Accounts receivable or AR is a term used to denote money owed to your practice for services you have rendered and billed. Any payments due from patients, payers, or other guarantors are considered AR. An increase in AR from one period to another is often a sign that monies such as copays, deductibles are not being collected upfront.
One common measurement of AR is “days in AR,” which is calculated by dividing the total AR by the average daily charges for the practice. For instance, “40 days in AR” means that the practice is due payment for the equivalent of 40 days of work. This days-in-AR measure does not, however, consider the “age” of any payment. To do so, we classify our AR by its age i.e., the time since we billed for a particular service. Payments due for services billed in the past 30 days are placed in a 0-30 day bucket, those billed between 31 and 60 days are placed in the 31-60 day bucket. Dividing the AR in each bucket by your total AR gives you percentages to gauge ongoing collection performance. Monitoring the percentage of total AR in each aging bucket, every month and comparing it to prior performance in other periods, is something every practice should do. Numerous studies have proven that the longer an account goes unpaid, the less likely it is that it will ever get paid. You can expect to get only 10 cents of every dollar that remains unpaid after 120 days.
With a well-managed revenue cycle, money comes in faster, with less effort. Everyone has a role, from physicians, nurses, and other clinicians to medical accounting staff to administrative workers. Here are a few ways to improve collection efficiency and reduce the AR bucket.
- Set a goal of collecting 100 percent of all copays at the time of service. Use a charge estimator tool in order to provide patients with pre-service estimates for scheduled visits so they know their approximate obligation before services are rendered. You can also provide an option for patients to pay over the phone prior to their service or at the time of service. The upfront communication increased the pre-service, time-of-service collection rates, and self-pay collections throughout the billing process. Patients are informed of their pocket costs and this decreases confusion and increases their likelihood to pay.
- Once a patient is scheduled, a staff member is notified and can begin verifying insurance information and eligibility, requesting pre-authorization, if necessary, and estimating the patient liability. Much of this work is done on the back end, but doing it upfront, instead, and giving patients the opportunity to pre-pay cuts collection costs and can reduce the risk of bad debt exposure.
- Billing staff often needs information from other areas prior to submitting claims and it might delay charge entry which leads to more AR days and risk of untimely filing denials. A “cross-functional revenue cycle review team” with key leaders from across the system monitored current trends against the goal, developed ways to reduce backlogs, and discussed opportunities to refine the process. Find out how often bills are sent out. Billing insurance just once a week, and patients just once a month, slows cash flow.
- Send out no more than two patient statements and then follow up with a phone call. If a patient has not paid his/her bill after the first two statements, why would the third be more effective? Eliminate the aging buckets from the bottom of your patient statements. They suggest to patients that payments can be postponed.
- Periodically run an aged AR report from the date of service (as opposed to billing date) to identify/address any lag times between date of service and date of billing.
- Target some of the drivers of denials or rebills in the business office, including the development of an automated workflow solution, dashboards, and extensive training to capitalize on real-time reporting and operational opportunities. The improvements included financial clearance, defined as the percentage of accounts with authorization, verification, and notification completed by the date of service, and an increase in point-of-service collections from the patient.
- Develop a series of reports and dashboards to show several different unbilled account data sets like unbilled reason, by payer, by the clinical department, allowing the team to spot trends, draw insights, and hold responsible areas accountable.
Our AR team closely works with the medical billing team and denials management team which ensures a quick collection of insurance payments. For most of our clients, 90+ days AR bucket is less than 10% and 120+ AR bucket is less than 5%. To know more about how our cross-functional billing team will assist you in reducing AR days, you can call us on 888-357-3226 or write to us at firstname.lastname@example.org