In medical billing, AR stands for accounts receivable. It represents amounts owed to healthcare providers for services already provided. This includes outstanding patient and insurance payments. In this article, we’ll discuss the importance of AR, common challenges, and tips for managing AR effectively.
Quick Info
- Accounts Receivable (AR) is the money a medical practice is owed for services provided.
- Effective AR management includes tracking charges, payments, adjustments, and denials to ensure your medical practice’s financial health and liquidity.
- Outsourcing AR management can improve efficiency and cash flow, allowing you to focus on patient care while reducing operational costs.
What is Accounts Receivable (AR) in Medical Billing?
In medical billing, accounts receivable (AR) represents amounts owed to a medical practice for services already provided. This is money that has not yet been paid by the patient or insurance company.
AR monitoring allows healthcare providers to track amounts owed by patients and insurance companies, giving them better visibility into their financial situation.
Effective accounts receivable management ensures a healthcare practice’s liquidity and financial stability, allowing it to provide quality patient care without interruption.
AR Medical Billing Process
The AR medical billing process includes several important components that impact the financial success of the entire medical practice. These elements include fees, payments, adjustments, and denials.
Charges: The amount charged to the patient or insurance company for services provided.
Payment: Money received from the patient’s insurance company, Medicare, Medicaid, or other payers. Payments come from a variety of sources, including:
Adjustments: When contracts, discounts, and depreciation reduce the fee billed. For example, if an insurance company pays $800 for a $1,000 bill, the $800 is reflected in the accounts receivable balance.
Denials: When a payer denies reimbursement for services provided to the medical practice.
Effective accounts receivable management ensures your practice’s liquidity and financial stability. Monitoring your accounts receivable helps you maintain the cash flow you need to pay employees, pay invoices, and invest in new technology and services.
Late payments can be devastating to a practice’s finances, making it difficult to pay employees, pay invoices, and invest in new technology and services. A strong accounts receivable system ensures that invoices are paid on time, ensuring stability and continuity of your medical practice’s operations. Monitoring your accounts receivable helps you avoid lost revenue and missed collection opportunities.
AR vs. AP: What’s the Difference?
Understanding the difference between accounts receivable (AR) and accounts payable (AP) is important to managing your medical practice’s financial success.
- AR represents amounts due to your medical practice.
- AP represents money your medical practice owes to suppliers and creditors.
- Managing accounts receivable ensures you receive payment for services provided, which is important for cash flow and financial stability.
- Managing accounts payable ensures you pay invoices and vendors on time, which is important for maintaining good relationships with suppliers and avoiding late fees and interest.
Effectively managing accounts receivable and payable is important to the financial success of your medical practice.
Challenges with Medical Billing, Accounts Payable
Several common challenges with medical billing and accounts payable can affect the financial success of your medical practice. These challenges include:
- Insurance claim denials
- Bad debt
- Disorganized debt collection process
Insurance claim denials
Insurance claim denials are one of the biggest threats to a healthcare provider’s financial stability.
If a claim is denied, you won’t get your money until the claim is resubmitted, which can take months.
Bad debts
Bad debts occur when patients don’t pay some or all of their medical bills. This can happen when patients are uninsured or underinsured, or when they receive high medical bills but can’t pay them. Bad debt can be a big challenge for healthcare providers, especially those with a high percentage of self-pay patients.
Disorganized debt collection process
A disorganized debt collection process can affect a healthcare organization’s ability to effectively manage accounts receivable. Lack of proper tracking of accounts receivable leads to late payments and an increase in accounts receivable balances. A disorganized debt collection process can be caused by a lack of manpower, a lack of training, or a lack of technology.
Unpaid patient liability
Expensive health insurance contracts and rising medical costs have led to an increase in unpaid patient liability amounts. When patients shoulder a large portion of medical expenses, they are more likely to delay or ignore payment.
