Hospital Accounts Receivable: Major Challenges and Their Solutions

Revenue delay causes serious problems with the overall cash flow in a hospital. Since hospital accounts receivable often have a high volume of accounts, most hospitals face revenue delays. Before you start navigating the challenges associated with hospital AR, you should first know what accounts receivable is and its critical pitfalls.

What are hospital accounts receivable?

Once you bill a patient or their insurance company for provided services, the total amount owed to your hospital is known as accounts receivable. Simply put, AR can be defined as pending invoices. There are several ways you can measure hospital AR. You can measure “days in AR” by dividing the AR total by the average daily charges of your hospital. Secondly, you can classify accounts receivable by their age, such as:

• 1 to 30 days since billed
• 31 to 60 days since billed
• 61 to 90 days since billed
• 91 to 120 days since billed

The longer an account remains delinquent, the more likely you will not collect from that account. You should not consider AR as a part of your revenue, though it involves money that is owed to you. According to research, you can only expect to collect 10 cents per dollar from an account aged beyond 120 days. Poor management of accounts receivable overburdens your financial department, causing staff burnout and leading to revenue leakage for your hospital.

Fortunately, with the right strategies, the complexities of managing accounts receivable can be effectively addressed. Let’s explore the common AR challenges and their practical solutions.

Common Hospital Accounts Receivable Challenges and Their Solutions

1) Insurance claim denials:

A denied insurance claim is one of the major accounts receivable problems. According to a survey by the U.S. Government Accountability Office (GAO), hospitals lose almost 10% of their overall profitability due to inadequate denial management processes. As per the Medical Group Management Association (MGMA) report, the ideal denial rate should be 4%.

Solution:

The in-house PA team should meticulously review each claim before submission so that claims meet all required guidelines. Also, there should be a routine follow-up process for denied claims. Your team should investigate each denied claim and correct it to avoid further denial.

2) Unwanted write-offs:

In many hospitals, AR teams do not maintain accounts that are low in amount. Eventually, this habit impacts the balance sheet of hospitals. It happens because there are patients who cannot make payments all at once. Instead, they prefer to go for the instalment option.

Solution:

The team should review and approve every amount before they write off. Regardless of the amount, everything must be recorded in the accounts book. In this way, you can ensure that your business not going south.

3) Bad debts:

Increasing number of bad debts has become a major roadblock for AR management. The patient’s share of healthcare costs now makes up over a quarter of the industry’s revenue. In the past, patients paid only at the time of service, but that’s no longer enough. Collecting payments from patients throughout the entire revenue cycle is now crucial.

Solution:

You should collect all the critical billing and insurance information before providing service to a patient. You should also calculate the potential out-of-pocket expense for your patients and let them know in advance. The patients should know the details of their insurance coverage and financial responsibilities.

4) Collection process:

Collecting payments is not something that healthcare professionals specialize in. Unfortunately, you can avoid payment collection as the overall revenue model of your hospital stands on it.

Solution:

To ensure seamless accounts receivable management, you need to foster a systematic culture of payment collection. You should use the right tools and approach to collect payments so that your patients don’t feel disappointed.

5) Lack of AR management:

Poor accounts receivable management process can push your hospital towards loss including bad debts and patient frustration. One critical sign of poor AR management is the rising number of bad debts in the accounts book.

Solution:

You should carefully reconcile your bank statements to ensure all transactions are correct and nothing is missed. This helps prevent fraud and errors, allowing you to focus on treating your patients. Your primary objective should be keeping your AR days low. You can do this by tracking and analyzing AR data from month to month. Run regular reports to examine the crucial components like-

• Average AR cycles
• Delays between services rendered and invoicing
• Aged accounts
• Collection rates

6) Limited payment options:

Patients often struggle to pay with limited payment modes. Frequently, patients do not carry adequate cash with them. Eventually, it becomes a major payment collection pitfall.

Collect payments at the time of services:

Most patients do not have adequate knowledge about their financial responsibilities and insurance policies. This may increase accounts receivable issues.

Solution:

You have several ways to educate your patients and some of the common ways of patient education are-

• Appointment Scheduling
• Provider Web Site
• Welcome letter
• Insurance Verification
• Appointment Reminder
• Patient Check-In
• Patient Check-Out
• Claim Processing
• Appeal Letter

At each process, you should clearly state the payment policy, payment method options, and outstanding balances.

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7) Unmotivated staff:

From doctors to administrative staff, everyone in your hospital should be passionate about their responsibilities. If the employees are not motivated and are not taking your goals seriously, you can see its negative impact on your hospital.

Solution:

The best solution is to outsource your accounts receivable to a reliable firm that specializes in this area. They will work hard to meet your needs. Hiring top administrative staff is difficult and expensive, but outsourcing gives you access to advanced technology and dependable services.

As a leading hospital accounts receivable, collections and management service, we know how to boost your ROI. Our team is up-to-date with the latest requirements and can improve your revenue collection process.

We have helped hundreds of healthcare providers cut operational costs by nearly 80%. If you need help with aging unpaid claims, Sunknowledge is the best choice for reliable and effective A/R recovery and management.