Navigating the Complex World of Accounts Receivable Practices in Medical Billing

Managing accounts receivable (AR) is a key aspect of medical billing. Effective AR practices are crucial for maintaining financial health for any industry, and the healthcare sector is also no exception. Appropriate AR practices directly impact cash flow, operational stability, and the ability to deliver quality care to patients. However, the complexity of AR management, coupled with the ever-evolving landscape of healthcare regulations, makes it a challenging task. This is the reason why properly managing the accounts receivable process is critical for building a thriving and financially strong practice.  

Let’s dive into the essential knowledge and best practices around healthcare accounts receivable management.  

What is Accounts Receivable (AR) in medical billing? 

At its core, AR refers to the amount owed from patients and insurance payers for the services rendered by the physicians. The unpaid accounts may involve outstanding patient invoices or reimbursements from the payers. The AR process encompasses several activities which include: 

AR analysis and classification according to varied criteria, e.g. aging days, payers, etc. 

Tracking and evaluating unpaid claims 

Proactively and consistently following up with the payers 

Taking corrective actions e.g. resubmission of claims and filing appeals 

Cleaning previous Accounts Receivables 

Regular reporting of AR and posting the collection of payments 

The Accounts Receivable process must be efficient as it is essential to billing success. Error at any stage can lead to delayed payments, denied claims, or even lost revenue.  

Challenges of Healthcare Accounts Receivable Management  

Some unique requirements associated with AR in medical billing give rise to specific challenges. All these challenges can significantly impact cash flow.  

Here are five common challenges physicians encounter in managing accounts receivable processes:  

Complexity of Medical Billing and Insurance Claims 

Managing AR in healthcare requires dealing with the complexity of medical billing and insurance claims. Each interaction with the patient requires managing many billing codes and diverse insurance policies, making the process complex and prone to errors. Hiring skilled and qualified AR professionals who are well-equipped with the complex nature of billing codes and insurance policies might help you mitigate this challenge. 

Bad Debt

As the cost of healthcare rises, so does the financial burden on the patients even though they have insurance. This leads to out-of-pocket expenses for the patients, which they sometimes cannot pay. Any loss of revenue can lead to bad debt. Some studies indicate that after 120 days in accounts receivable, providers only receive ten cents for every dollar owed. To increase profitability and lower bad debts, your AR team must gather and verify all the billing and insurance information before services have been rendered. This helps calculate the expected cost a patient needs to pay out of pocket. Verification of coverage and benefits allows the patient to understand and agree to her responsibilities even before the service is rendered.  

Unwanted Write-Offs

It means forgiving a patient’s debt without receiving the payment. Writing off unpaid charges severely impacts your practice’s bottom line.  While there are many reasons why these write-offs are necessary, with better Accounts Receivable management, you might be able to recover some of that money. Eliminating write-offs may be impossible, but having a set of proven procedures in place might help reduce it. 

Denial of Insurance Claims

This is the most predictable accounts receivable problem. Claims are denied primarily due to incorrect information or inaccurate coding. This can lead to delayed payments for the providers. To combat insurance claim denials, your AR management team must conduct thorough documentation to minimize these errors. Additionally, denied claims require prompt and meticulous follow-up to ensure that the necessary corrections are made and the claims are resubmitted. 

Poor Accounts Receivable Management Practices

Improper AR management in medical billing can lead your firm to financial loss, which includes bad debts and poor patient experience. Bad debts will also increase due to leniency in the collection process. To mitigate this, your AR team must reconcile the bank statements to verify the transactions’ accuracy and ensure you’ve not missed any entry. Proactive AR approaches can help you prevent any errors, enabling you to focus more on your patients.  

Benefits of Outsourcing Accounts Receivable Management 

There are many benefits to outsourcing Account Receivable management services to professional billing companies. Let’s look at some of the critical benefits of accounts receivable outsourcing in the long run:  

Manage Your Cash Flow Better: Managing accounts receivable plays an essential role in revenue cycle management, but it is a tedious process that requires a lot of time and energy. Instead of getting your employees stuck with such responsibilities, you can outsource this and let them devote their time to more important activities directly linked with revenue generation.   

Expertise and Professionalism: Outsourcing AR services will allow you to access specialized expertise. An expert and professional AR team will handle all the processes, starting from credit analysis to payment collection, quite efficiently. You can access a team capable of evaluating and addressing potential issues before they escalate, minimizing the risk of bad debt and financial losses. Knowledge of AR or overall billing residing in a large vendor will always be significantly better than a primarily enclosed and smaller in-house team.  

Cost Savings: Outsourcing AR might result in significant cost savings for your company. Although there are up-front expenses associated with outsourcing AR, doing so can often save money compared to recruiting and onboarding internal staff. You can outsource these tasks to a vendor for a much lower cost.  

Outsourcing AR services frees up time for other operational activities. This gives you free time and resources to focus on other core operational activities. These services might be revenue-driven or deliver excellent patient care. Your internal staff can utilize advanced technologies and tools to focus on strategic initiatives that are essential in meeting business objectives. 

With the enormous responsibilities that healthcare institutions continuously encounter, AR management is a considerable challenge. However, a company like RCM Workshop, with its skilled AR team, can help you eliminate the obstacles and ensure your AR process is handled seamlessly. Our unwavering commitment to minimizing write-offs and lowering bad debts and AR days guarantees that you can count on us to get the best financial results. 

In a Nutshell 

To increase your accounts receivable, various best practices must be thoroughly implemented. If you want to increase revenue, remember to look for additional inefficiencies and adhere to the best practices that your revenue cycle manager has laid out. Improving accounts receivable in medical billing is a multifaceted process that needs proper execution and strategic planning. From streamlining the billing process to checking proper documentation, conducting regular audits, communicating with payers, etc., all play an important role in increasing the revenue cycle. However, managing AR in-house can be tedious and time-consuming. Therefore, outsourcing these tasks to a professional will not only deliver efficiency but also enhance your financial stability while you focus on delivering excellent patient care.