- September 19, 2024
- Posted by: David Smith
- Category: Hospital AR
We all know the fact that managing a hospital is not an easy affair because there you deal with multiple specialties. Apart from handling patient care, you also need to take care of your administrative part, especially the accounts receivable and billing jobs. To ensure a seamless cash flow and healthy revenue structure, you must handle your hospital accounts receivable very carefully. The first thing you need to understand what hospital accounts receivable is.
Accounts receivable (AR) is crucial for managing your practice’s revenue. Think of AR as the heartbeat of your practice—it represents the payments owed by patients and insurance companies. Handling AR well is key to both your financial health and operational efficiency. Since AR involves complex billing processes, it has a big impact on how well your practice runs and how financially stable it is.
Understand the intricacies of hospital accounts receivable:
You must keep proper track of your delinquent accounts because at the end of the day, it’s your money owed by your patients and their insurance companies. You’re not just collecting payments—you’re also following rules and working with patients and insurers. Managing your A/R well keeps your cash flow steady, reduces debt, and supports your practice’s financial health. When you stay on top of it, you can see trends, improve processes, and boost your practice’s finances. To improve your overall hospital AR management, you first need to understand the ways of AR classifications.
Understand how ARs are classified:
You should submit claims within 3 working days after providing services. Usually, you should expect to receive the payment from a patient’s insurance company within 2 weeks but unfortunately, the truth is almost half of the hospital and other healthcare sectors are dealing with the significant amount of debt due to poor management of hospital accounts receivable.
Can you guess how much? It was almost $100 billion! The main culprit? Overdue accounts that were more than 180 days old.
If you’re dealing with late collections and overdue payments, your hospital will have more days in AR. “Days in AR” is how long it usually takes to get paid for your daily charges. To keep your finances stable, you need to track and manage these AR days.
To measure days in AR, divide your total accounts receivable by your daily charges. The American Academy of Family Physicians recommends keeping days in AR under 50 days. Ideally, aim for 30 to 40 days.
Another crucial way, you can segment your delinquent accounts is by counting their age. There are 4 age buckets that you can use-
- 0-30 days
- 31-60 days
- 61-90 days
- 91-120 days
The more aged an account is, the less amount of money you can expect to receive from that account. You can only expect to receive 10 cents per dollar owned from an account aged 120 days of more.
Tracking AR days is key to knowing how long it takes to collect payments. It helps you find ways to speed up collections and improve your revenue cycle. For example, if you notice your AR days are going up, it means payments are getting delayed. By checking this data, you can spot problems in your billing process and make changes to fix them. This can help lower AR days and improve your cash flow.
It is always important to know about the common challenges with hospital accounts receivable pitfalls so that you can implement a streamlined plan to mitigate all those challenges.
Challenges of hospital accounts receivable services:
1) Complex insurance claims:
To manage your hospital accounts receivable efficiently, you have to handle the complex world of medical billing and insurance claims. This means dealing with lots of medical codes and claim submission rules, which can make the process more complicated for you.
2) Poor cash flow due to delayed payment:
Most hospitals encounter poor cash flow due to payment delay from patients and insurance companies. This gap between when you provide services and when you get paid can lead to higher AR for your hospital.
3) Compliance and regulations:
The healthcare industry has a lot of rules and regulations. It’s really important for you to follow these laws and policies to make sure you collect payments effectively.
4) Significant operational expenses:
Managing AR, especially with denied claims and follow-ups, can be expensive for you. These costs can reduce your overall profitability.
5) Lack of staff training:
Using new technology is key to improving your AR. By adopting the latest tech and giving your staff good training, you can switch to more efficient and effective AR management systems.
6) Limited payment modes:
Limited payment options can slow down your revenue collection. By offering more payment methods and using modern solutions, you can make it easier for patients to pay and speed up your revenue cycle.
7) Bad debts:
Uncollected debts and the financial stress on patients are major challenges. By using strategies to reduce bad debts and offering financial assistance programs, you can ease the financial pressure on both yourself and your patients.
Unfortunately, most hospitals lack the experienced team of hospital AR management services and that’s why they are now outsourcing their billing and AR jobs to third-party hospital accounts receivable solutions. Outsourcing your AR collection to a hospital accounts receivable services provider enables you to fully focus on patient care while they take care of your end-to-end AR process and amplify your overall revenue.
If you need great support for managing hospital accounts receivable, Sunknowledge is here for you. Our team offers efficient help with a coordinated approach to handle all your payments smoothly. We provide customized support and high productivity to ensure you get a strong return on your investment, even for large operations.
Contact us to create your own AR success plan!