When people refer to accounts receivable (A/R), they refer to all payments owed to a healthcare organization for services that have already been provided to patients. These balances could be due after insurance companies cover their portions or balances for people who opted not to use insurance. Strong A/R practices help create financial stability within healthcare.
When A/Rs aren’t paid in a timely manner, it adds additional financial burden to the healthcare organization. The revenue shortfall is exacerbated by time spent chasing payments. Research indicates that when A/Rs reach 120 days, providers can expect roughly 10 cents per owed dollar. The longer medical invoices go unpaid, the more likely an account will never be paid. When not paid, providers write these invoices off as bad debt.
While late payments are common in healthcare, minimizing nonpayment should be a priority. Late and non-payments limit cash flow, which healthcare organizations need to thrive.
Major A/R Challenges
Several factors contribute to A/R challenges, including:
- Insurance claim denials – medical claims can be denied for various reasons, such as missing information, lost claims, filing late, coding errors, duplicate submissions, etc. When denials occur, healthcare organizations rework those denied claims to get reimbursed. Proper coding and documentation can help mitigate denials.
- Bad debts – Patients are paying more because of the growing costs of healthcare. During times of inflation, those costs can soar. With more financial responsibility for medical services being pushed to patients, the volume of bad debt increases.
- Unwarranted write-offs – This occurs when providers opt to forgive debts without payment. Unwarranted write-offs further impact a healthcare organization’s bottom line and should be avoided.
- Disorganized collection processes – Streamlining the A/R process, price transparency, open communication, and positive patient experiences can all help improve A/R. When these are lacking, and the collection process is disorganized, providers don’t receive the volume of payments they are due.
- Limited payment modes – Accepting a variety of payment methods not only helps to meet the needs of patients, but it also helps to ensure timely payment.
Improve the Health of Your A/R
A/R acts as a line of credit for patients, which is helpful to the patient but can be detrimental to the healthcare organization if that debt goes unpaid. The following practices can help you ensure A/R payments are received promptly:
- Establish Credit Terms
Healthcare organizations with solid A/R practices work with patients to establish clear payment terms, such as deadlines, interest rates, payment methods, and late penalties. Clearly defined terms and conditions help reduce the number of delinquent or delayed payments. These terms must be made clear to patients before services are rendered, and patients should sign the document detailing the terms. Clear collection policies that are documented for overdue payments are helpful. The collection policy should include when periodic reminder calls occur, letters of demand, and details about when a collection service will be deployed. - Collect Invoicing Information
Before performing services, healthcare staff should capture the data needed for invoices, such as services rendered and itemized costs for the procedures. At this time, it’s also important to capture a variety of ways to contact the patient – email, phone, home address, etc. Manual A/R processes are tedious and invite errors. Automating A/R workflow improves efficiency. - Check-In with Insurance Providers
Patients have the option to pay out of pocket. If they choose to use their insurance, you’ll need to capture that information. Maintaining strong relationships with patients and insurance providers is essential. Keep records of all interactions and make sure your records are detailed. - Collect Co-Payments and Payments in the Office
Requiring co-payments and payments (either a deposit or percentage) to be made upfront for specific procedures or services isn’t uncommon. It can significantly reduce the A/R volume. - Regular Reporting
Those who are managing A/R should monitor and report on outstanding invoices and payments frequently. Regular reporting helps to ensure that delayed or delinquent payments are minimized. Immediate follow-up should occur for all unpaid invoices. This helps ensure healthcare organizations receive timely payments. Aging A/R reports break down the number of debts and how long they’ve been outstanding, helping you avoid problems with late payers. If needed, you can intercede with collections or discontinue providing services to avoid credit risks. - Maintain Communication
A/R staff can do their due diligence by regularly communicating with patients, providers, and insurance companies. Consistent follow-up increases the likelihood of payment. - Closing
Positive patient experiences can help mitigate nonpayment. Open and honest communication can help to establish a strong foundation. While collecting payment at the time of service is ideal as it keeps your A/R department running smoothly, it isn’t always realistic, especially in healthcare.
Healthcare A/R loses its value over time. The increase in high deductible health plans means more patients paying for services out of pocket – creating opportunities for delayed and delinquent payments, and increasing the healthcare organization’s financial burden. By following these practices, healthcare organizations can obtain timely payments and minimize non-payments.
If A/R continues to be a challenge, consider outsourcing medical billing services. Accurate medical billing helps to prevent denials, improving provider cash flow. If you are interested in exploring this option, AGS can help.
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