Accounts Receivable in healthcare refers to the money a healthcare provider owes for services rendered to patients. This can include fees for office visits, procedures, lab tests, and hospital stays. In the healthcare industry, insurance companies and government programs often pay a portion of the total bill, leaving the patient responsible for co-payments, deductibles, and any remaining balance. AR management services help to streamline the collection of these dues.
Healthcare providers need effective accounts receivable management services to ensure they receive payment for services rendered promptly. This includes accurately coding and submitting claims to insurance companies, following up on denied claims, and communicating with patients regarding their financial responsibility.
Proper accounts receivable management helps ensure that healthcare providers can maintain financial stability and continue providing high-quality care to patients. It’s important to note that healthcare providers must adhere to laws and regulations regarding patient privacy and billing practices.
Did You Know
On average, it takes healthcare providers 45-90 days to collect payment for services rendered.
Examples Of Accounts Receivables in the Healthcare Industry
Given below are examples of different types of service payment that get into the provider’s receivable pipeline.
Outpatient services: This can include doctor’s office visits, diagnostic tests, and rehabilitation services. The patient or their insurance company is responsible for payment for these services.
Inpatient services: This can include hospital stays, surgeries, and procedures. The patient’s insurance company or government program is responsible for payment for these services.
Insurance claims: Healthcare providers must submit claims to insurance companies to reimburse services rendered. Insurance companies can either pay the full amount, a portion of the amount, or deny the claim altogether.
Patient co-payments: Patients are often responsible for a portion of the cost of healthcare services, which is typically due at the time of service. If not collected upfront, a co-payment may become an account receivable.
Deductibles: Patients may have a deductible that they must meet before their insurance coverage kicks in. This amount is also considered part of the healthcare provider’s accounts receivable.
Uninsured patients: Some patients may not have insurance coverage and are responsible for payment of the full amount of the healthcare services they receive. When patients do not pay this amount after availing the treatment, it becomes an account receivable.
Did You Know
It is estimated that up to 8% of all claims submitted to insurance companies are denied, which can lead to significant delays in payment.
Why Do Hospitals Struggle to Streamline their Accounts Receivables Management Services
There are several reasons why hospitals struggle to streamline their AR management services:
The first reason is complex billing systems. The healthcare industry has a complex billing system, with multiple insurance providers, government programs, and patient co-payments. This can make it difficult for hospitals to track and manage accounts receivable accurately.
The second reason is the need for more standardization among payers. Each insurance provider and government program have different reimbursement policies and procedures, which can make it difficult for hospitals to standardize their billing and collections processes.
Improper data management is yet another reason for the struggle. Maintaining accurate patient and insurance information is critical for efficient billing and collections. However, manual data entry and limited data management systems can lead to errors and inefficiencies in the accounts receivable process.
One more major reason is denied claims. Insurance companies can deny claims for various reasons, such as coding errors or incorrect billing information. This can lead to delays in payment and additional work for the hospital to appeal the denied claim.
Improper patient collections are a major trigger for accounts receivable problems: Collecting payment from patients can be challenging, especially if they are uninsured or have high deductible plans. Therefore, hospitals need to have effective processes to communicate with patients and follow up on payments.
The inability to comply with regulations is also a reason for poor AR management. For example, healthcare providers must comply with numerous laws and regulations regarding patient privacy and billing practices, which can add complexity and challenge to the accounts receivable process.
Overall, the complexity of the healthcare industry and the numerous factors involved in the accounts receivable process can make it difficult for hospitals to streamline their services. However, by investing in technology and improving processes, hospitals can work to improve the efficiency and accuracy of their accounts receivable operations.
Did You Know
According to some estimates, as much as 40% of all medical bills result in an unpaid balance for the healthcare provider.
How Can Hospitals Streamline Accounts Receivables in 2023
A recent report says that hospitals wrote off an average of 3-5% of their total revenue in 2022 due to uncollectible accounts receivable. In 2023, hospitals can streamline their accounts receivable process by implementing some proven strategies. Some steps that hospitals need to take are:
Implement an electronic billing and collections system: Electronic systems can automate many of the manual tasks involved in the billing and collections process, reducing errors and increasing efficiency.
