Revenue cycle management (RCM) is a complex system with many moving parts, and expertly managing them all is crucial for any healthcare practice aiming to maintain financial stability and growth. Among these critical elements, managing accounts receivable (A/R) stands out due to its direct impact on your medical billing company’s financial health. Effective A/R management can offer a healthy cashflow stream and build a strong foundation for future growth and success.
Accounts Receivable in Healthcare
A/R represents the amounts owed to a healthcare facility by patients and insurance companies, making it a fundamental component of both your clients’ and medical billing company’s financial operations. It starts as soon as a patient is billed or a claim is submitted to insurance and remains active until full payment is received. Effectively managing A/R involves monitoring and categorizing outstanding receivables based on age, typically segmented into 30-day intervals (e.g., 1-30 days, 31-60 days, etc.), to prioritize follow-up actions and optimize cash flow.
Healthcare organizations may lose between 5% to 15% of their yearly earnings on average due to ineffective accounts receivable management. According to a survey by the Medical Group Management Association (MGMA), it was noted that approximately 13.54% of accounts receivable remain outstanding for over 120 days. These figures highlight the potential risks of ineffective A/R management, underscoring the importance of addressing this issue.
The Critical Role of A/R in Financial Viability
Managing accounts receivable is more than a routine administrative task; it’s a crucial element that impacts the liquidity and financial viability of the healthcare practices you bill for and your own company, too. When your company experiences high A/R levels, funds are tied that could otherwise be used for running operations, expanding services, or growing your general financial health. Moreover, the longer receivables remain outstanding, the higher the risk of them turning into bad debts, which can severely impact your bottom line.
To ensure effective management of your healthcare accounts receivable, monitoring several key performance indicators (KPIs) in your revenue cycle management (RCM) is essential. These metrics include:
- Average Days in A/R: Ideally, this should be 35 days or less, indicating a swift reimbursement cycle.
- A/R over 90 Days: Keeping this figure below 10% is crucial as it reflects effective billing practices and follow-up procedures.
Strategies to Optimize A/R Management
To effectively manage and reduce A/R days, consider implementing the following strategies:
- Enhanced Billing Procedures: Streamline billing processes to ensure accurate and timely submissions with advanced systems that automate your processes, reducing errors and increasing efficiency.
- Proactive Follow-Up: Regular follow-ups on unpaid claims are crucial to speeding up reimbursements. Implement a strategy where your team reviews claims over 30 days old each week and contacts insurers to resolve any pending issues quickly.
- Patient Education: Collaborate with your clients to develop more informed patient communication. When patients understand their financial responsibilities well, payment delays will be fewer.
Streamline Your Revenue Cycle and Increase Your Cashflow: Partner with 4D Global for Expert A/R Management
Outsourcing A/R management to specialists like 4D Global, a leading healthcare revenue cycle management company with a proven track record, allows you to leverage expert knowledge and innovative technologies to streamline billing processes and enhance revenue recovery. Our team focuses on critical A/R activities—from detailed follow-ups to handling aged accounts—ensuring that your receivables are efficiently managed and that your practice can achieve financial goals more reliably.
Are you ready to transform your medical billing company’s financial health with expert A/R management? Contact 4D Global to discover how our tailored solutions can enhance your billing processes, boost your revenue, and allow you to provide better care without the administrative burden. Join us in redefining healthcare financial management and take a step towards a more profitable future.