Is Medical Accounts Receivable Outsourcing Services a Good Option?

Today, to know if you should outsource your AR services or not, you must understand Healthcare Receivables and AR Management and its challenges with a solution of outsourcing that makes a difference. That’s why we are here.

What are Healthcare Receivables and AR Management?

In medical billing, healthcare receivables are just commonly known as accounts receivable since it represents the total money due to the healthcare providers from patients, insurance companies, or other payers for services provided. In today’s busy regulatory climate, an efficient AR management system is the only way a healthcare practice can maintain its financial health and remain competitive. Problems like delayed payment, underpayment of claims, and denials often haunt healthcare practices in relation to financial stability. However, a medical revenue cycle management firm can help stream line AR to ensure timely collection and healthier performance.

The Emergence of Claims Denials: The Challenge Becomes Increasingly Difficult

Claim denials and delayed reimbursements remain significant challenges for healthcare providers. As per a PYMNTS Intelligence report, more than 37% of healthcare providers wait for payments in the range of $25,000 to $100,000, and 32% for debts over $100,000. The Working Capital Tracker also shows that 30% of healthcare providers report higher denial rates since the end of the pandemic.

Data from Crowe Revenue Cycle Analytics covering over 1,800 hospitals and 200,000 physicians revealed that one in three inpatient claims submitted to commercial insurers during the first quarter of 2023 were still outstanding for over three months. Also, 15% of both inpatient and outpatient claims received an initial denial. This clearly highlights why managing AR is essential in the current times, so financial risks can be kept under control.

Why Days in AR Matter

The AR process begins when a healthcare provider bills a patient or submits a claim to an insurance company. Once payment is received, the account is cleared from AR. Timely submission of claims—ideally within 72 hours of service—and ensuring clean, error-free claims can significantly reduce days in AR.

Days in AR equals accounts receivable divided by average daily charges, which are often used to determine the financial health of a practice. AAFP recommends keeping days in AR at 50 or below, with a target range being between 30 and 40 days. Directly related to improved cash flow and the enhancement of a practice’s overall financial performance is efficient AR management.

Some common causes of increased days in AR

Several factors can lead to extended AR periods, including:

• Inaccurate patient information or insurance details
• Incomplete documentation and coding errors
• Delayed claim submissions
• Ineffective follow-up on denied claims

Addressing these issues through robust AR management practices is vital for optimizing revenue.

Key Strategies for Effective AR Management

1. Insurance Eligibility Verification:

Verifying patient insurance details before services are provided ensures accurate billing and reduces claim denials. This includes confirming demographics, coverage limits, and identifying patient financial responsibilities.

2. Proper Charge Capture:

Document all services offered correctly. Healthcare providers must include all procedures and diagnoses performed or diagnosed along with supplies in the EHRs to enable error-free billing and reimbursement.

3. Clean Claims Submission

Sending claims promptly and accurately reduces rejection. It incorporates professional coders and a pre-submission cleaning process, indicating and correcting discrepancies to be submission-ready while staying within compliance mandates.

4. Patient Financial Literacy and Follow-Up

Educating patients on their insurance benefits and payment responsibilities fosters transparency and reduces overdue accounts. Clear payment policies and multiple payment options enhance collection efficiency.

5. Payment Posting:

Accurate recording of received payments in patient accounts ensures real-time updates and facilitates reconciliation. Identification of discrepancies such as underpayments or denials enables prompt corrective actions.

6. Denied Claims Management:

AR specialists are crucial in identifying, correcting, and resubmitting denied claims. Regular analysis of payer trends helps pinpoint slow-paying insurers and common denial reasons, enabling targeted improvements.

7. Reporting and Analysis:

Continuous monitoring of AR metrics, such as aging reports, highlights trends and inefficiencies. Regular analysis aids in identifying recurring issues in data collection, coding, or billing processes.

Now let’s see what is the Benefits of Outsourcing AR Management

Several advantages are offered in outsourcing AR management to specialized RCM firms staring from:

• Reducing in your operational burden: frees internal resources for patient care
• Improves cash flow: expedites payments and reduces accounts receivable
• Access to expertise: AR specialists utilize leading-edge software for automation and fewer errors
• Proactive denial management: identification and resolution of potential issues prior to claim submission increases first pass acceptance rates.
• In-depth Reporting: Offers in depth AR reports and analysis, allowing for better informed decisions.

With the healthcare industry becoming increasingly complex, today effective AR management is necessary for financial security. Outsourcing accounts receivable services to experienced RCM companies like us can have a huge impact on cash flow. Our expert not only helps in reducing claim denials but further improve the overall efficiency of the revenue cycle. Ensuring proactive AR strategies with us will further allow healthcare providers like you and hospitals to focus on providing quality care while maintaining strong financial health.

Optimizing Medical Accounts Receivable Services: Things You Must Know

The healthcare sector is confronted with unique dynamics of medical accounts receivable due to the complexities of healthcare administration including payer policies, government programs, self-paying patients, and the industry’s capital-intensive nature. There are numerous moving parts within a medical practice, but medical accounts receivable services are one of the most important components of working capital management. Therefore, tracking and improving accounts receivable services is essential for a thriving and financially strong practice.

