The number of days in accounts receivable (A/R) is a critical indicator of your practice's overall financial health and operational efficiency. Sure, your medical practice might be bustling with patients and appointments, seemingly doing well on the surface.
But if your days in A/R are high, it’s a red flag that your cash flow is lagging. It can create a precarious financial situation, making it challenging to manage operational expenses and limiting your ability to make strategic investments in your practice, whether upgrading to the latest medical technology, expanding your facilities, or enhancing patient services. It’s like trying to run a marathon while waiting for your energy drink to be delivered — it slows you down and hinders your performance.
Let's discuss some actionable tips to help reduce accounts receivable, improve cash flow, and build a more resilient, adaptable, and financially secure practice.
Accounts receivable in medical billing represent the outstanding payments owed by patients or insurance companies to healthcare providers for their medical services. Alarmingly, 56% of medical groups reported spending more time on accounts receivable.
Ideally, the days in accounts receivable should range between 30 to 40. And aged accounts receivable over 90 days should ideally be less than 10%. Long days in A/R means that the money you’ve earned is tied up in uncollected bills. Here's how you can effectively manage your A/R.
When it comes to payer collections, time is of the essence. Prompt claim submissions lead to quick payments and help maintain a healthy cash flow. Submit your claims without delay — as soon as you render the services.
Most claims are typically processed within 15 to 30 days of submission, with Medicare often reimbursing within 15 days.
Avoid missing payer deadlines to secure full reimbursement for your services. Missed deadlines can lead to partial payments or outright claim denials, significantly impacting revenue. Leverage electronic health record (EHR) systems or billing software to automate claim submissions, reduce manual errors, and ensure timely submission.
Claim submission is not uniform across payers; each has its own specific requirements and deadlines. Additionally, coding regulations continuously evolve, with ICD-10, CPT, and HCPCS codes frequently undergoing updates, deletions, and modifications. Clean claims result in swift payments, but the volatile nature of regulations makes this challenging.
Investing in robust billing and coding software like GlaceEMR and engaging in claim scrubbing guarantees the submission of clean claims, reducing the chances of denials due to billing and coding errors. Moreover, leveraging electronic prior authorizations can save time, reduce the chances of claim rejection, and prevent revenue leakage.
Despite robust measures, claim denials are inevitable. It’s imperative to act quickly to appeal denied claims and reduce days in A/R.
In case of claim denials, address each denial at the earliest. Determine the reason for the denial and take corrective action to fix the issue. Implementing a proactive denial management system, using standardized appeal procedures, and investing in ongoing staff training help minimize denials and optimize claim submission.
Denial management software like GlaceRCM allows you to efficiently categorize and manage denials while keeping track of accounts receivables (A/R). Glenwood’s advanced system studies past denial patterns and flags errors, empowering your team to address and resolve issues promptly. We diligently oversee each claim until it's resolved, ensuring no claim is prematurely closed from A/R. This meticulous approach safeguards every hard-earned dollar.
Track key metrics like claims denial rate and accounts receivable turnover ratio to identify trends and areas for improvement and understand how quickly payments are collected. A high denial rate might indicate an error in the claims submission process or failure to meet payer requirements. Similarly, a lower AR turnover ratio suggests prolonged collection periods and potential cash flow issues.
Regularly report key A/R metrics and monitor your progress to make data-driven decisions. Monthly or quarterly reports can reveal trends and highlight areas that need attention. Continuously review these insights and refine your processes accordingly to reduce denial rates and enhance the efficiency of your A/R management.
Efficient A/R management ensures that no pending payments slip through the cracks. Regularly reviewing your aged trial balance helps identify outstanding accounts, allowing you to prioritize follow-ups and address issues with long-outstanding claims. Here’s how to effectively monitor and manage your aged trial balance:
Systematically monitoring and managing your aged trial balance enables you to address overdue accounts and increase collections, enhancing your cash flow and overall financial health.
Reducing accounts receivables and ensuring faster, more reliable collections requires a proactive and systematic approach to claim submission and denial management. By identifying issues, implementing effective solutions, and continuously monitoring performance, you can minimize outstanding A/R, improve cash flow, and create a more financially stable environment. Consistent effort and proactive revenue cycle management are crucial to achieving a successful turnaround in managing accounts receivables in your medical practice.
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