How well do you understand your cash flow in terms of accounts receivable? Many medical offices see their A/R metric as a dark box of ambiguity, but in truth, it’s one of the most significant figures to comprehend when receiving an overview of your practice’s financial condition. The invoice is created when the service has been provided and invoiced. It is then forwarded to the patient, medical billing services, or insurance company for payment posting. To ensure on-time payments, the staff team must keep a watch on these account receivables. The complete process begins with finding the denied or unpaid claim, resubmitting the correct claims, lowering the AR recovery duration, and eradicating older account receivables. Continue reading to find out more about this significant figure and how to track it.
Understanding Accounts Receivable
Accounts receivable are funds owing to your office for services given and billed, and they are a high-touch area in any medical business. So, if you have a big number of administrative personnel managing different patient accounts or specializations, it might be difficult to get a comprehensive picture of how long it takes to get paid.
When you give medical services on credit terms, your medical practice’s accounts receivable statistic grows. The continual surveillance of your accounts receivable helps you pay your bills on time. If you fail to keep track of your accounts receivable, your medical practice may end up with bad debts. As a result, offering your health care services on credit entails the added obligation of handling accounts receivable.
Why Monitor Accounts Receivable Turnover?
If patient visits are constant, so should incoming cash. This is why it’s critical for medical practices to understand how many days pass between bills being paid and payments being received.
Accounts receivable (A/R) for a practice indicates how many payments have yet to be collected, whether for insurance reimbursements or out-of-pocket treatments. The goal of a healthy medical practice is to simplify processes in order to be paid quicker. Which might include minimizing billing and coding mistakes or doing a better job of following up on claims. Tracking the length of time claims spend in A/R can assist practices in determining which payers are delayed and why.
You may identify whether your team is late to submit claims to payers by knowing the usual number of days from the time you visit a patient and the time you collect what you’re entitled to. Furthermore, you’ll know how much money you need to retain in the bank – and for how long – in order to cover your operational expenditures before reimbursements.
Accounts Receivable Calculation
Calculate your current “Days A/R” by reviewing your billings to obtain a notion of your starting point.
- Add up the costs reported for that time and divide them by the total number of days in those months to calculate the average daily charges for a certain number of months.
- Total accounts receivable divided by average daily charges
The average Days in Accounts Receivable is the outcome. For example, if you go back three months, you may use that as a beginning point for continuous quarterly measurement. When you compare those three months to the three or six months before them, you can see if that baseline is consistent with your overall performance.
The optimum standard is A/R within 30 days. Investigate quickly if your accounts receivable average is more than 60 days. Is there a payer who is delaying payments? Are denials increasing in relation to certain procedures? Have there been any inaccuracies in your claims that necessitated resubmission?
If you’re in the zone of 45 days or fewer, you may begin tracking and comprehending your billings more effectively by bucketing and aging your receivables.
Because each payer operates on their own schedule, you can correlate payments made with bills received to determine whether an insurer reimburses you within a 30 or 60-day window, giving your team a better understanding of when a given bill has reached its “late payment” threshold and it’s time to contact the payer.
Best Practices for Reducing Accounts Receivable Days
Here are some best practices for reducing days in A/R at your medical practice:
Invoicing on Time
Prepare and send your bills as soon as you provide medical services on credit. Each invoice should include the client’s name, account number, transaction date, a description of the medical services delivered, any discounts provided, and the total payment amount.
These particulars are critical in tracking your accounts receivable once they have been transferred to your sales journals and general ledger accounts. Invoices are also useful if there are any future issues or conflicts, such as overcharges or undercharges. Follow up with your clients to ensure they got their invoices.
Educate Patients
Most people have only a hazy awareness of how healthcare practitioners receive payments from insurance companies. And they may not be aware of their financial obligations when they use medical services.
Giving each patient a brochure or reference page detailing their situation. And duties in the payment process will help to clear up a lot of misconceptions. It is also critical to have someone on staff with financial knowledge to address any concerns patients may have regarding the claims and payment process.
Frequent Audits and Report Submission
One of the finest strategies for account receivables management is to conduct audits on a regular basis. This allows you to discover areas that need improvement, identify concerns, and assess the risks associated. Following the completion of such audits, reports are generated and filed. Which clarifies outstanding debts, helps keep claim denials at bay, and assures timely payment collection.
A/R Workflow Automation
A/R workflow automation saves time by managing some of the more time-consuming aspects of A/R. Many applications make automated A/R more feasible. Best medical billing services, for example, cover tasks such as benefit verification, claim submission, and A/R reporting. This form of automation not only makes invoicing and payment collection more prompt. But also decreases issues such as forgotten A/R accounts or claim denials.
Increase the frequency of billing cycles
The sooner payers are invoiced for services, the sooner outstanding accounts are settled. However, many suppliers only send out bills once a month, which might cause delays in accounts receivable. It doesn’t harm to think about raising the frequency of billing to speed up operations. You may, for example, mail or submit patient or insurance bills on a weekly basis.
Run A/R Reports Frequently
The overarching aim is to keep A/R days low because this is the most effective way to manage the revenue cycle. This necessitates thorough monitoring of AR. It is beneficial to thoroughly evaluate AR data from month to month in order to identify troubling trends or persistent problems with collecting payments. These reports should look into issues such as:
- Average AR cycles
- Delays between services rendered and invoicing
- Aged accounts
- Collection rates
Outsource Your Medical Billing
Whatever the root reasons for your accounts receivable numbers. Working with a professional medical billing firm is one of the quickest and easiest strategies to improve this critical income indicator. To reduce the number of denials. Experienced medical billing services can alter the way a practice classifies its services and sends claims to payers.
Outsourcing your medical billing process to a third party also gives your office personnel more time to focus on providing the finest service and care possible. Instead of spending hours on the phone trying to collect unpaid bills, a medical billing business may focus on growing the practice’s patient base and enhancing the practice’s healthcare experience in order to keep the customers it already has.
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