Let us understand some critical and essential nuances of AR services and how you can optimize revenue by medical accounts receivable outsourcing services.

What are Accounts Receivable in Healthcare?

Accounts receivable is the amount of money owed by patients or insurers to a healthcare facility or provider for rendered care. Essentially, this extends credit, which is somewhat beneficial for patients. However, for providers, increasing the AR bucket is a major concern considering its impact on revenue.

Once your practice bills a patient or submits a claim to the insurer, the AR process begins. After they reimburse the correct amount, the account will no longer be in the AR bucket. In the healthcare revenue cycle management, AR is categorized based on age, usually 30-day buckets:

• 1-30 days
• 31-60 days
• 61-90 days
• 91-120 days
• 120+ days

What is the Significance of Medical Accounts Receivable?

Effective medical accounts receivable management is essential for optimized cash flow. The more accounts you have in your bucket, the less money your practice collects, which is a major concern considering your financial and functional viability. The longer an account sits in your bucket, the lesser the chance of reimbursement.

If you have to write off several accounts in your practice due to insufficient follow-up and monitoring systems, you leave a substantial amount of revenue on the table. This means you will have less money to invest in enhancing care quality or existing infrastructure, or even to pay your existing staff.

Therefore, you must take good care of your AR services to ensure functional and financial stability. ‘

How is Medical Accounts Receivable Unique?

Compared to other industries, medical AR services are unique considering the involvement of different stakeholders and the increasing risk of late payments resulting in bad debts. In fact, unlike other industries, hospital AR loses its value over time. The growth of high-deductible plans and copays poses a specific danger to medical practices. These plans increase the financial responsibilities of patients. As a result, patients bear a larger share of the costs in the care process. Due to this hefty healthcare expenditure, most providers expect only one-fifth of what their patients owe.

Key Performance Indicators in Medical Accounts Receivable Services

Identifying the key performance indicators in healthcare AR is essential to understand the financial well-being of your practice. We have broadly categorized AR into three parts:

Efficiency KPIs:

• AR turnover ratio- Measures how quickly payments are collected
• Days Sales Outstanding Ratio- Days to collect payment after the services provided
• Days Deduction Outstanding- Days to resolve issues in billing and coding
• Cost per collection- Expenditures of the collection process

Risk assessment KPIs:

• The proportion of accounts having a higher payment risk is known as the “percentage of high-risk accounts
• Typical Days Delinquent- The average number of days past due for accounts that are past due
• The bad debts to sales ratio percentage of sales that result in bad debts is known as the bad debts to sales ratio

Customer experience KPIs:

• Collection effectiveness index (CEI)- Measures success in payment collection
• Patient satisfaction- Satisfaction with billing and payment processes
• Number of revised bills- Frequency of invoices needing correction and resubmission

Challenges in Medical Accounts Receivable Services

The healthcare industry is constantly evolving and with that providers are consistently dealing with numerous complexities of revenue cycle management and quality care delivery. Along with skill shortages and high labor wages, the following are some of the factors that increase difficulties in managing medical accounts receivable services

High claim denial: Insurers purposely and constantly make it tougher to obtain reimbursements for rendered procedures or services. They can deny claims for a myriad of reasons. From missing information and insufficient documentation to coding errors, and late claim filings – all can result in claim rejections and denials.

Increased bad debts: Patient’s financial responsibilities are increasing within the care process considering frequent changes within the industry. This results in high expenditure and often is not paid by the patients. Eventually, this not only leads you to revenue loss but also disrupts your practice’s bottom line.

Disorganized collection process: Being a healthcare professional, it is not always possible for you to focus on financial aspects. It is also true that while it’s a delicate process, you must discuss and disclose the care expenditure to your patients. But transparency is often difficult for some practices considering the lack of expertise and proper tools. As a result, the reputation of the practice is at stake along with the financial stability.

Limited payment methods: Not accepting different payment processes is a major roadblock in collecting reimbursements. Failure to offer multiple payment methods puts your organization at a severe competitive disadvantage, as patients will likely seek service from a provider with multiple and convenient payment options.

The Key to Efficient Accounts Receivable Management: Outsourcing

Controlling accounts receivable is an encompassing affair for organizations in the healthcare industry because the strings attached endanger its success. Receiving payment as soon as possible through efficient maintenance of AR management is crucial for any care provider who wants to be profitable and increase their market share.

But along with a smooth set of accounts receivable, and fulfilling the healthcare needs, a proper and secure communication channel has to be well coordinated with the patients. If you need to onboard your patients, educate them about the treatment plan, care process, and their role, and collect their bills.

Team Sun Knowledge consists of a multitude of roles, functions, and expertise that can transform your practice’s growth and performance. With extensive experience in managing hospital AR and effective communication, our team can provide you with insights to empower your practice. The thought leadership we have in medical accounts receivable outsourcing services is made possible by close collaborations with field experts of different specialties and organizational structures of Sun Knowledge Inc.