5 Mistakes in Healthcare Accounts Receivable That Drain Your Profits

Healthcare accounts receivable (AR) valuation depicts the total money owed by payers and  patients. Providers primary objective is to ensure the swift recovery of patients. Hence, they render treatment after securing prior authorization. Later, they send the bills to patients’ insurers, expecting total reimbursement. However, due to payer denials, a significant amount of outstanding debt piles up every month. If providers don’t take adequate initiatives to collect them at the earliest, these valuable dollars will end up as bad debts. Consequently, the practice will face an exorbitant financial crisis.

Understanding Healthcare Accounts Receivable Valuation

Some medical practices notice cash flow tightening even though patient visits are steady. They see their ledger showing millions in outstanding receivables. As a result, the balance in their banks becomes uncomfortably low. To address this issue, providers mostly engage in conversations regarding their revenue gaps. It steals their attention from patient outcomes to finance. And before long, healthcare staff realizes the culprit isn’t patient volume. Rather, it’s how they manage their accounts receivable (AR).

This story repeats itself across the U.S. healthcare landscape. While hospitals and practices deliver lifesaving care every day, many struggle with the “business side” of medicine. Specifically, the responsibility of collecting their accounts receivable keeps them busy during their entire working hours. Once they manage to get it right, financial stability follows. If providers take AR lightly, the consequences ripple into staffing, patient services, and long-term growth.

That’s why understanding the pitfalls of healthcare AR is more than just an accounting issue. It’s a survival strategy.

Why Healthcare AR Valuation Is So Risky

Unlike retail, where money changes hands at the point of sale, healthcare services are usually rendered on credit. Here, treatments and medications are rendered first, and bills are sent later. Often, the outstanding AR hangs between payers and patients. Eventually, providers become frustrated seeing their collection process going out of control.

Now, we have observed multiple reasons behind the increasing accounts receivable. The most common reasons are as follows:

Unobserved Denied Claims

Healthcare staff spend their entire day mainly ensuring patients get top-notch treatments and medications. As a result, they often miss out on guidelines for billing perfection. Eventually, those claims hit denial lists. Now, due to a lack of time or proper knowledge, those rejected claims go unobserved, and AR piles up.

Inefficient Denial Management

As soon as a claim hits denials, healthcare accounts receivable services should re-appeal with required rectifications. It requires in-depth knowledge to recognize the errors in claims. Moreover, billing staff should be able to swiftly rectify the errors and resubmit within the appeal time limit. Due to feeble denial management techniques, many claims turn into bad debt every year.

Patients Deny Paying

As per the insurance policy, if a treatment is not covered under the patient’s insurance plan, they should pay for the treatment from their own pocket. These charges are referred to as out-of-pocket expenses. Patients often have a misconception that their treatment costs will be reimbursed. Eventually, they become frustrated seeing huge bills after treatment and refuse to pay.

For these reasons, between coding errors, denials, contract allowances, and shifting regulations, the receivable listed on the balance sheet is rarely the amount that will actually hit the bank.

The 5 Errors That Throw Healthcare AR Valuation Off Track

We have observed over the years that some common errors repeatedly sabotage healthcare providers’ AR accuracy. Hence, it should be their top priority to avoid these mistakes. It won’t just improve their bottom line. Rather, it will enable them to build a sustainable foundation for patient care.

1. Claim Denials and Rejections

Every denial is more than just lost revenue. It’s a signal that billing requires more close attention. The common reasons behind claim denials are coding errors, incomplete documentation, or eligibility mismatches. These denied claims distort AR valuation by inflating receivables that will never convert into cash.

Now, most practices have a common query: how to avoid it? Here, medical accounts receivable services should create denial management protocols that don’t stop at resubmission. They need to dig into the root causes. By fixing upstream errors, providers not only clean up their AR but also prevent revenue leakage long before it hits the books.

2. Delayed Payments

When reimbursement delays become chronic, AR valuations grow over the limit. If a claim valued at $10,000 sit in receivables for six months, its actual collectible value drops every day it remains unpaid. Gradually, it becomes a reason for a significant financial loss.

To eradicate claim denials, billing staff need to track average payment timelines by payer. Practices that use real-time AR analytics can predict delays, escalate slow claims, and prioritize follow-up efforts. Here, they must understand that payment lag is a trend, not an accident. Recognizing the pattern helps financial teams build realistic projections.

3. Bad Debt and Write-offs

Bad debt is an unavoidable part of the healthcare equation. Practices often encounter patients who refuse to pay or have insurance gaps. These accounts are usually stuck in the outstanding ledger. Moreover, the in-house staff of the provider often fails to recognize these issues. Eventually, their AR increases and, over time, goes into bad debt.

To solve the issue related to bad debt, providers must accurately recognize the point at which a receivable gets written off. A structured approach paints a more honest picture that convinces payers to process reimbursement.

4. Inaccurate Aging and Allocation:

Aging schedules are the heartbeat of AR valuation. They reveal how long receivables have been outstanding. Moreover, the aging data help predict collection probability. However, in many cases, practices assign claims to inaccurate buckets. It is the result of misclassifying collectible amounts.

To avoid this, providers should automate AR aging reports with software that integrates directly with their billing systems. Manual entry invites error, and outdated spreadsheets can’t keep pace with payer complexity. While proper analysis will enable healthcare accounts receivable management services to speculate on how much is collectible. In addition, they can determine how much is at risk and what actions must follow.

5. Overlooking Regulatory Compliance

Providers deal with Medicare audits, HIPAA rules, Medicaid nuances, etc. Here, they need to understand that compliance isn’t just red tape. It directly impacts collectability. A receivable that looks solid today may vanish tomorrow after an audit correction.

To avoid noncompliance issues, practices need to build compliance checks into valuation. They must treat it as part of the process, not a separate task for the legal team to worry about later.

Hence, regulatory shifts, inconsistent valuation methods, poor use of analytics, and even skill gaps in AR teams gradually increase outstanding debt. Over time, that becomes a pain point for providers, as due to significant financial loss, many practices have even faced closure in recent years.  

How Outsourcing Helps in AR Collection

Doctors must realize that they went to medical school, not accounting school. Furthermore, running a clinic or hospital demands focus on patients, not spreadsheets. That’s why many providers are now planning on medical accounts receivable outsourcing. These third-party AR collection experts have unparalleled mastery. Moreover, they offer the most cost-effective solutions to help small and medium-scale practices keep up their financial health.

Why Choose SunKnowledge for Healthcare Accounts Receivable Management

SunKnowledge Inc. has been a top-performing healthcare accounts receivable company for more than two decades. We don’t treat outstanding AR casually. Rather, we focus on resolving issues and ensuring swift payments. We manage AR with the following efficiencies.

• We are a one-stop shop for AR management
• We provide advanced analytics and reporting
• We explain bills to patients in simple terms
• We seamlessly integrate with providers’ technologies

Along with top-notch AR management, we also offer specialty-specific billing services at the lowest rate. Our partnership helps providers save up to 80% of their administrative costs. Therefore, our services not only keep finances stable but also inspire them towards growth. Fill out the “Quick Connect” form to keep your AR under check.

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