Improve coding accuracy: Accurate coding is critical for efficient billing and collections. Hospitals can invest in coding training and software tools to help improve accuracy.
Monitor insurance reimbursement policies: Insurance reimbursement policies can change frequently, so hospitals need to stay updated on the policies of their insurance providers.
Communicate with patients: Hospitals can improve the collections process by communicating effectively with patients, explaining their financial responsibility, and providing clear instructions for payment.
Offer payment options: Hospitals can increase patient satisfaction and improve collections by offering flexible payment options, such as online payment portals, installment plans, and charity care programs.
Monitor and follow up on denied claims: Denied claims can significantly delay payment, so hospitals need to monitor denied claims and follow up with insurance providers to resolve any issues.
Invest in debt collection services: Hospitals can consider using debt collection services to help collect payments from patients with overdue balances.
Did You Know
Collecting accounts receivable can be significant, with some estimates suggesting that it can cost up to $20 to collect $100 in healthcare receivables.
Key Metrics Used to Evaluate the Performance of Accounts Receivable Services
Accounts receivables can best be managed with the help of a few standard metrics. These metrics provide valuable insights into the performance of accounts receivable services and help identify areas for improvement. By monitoring these metrics, healthcare providers can ensure that their accounts receivable processes are efficient, effective, and aligned with their financial goals. These metrics include:
Days Sales Outstanding (DSO): This measures the average number of days a provider needs to receive payment for its invoices. A low DSO indicates efficient accounts receivable management and effective collection practices.
Payment Default Rate: This measures the percentage of invoices that go into default or are written off as uncollectible. A low payment default rate is desirable and indicates effective credit control and debt recovery efforts.
Cash Conversion Cycle: This metric measures the time it takes for a provider to convert sales into cash. A shorter cash conversion cycle indicates efficient accounts receivable management and improved cash flow.
Gross Margin Return on Investment (GMROI): This measures the return on investment a healthcare provider gets from its inventory. A higher GMROI indicates better use of working capital, which can be influenced by efficient accounts receivable management.
Write-Off Rate: This measures the percentage of invoices written off as uncollectible. A low write-off rate indicates effective credit control and debt recovery efforts.
Did You Know
It’s estimated that up to 50% of healthcare providers have aging accounts receivable that are 90 days or older.
Why is Accounts Receivable Outsourcing a Preferred AR Management Strategy
Outsourcing AR management services is a growing trend among hospitals. This is because accounts receivables bring numerous benefits to healthcare providers. Unfortunately, an onshore service provider cannot offer most of these benefits.
Firstly, outsourcing help providers save time and resources that can be redirected toward more important tasks. Delegating the task of accounts receivable management to a third-party service provider frees internal staff to focus on core business operations, improving productivity and efficiency.
Secondly, outsourcing can provide access to specialized skills and expertise. The most important benefit is that accounts receivable service providers employ dedicated professionals who are trained and experienced in the latest accounts receivable management techniques and technology. The combination of skills and tools enables them to handle complex and time-sensitive tasks efficiently and effectively.
Yet another benefit of outsourcing accounts receivable services is that it improves cash flow and reduces the risk of bad debt. Service providers can help streamline the accounts receivable process, ensuring invoices are sent out promptly, and payments are received on time. They can also provide credit control and debt recovery services, reducing the risk of bad debt and improving overall cash flow.
Outsourcing can even support healthcare providers with considerable cost savings. This is because outsourcing eliminates the need to hire and train additional staff, reducing personnel and training costs. Additionally, service providers typically have economies of scale, enabling them to provide services at a lower cost than if the business were to do it in-house.
MedBilling Experts has over 10 years of experience providing AR management back-office services to US-based practices. Our services are designed to make your accounts receivable process highly effective, reduce risk, and improve cash flow. Our team of experts is trained in the latest accounts receivable management techniques and technology, providing you with specialized skills and expertise to handle complex and time-sensitive tasks efficiently and effectively. With our services, you can eliminate the need to hire and train additional staff, reducing personnel and training costs. In addition, we take care of all aspects of accounts receivable management, from invoice generation to debt recovery, ensuring that payments are received on time. Partner with us for a hassle-free and efficient accounts receivable management solution.