Medical Expense Deductions
Medical expense deductions represent amounts that a medical practice writes off as uncollectible. These include unpaid patient debts and bad debts. Unjustified write-offs of medical expenses can have a devastating effect on a medical practice’s financial success. Effective accounts receivable management can help minimize unjustified write-offs and reduce lost revenue.
Disorganized debt collection process
Another common challenge healthcare settings face when managing accounts receivable is a disorganized debt collection process. A disorganized debt collection process can lead to confusion and delays in payment collection, leading to increased outstanding balances and delayed refunds.
A disorganized debt collection process can be caused by:
- Lack of standardized procedures
- Unclear or missing documentation
- Poor communication between the front office and the billing staff
Best Practices for Accounts Receivable in Medical Practices
Managing medical billing accounts receivable can be difficult, but there are some proven methods you can use to overcome common challenges. These best practices include:
- Regularly monitor accounts receivable
- Automate your accounts receivable processes
Collect patient payments at the point of service.
Collecting patient payments at the time of service is one of the most effective ways to reduce outstanding balances and increase cash flow. Collecting patient payments up front allows you to avoid issuing invoices and chasing outstanding balances. This is especially important in practices with a high self-payer population, such as dermatology and plastic surgery. Offering financing options and no-interest payment plans to patients can help you collect more funds up front.
Provide patients with cost estimates.
Providing patients with cost estimates before a treatment or procedure is important for patient financial planning. If patients know how much the procedure will cost, they are more likely to pay.
Provide multiple payment options.
Limited payment options can prevent patients from paying their medical bills on time. If patients only have one payment option, they are more likely to delay or neglect to pay. Offering multiple payment options, such as online payments, credit card payments, and interest-free payment plans, can help patients pay their medical bills on time.
Regularly Monitor Accounts Receivable
By reviewing accounts receivable aging reports, you can identify outstanding balances and take action before they become bad debts.
Monitor Accounts Receivable Trends
Monitoring trends in accounts receivable is important for making informed business decisions for your medical practice. Tracking and analyzing claims can help you identify areas for improvement and make data-driven decisions about your practice.
Automate Accounts Receivable Processing
Automating your billing process can help you collect payments more quickly and reduce errors. Integrating your billing system with your electronic health record (EHR) allows you to submit claims electronically and reduce data entry errors.
This means less time to receive your money and fewer denials and claim rejections. Automated accounts receivable tracking and invoice submission also allow you to collect payments faster and reduce outstanding balances.
AR Tracking Team
A dedicated accounts receivable tracking team is key to collecting payments on time. Tracking outstanding balances allows you to resubmit claims quickly and avoid long payment times.
AR follow-up teams
Must regularly track outstanding balances, resubmit claims, and correct errors to ensure timely payments.
This helps avoid bad debts and increases the practice’s cash flow.
Medical billing services
Medical billing companies provide status updates for all submitted claims, giving you transparency into the collection process. Working with a medical billing company allows you to focus on patient care while the medical billing company handles bill submission and follow-up.
Calculating AR days
AR Days represent the number of days it takes to collect money from patients and insurance companies.
Calculating AR Days Ratio
A high AR Days ratio indicates a backlog in your practice’s financial processes. Claims that have been sitting in the old bucket for months are likely to be adjusted or denied and may be worth little in terms of reimbursement.
Monitoring AR Days
Monitoring AR Days is important to make informed business decisions for your medical practice. Tracking and analyzing your AR use days can help you identify areas for improvement and make data-driven decisions about your practice.
Cost-effective
Outsourcing AR management is a cost-effective solution for your practice.
Focus on Patient Care
Outsourcing your accounts receivable management allows you to focus on what matters most: providing quality patient care. Outsourcing your billing and collections allows your staff’s valuable time and resources to be spent on more important tasks.
Managing medical billing accounts receivable is critical to your medical practice’s financial success and operational stability. Understanding accounts receivable and following best practices can help you overcome common challenges and ensure a healthy cash flow. Effective AR tracking and AR days monitoring are important for making informed business decisions.