurer Consultations
Hospitals should conduct regular consultations with patients and insurance companies. With consultations, you should ensure due diligence so that you can recover your late ARs. This way, you can also end any cash flow concerns. It also includes detailed accounts of your interactions along with the payment information.
Factors That Complicate Accounts Receivable Management
1. Slow Payment Cycles
You must receive timely payments with accurate processing to ensure effective accounts receivable management system. For this, your collections should increase, and the pending invoices should decrease. This way, you can optimize your cash flow. But your manual work can slow down these payment cycles.
It involves the usage of paper invoices and checks. They decrease your productivity as they need more time and manual labor. You have to wait longer to get paid, which reduces your cash flow. It also becomes harder for you to keep up with your invoices.
2. Tracking Pending Payments
Tracking the pending payments from your patients can also become an issue. You may lose track of them, which can lead to inaccurate records. You may end up with double and missed payments. All these problems lead to payment delays and cash flow problems.
It can also be time-consuming if you are manually reconciling your payments. You have to match those payments to their invoices, which is a tedious and error-prone task.
3. Lack of Proper Policies
The worst thing you can do with your healthcare organization is to undercut it due to a lack of proper policies. You may be adding new payment options for your patients. While doing that, you may not be considering their negative impact on your accounts receivable. There is no check and balance since you do not have any strict policies to follow.
How To Measure The Performance Of AR Management
There are various methods that you can use to measure the performance of your account receivable management. We have covered the four major methods to get accurate results:
1. How ARTR Measures AR Management Performance?
The full form of ARTR is the accounts receivable turnover ratio. It measures the number of times a hospital converts its accounts receivable into cash in a specific period. This period usually lasts over a year. The ARTR formula divides the net revenue by the average accounts receivable.
Your AR is being converted into cash more frequently if this ratio goes up. This means an increase in your cash flow and liquidity.
2. How CEI Measures AR Management Performance?
The full form of CEI is the collection effectiveness index. It compares your pending payments with the ones received in a specific period. This period usually lasts a year. You can use the resulting percentage to check your current policies and procedures.
The formula for CEI is given below. As close as this value is to 100, it refers to stronger processes and policies for payments. If it is going away from 100, you need to re-evaluate those policies.
(Beginning receivables + Monthly credit sales – Ending total receivables) / (Beginning receivables + Monthly credit sales – Ending current receivables) x 100
3. How DSO Measures AR Management Performance?
The full form of DSO is Days Sales Outstanding. It calculates the time taken for payment collection after you have provided the relevant medical service. The formula of DSO is given below:
(Accounts receivable/total credit sales) x number of days in a period.
Your DSO should not exceed the terms by more than half. You must get it as close as the Best Possible DSO. It refers to payment collections as quickly as possible. The formula of the Best Possible DSO is given below:
(Current receivables x number of days in period) / credit sales for the period
4. How ADD Measures AR Management Performance?
The full form of ADD is average days delinquent. It determines the level of efficiency and effectiveness of your medical billing processes. They refer to your ability to collect timely receivables. The formula of ADD is given below:
ADD= Days Sales Outstanding – Best Possible Days Sales Outstanding
Accounts Receivable Management With Health Quest Billing
As a medical billing company, Health Quest Billing provides comprehensive services for account receivables management. We have a dedicated team of billing professionals who can track and collect your payments. This is how we ensure that our services optimize your revenue streams. We also use automated tools that are helpful in streamlining your medical billing.
They reduce any errors that can increase the number of receivable days on your accounts. Our proactive follow-up mechanisms are based on detailed reports. Our AR management expertise can customize billing solutions to your specific needs. This is how we ensure faster reimbursements and increased cash flow for your healthcare organization.
Apart from that, streamline your revenue cycle with Accounts Receivable Automation. Find out how AR automation software can increase efficiency and reduce errors.
The Bottom Line
This blog examined the intricacies of AR management in healthcare in detail. We comprehensively analyzed the impacts and benefits of managing accounts receivable. The blog also covered the factors that can complicate this process.
We also gave special attention to the methods for measuring the performance of your accounts receivable. Health Quest Billing has a team of expert billers who possess the necessary skill set to upscale that performance. So, contact us today to decrease your accounts receivable days.