At a Glance
- A/R in medical billing refers to the amounts that payers (patients or their insurance companies) owe a medical provider for care and services received
- A practice’s front office, providers, and billing office all play vital roles in ensuring clean claims and reducing denials
- Strategies to reduce denials include establishing a clear financial policy, automating patient statements and payment options, and documenting a clear collections process
Understanding and improving medical billing accounts receivable (A/R) is a critical element of success for any medical practice — it gives meaningful insight into the financial situation, reveals areas where workflow can be more effective and helps ensure quicker payments.
By using A/R as an analytical tool to identify issues with claims denials or patient collections, practices can take steps towards shortening cash cycles and maximizing their profits.
What is accounts receivable in medical billing?
Let’s start with the basics: what is accounts receivable in medical billing? In medical billing, accounts receivable (A/R) refers to the amounts that payers — patients or their insurance companies — owe a medical provider for care and services received.
A/R in medical billing involves the patient, the front office, the provider, the payer, and the billing staff.
- Submitting claims
- Following up with payers
- Managing denials
- Billing and collecting from patients
- Reviewing reports to see how a practice compares to benchmarks
“In medical billing, accounts receivable (A/R) refers to the amounts that payers — patients or their insurance companies — owe a medical provider for care and services received. ”
Assessing and comparing performance is essential to success; for example, if a practice’s clean claims rate is less than 95%, it’s losing money, said Diane Allison, a customer training specialist for Tebra.
To calculate the clean claims rate, divide the number of clean claims by the total number of claims submitted and multiply the result by 100.
Another key metric is the denial rate: an experienced A/R expert herself, Allison declared that the denial rate should be less than 5%.
To calculate the denial rate, divide the number of denied claims by the total number of claims and multiply the result by 100.
If the clean claims and denial rates are respectively too low or high, then it’s time to look at the reasons why.
Why denial management is important
The top reasons for medical claim denials include:
- Inaccurate patient information
- Missing patient information
- Inconsistent information
- Insurance eligibility
- Benefits exhausted
- Provider out of network
- Missing pre-authorization
- Coding errors
- Claim not filed on time
- Duplicate claim submitted
Denials are clues that can reveal issues with your workflow. Determine how you can improve your clean claims and denial rates, and you’ll figure out how to better your A/R management.
Whose workflow is it anyway? The front office
The front office has a lot of potential to impact the clean claims and denial rates and, therefore, the A/R.
Whether you’re a billing company or a practice that manages billing in-house, you’ll need the partnership of the front office staff to reduce denials.
There’s no need to discuss every denial, and doing so can lead to an antagonistic dynamic. Instead, keep an open line of communication and transparency, and share weekly reports highlighting any inefficiencies.
The front office staff can take a few simple steps to start impacting clean claims. They can:
- Verify patient information before the start of the visit to correct inaccurate, missing, or inconsistent patient information.
- Add or verify pre-authorization.
- Confirm insurance eligibility, whether the patient has exhausted their benefits, and whether the provider is in or out of network.
Whose workflow is it anyway? The provider(s)
The provider is also part of ensuring claims are clean, and can also benefit from clear communication with billing staff around denials.
“Keeping an open communication with your front office staff and partnering with your providers as well as your office admins will drive down those pain points, those inefficiencies,” Allison said.
Like the front office staff, the provider has the opportunity to confirm the patient’s information. The provider is also responsible for selecting the appropriate CPT® code(s) for a given date of service, including for making sure that the codes accurately reflect the care the patient received and, if applicable, are bundled correctly.
Whose workflow is it anyway? The billing office
Where there’s a dedicated coder, the coder double checks that the provider has used the correct CPT codes. Billing office staff have a final chance to make sure that patient information is consistent. They’re also responsible for filing the claim on time and ensuring it isn’t duplicated.
How do I lower my accounts receivable (A/R) in medical billing? Start with patient collections
Collecting from patients has been on the rise, as payers are shifting more financial responsibility through higher cost-sharing. This revenue cycle shift means improving patient collections will help improve your A/R.
Here are 3 steps to take.
1. Establish a written financial policy
A transparent, consistent, and defined financial policy can alleviate both A/R issues and patient frustration. Consider creating a policy that addresses the following issues:
- Co-pays/deductibles. Will you collect before a patient sees a provider or send a patient statement afterward? Does a high deductible impact when or how you will collect payment?
- Insurance billing. Who is financially responsible if a claim is denied?
- Referrals and pre-authorizations. Are these the patient’s responsibility to obtain or the office staff’s responsibility to capture?
- Patients without insurance (self-pay). When will you collect a payment, and what schedule is acceptable?
- Missed appointments. Is there a fee for missed appointments? How far in advance can patients make changes to their appointments?
- Returned or NSF (not sufficient fund) checks. What is your policy when payment doesn’t go through?
- Copies of medical records. Do you bill for medical records or copies?
- Payment plans and outstanding balances.
- Any fees added to services. What are these, and how will you communicate them to patients?
Several of these questions require compliance with the law: as examples, many states regulate the pricing for copies of medical records and federal law dictates the pre-visit communication of prices to patients. Consistent collection procedures will improve internal and external communications as well as A/R. Staff will know what to collect, and patients will know what to expect because the practice has a written financial policy.
2. Automate patient statements and payment options
Automating patient statements, and offering a variety of payment options, will help improve A/R by making it easier for patients to pay and for the practice to collect.
It will also save your staff time following up. With automated statements, depending on your chosen solution, you might transmit statements via email within a certain time frame of a balance appearing in a patient’s account.
Text and email reminders, delivered automatically on a predetermined schedule, can help to drive online payments. So can paper statements that include QR codes to enable online payments. Some services offer delivery reports, broken down by medium.
However you choose to automate your patient statements and payment options, doing so will streamline your collections, making them more convenient for you and patients.
3. Establish a written collections process
Your written financial policy is the agreement between the patient and the practice, but documenting your internal collection protocols is crucial. Your written protocols describe how patient balances will be handled depending on where they are in the collections process.
Having a written policy for each step of the collections process will improve internal and external communications, as well as cash flow.
Key takeaway for medical billing accounts receivable (A/R)
To improve medical billing A/R, adopt a 2-pronged approach where you reduce claim denials on the one hand, and improve the speed of patient collections on the other hand.
In both, examine your existing workflow to identify inefficiencies, look at denials to assess places for improvement, and seek ways to automate and streamline.
You Might Also Be Interested In
Learn the secrets of high-performance medical billing companies in our 2023 medical billing benchmark report.