3 Tried and Tested Methods to Improve Hospital Accounts Receivable
Hospital accounts receivable is the total amount of money that your patients and their insurance companies owe to you. In the complex environment of the hospital industry with ever-changing federal regulations, the efficient management of hospital accounts receivable plays a paramount role in maintaining overall financial stability. Delayed, underpayment and denied claims are the common roadblocks that most hospitals encounter. Before you know about common hospital accounts receivable challenges and strategies to mitigate them, it is important to understand hospital accounts receivable first.
Understand hospital accounts receivable:
In an ideal situation, you should submit a claim within 72 hours after providing the services. When you submit a clean claim electronically, you should expect to be paid within two weeks. However, multiple factors can cause claim delays. In November 2022, the American Hospital Association reported that half of hospitals and healthcare systems had $100 million in unpaid claims that were more than 6 months old. An efficient hospital accounts receivable management process ensures timely reimbursements.
If you are constantly facing delayed collection and rising overdue payments, it leads your hospital to encounter increased days in AR. It is the average time it takes for a claim to be reimbursed based on your average daily charge volume. To identify the key areas for improvement and ensure the stable financial health of your hospital, you must measure days in AR.
You should divide the total accounts receivable by your hospital’s average daily charges to calculate the exact “days in AR.” According to the American Academy of Family Physicians (AAFP), for any healthcare practice, the ideal AR days should stay below 50 days, though 30-40 days is preferable.
Another effective way you can classify your hospital accounts receivable is by considering their age bucket. There are age-buckets for categorizing AR:
0-30 days
31-60 days
61-90 days
91-120 days
The truth is that the older your account is, the less likely you are to collect payment from that account. You can only expect to receive 3 cents per dollar from an account older than 120 days.
Tracking AR days enables you to figure out how long it takes to collect payment so that you can take effective measures to improve your collection and overall revenue cycle.
The common factors that increase hospital accounts receivable days are-
Claim filing delays
Lack of insurance eligibility verification
Inaccurate coding
Data entry mistakes
Frequent claim rejections
Poor appeal process
Credentialing delays
Inefficient posting process
High out-of-pocket expenses for patients and failure to collect payment from patients
Fortunately, you can improve the overall accounts receivable mechanism by following the steps mentioned below-
3 Effective practices to improve hospital accounts receivable:
1) Verify a patient’s insurance before appointment:
It is always crucial to identify a patient’s current insurance information to know about their exact coverage and possible out-of-pocket payments. Your front-end staff members should obtain and verify information such as insurance, demographic and contact information. You must update the information before the appointment. Verifying a patient’s eligibility each time can help you see if the patient has any outstanding payments from past encounters.
2) Patient education:
Educate patients about their insurance benefits and what healthcare costs they need to pay out-of-pocket. The best way to do this is by creating a clear payment policy that outlines your expectations. Key points should include:
When payment is due (like at the time of service)
Who is responsible for payment (patients without coverage pay the full bill, while those with insurance pay any amount not covered)
How co-pays and deductibles are handled (patients should pay these at check-in)
Accepted payment methods
Information on fees, interest, discounts, refunds for overpayments, and collection of old debts
To improve AR days, aim to collect all co-pays, prepayments, and outstanding balances at the time of service.
Communicate with payers:
Managing payments from carriers is crucial for your practice's financial health. To ensure timely payments, identify and resolve issues that are delaying reimbursements. MGMA suggests analyzing collections by the payer to spot slow payments and high denial rates. A hospital billing company can help by creating monthly reports on AR cycles, showing how much a payer owes, how much remains unpaid, and if that amount is growing. They’ll also track every claim to fix and resubmit any denials or rejections.
Finally, with the right people and efficient processes, you can implement the best AR management practice. Partnering with one of the best hospital accounts receivable services, you can fully focus on patient care, while your outsourced partner takes care of the end-to-end AR management for your practice. An efficient hospital accounts receivable management partner ensures excellent collection of outstanding payments and minimizes AR backlogs.