“Account Receivable” (AR) is a widely used term referring to the amount of money that customer owes to the company. Similarly, in the healthcare industry, AR means the patient’s account balance becomes due for payment within a year.
Account receivable services include the management of many reports dealing with insurance, collection analysis, write-offs, bad debt reviews, and ratio analysis. Moreover, it contains an analysis of insurance contracts to ensure healthcare providers are being reimbursed correctly.
We will discuss in this article about how to analyze the account receivable, how to reduce account receivable, and how to work the account receivable.
Account Receivable Analysis
An account receivable summary is an important aspect of AR analysis. This AR summary will help you see who owes you money, how much each customer owes, and who is past their due date. The AR summary can assess your receivables in many ways, including by individual patient, by insurance plan, and by payer class. Your billing staff should perform insurance eligibility verification before the date of service to avoid this patient responsibility enters into AR cumulation.
While analyzing the AR summary, each payer class should be examined and check if the pattern of AR totals by time category (30, 60, 90, 120 days, etc.) is appropriate for that class.
For instance, large AR volumes in the 120-day bucket suggest that Medicare claims are not being worked or that they are not being appropriately written off as contractual adjustments.
How to calculate Account Receivable?
Measurement of Account Receivable is called “Days in AR” which represents the average time it takes to collect a bill.
Let’s consider an example to elaborate on the term:
Assume that a practice charges $3,898,500 per year, $324,875 per month, or $10,680.82 per day.
To calculate the “Days in AR,” the following formula is applied: –
Days in AR = Total AR ÷ Average daily charge
Average Daily Charge = USD 10,681
Total AR = USD 916,752
Days in AR = USD 916,752 ÷ USD 10,681 = 86 days (85.83)
86 days looks excessive due to payer-mix or some circumstance of a major payer. Also, your collection process needs to be revised to identify why are you slow in collecting your charges.
If your practice is largely Medicaid, and the Medicaid agency in your state never pays in less than 90 days, then 86 days considered to be appropriate for Days in AR.
How to Reduce AR?
Providers should collect the charges at the time of service to reduce AR, also patients with a variable co-payment (e.g., the 30% of the Medicare allowable owed by patients without secondary insurance) could be charged at the time of service.
The staff person should have Medicare allowable payment schedule of the patients for the services provided to these patients in the office, along with the precalculated 30% co-payment at the patient’s checkout.
Moreover, staff should be aware of those Medicare patients who don’t possess co-insurance and these staff should collect the co-payment before the patient leaves the office.
Nowadays we observed that various factors that cause overheads for healthcare organizations such as outstanding claims and delayed collections as well as stringent federal regulations. This increases the pressure on healthcare organizations to follow up on denied or appealed claims.
For a long time if the account goes uncollected then the provider suffers not only loss of revenue but needed to set aside resources for collection.
Tips from the industry to reducing AR days
Experienced and trained Employees
It is observed that training of employees might be costly and time-consuming; however, it saves a lot of money for healthcare organizations in the long run. If healthcare staff that is responsible for billing are not trained properly then, they can make coding and billing mistakes which cause unnecessary spending. Moreover, Coding staff should complete a 60-hour long training session in four-hour increments in order to learn how to code effectively.
Alex Fernandez, a chief financial officer at Broward Health Medical Center in Ft. Lauderdale, Florida said “First and foremost is dropping a clean, accurate claim to the payer as close to discharge as possible,”
Automating your AR department
Rapid development in technology has provided businesses with the tools to streamline processing, and to reduce costs as well as improve productivity and efficiency across the whole organization.
Medical billing software can streamline your entire collections process by tracking various things simultaneously such as past-due bills, identifying those patients who have fallen behind, and automating late fees. However, this software might be costly but one needs to understand that the software will end up saving a lot on internal billing resources as well as increase your collection rate.
Manual AR processing can be inefficient and costly, but automated AR can be helpful to streamline business processes, enabling the AR team to improve cash flow, reduce operating costs, and enhance customer service.
How to work the AR?
AR report is used primarily to collect overdue balances from both insurance companies and patients. Your AR report should be categorized based on payer (patient balance vs. insurance balance), age (e.g., patient balances over 90 days), and balance amount (e.g., within a category, list accounts in descending order of balance owed).
Start AR Collection
Your staff should start to work from the largest accounts first when making the collection calls to patients. Moreover, determine the minimum level for small balance write-offs. You should not miss any account irrespective of the system you follow for AR.
AR report helps your practice to accurately reporting charges and collection. Additionally, this explains what has not yet happened and it has a lot of valuable information if used properly. Moreover, the management aspect of AR enables you to identify problems with your receivable’s management process.
Medical Billers and Coders (MBC) has been providing account receivable services to clients across the USA. Our highly experienced team of AR specialists has worked with different insurance companies and is well- acquainted with all their policies. If you have a lot of account receivable payments that need to be collect, feel free to get in touch with our AR Team.