What is an AR aging in Healthcare?

AR Aging is a metric used in healthcare RCM to track the age of outstanding accounts receivable. As a report, it categorizes the outstanding invoices by the length of time they have remained unpaid, which is typically in 30-day increments.

Importance of AR Aging

AR Aging reports help healthcare organizations identify which of the accounts are overdue, and how long they have been outstanding. This information is important for AR recovery process and management of cash flow. It also helps identify the trends in payment patterns and prioritize collection efforts.

For efficient medical billing services, AR Aging is important to monitor the health of the revenue cycle, which ensures timely payments of outstanding invoices.

Challenges of AR Recovery Process in Medical Billing

The varying requirements and demands of accounts receivable result in some challenges. These challenges may impact your practice cash flow, necessitating strong and efficient AR follow up in medical billing. Some of these challenges include:

1. Insurance Claim Denials

Insurance providers purposely and frequently make it difficult to receive payments by denying insurance claims for multiple reasons. They are for-profit entities that benefit financially from not accepting a claim. Some of the common reasons for claim denials include:

Missing information
Late filings
Lost claims
Information or coding errors
Duplicate submissions, and more.

These are also the primary reasons for aged accounts receivables in healthcare, as an insurance provider’s unwillingness or inability to accept a claim can lead to outstanding payments.

2. Bad Debts

With the healthcare landscape changing constantly, patients have to consistently pay more due to the high deductible plans and the rising costs of patient care. Over 74% of healthcare providers now report an increased financial burden on patients. This increased responsibility is leading to a higher number of bad debts; these are bills that patients never end up paying.

3. Unreasonable Write-offs

The unwarranted write-offs are forgiveness of a customer’s debt without receiving payment. The write-offs however small do pose a concerning impact on a healthcare practice’s bottom line, so it is important to avoid them as much as possible.

The write-offs can become a massive issue for companies with a manual patient collection process, as details fall through the cracks, causing accumulation of unpaid balances.

4. Disorderly Patient Collection Process

Similar to any other business, it is important for healthcare practices to receive timely payments for continued business functioning. It is a delicate process, however the expenses for care services must be clearly discussed and disclosed to patients at time of service.

There are some helpful steps for making the collection process easier. For starters, the conversation must be managed with compassion and sensitivity from the staff prior to notifying patients. Plus, the payment terms and plans must be transparent to avoid any potential issues. Maintaining transparency is difficult for many organizations that lack the proper tools to keep their patients informed regarding the billing, deadline, and payment confirmation details. Such instances can create a negative customer experience, especially for patients or families who are dealing with the stress of illnesses or injuries.

An unorganized patient collection process can also result in unnecessary write-offs, which essentially means that the healthcare provider will need to absorb the debt. Write-offs are a result of a poor patient collection process, or one that lacks a systematic adjustment approval process.

5. Limited Modes of Payment

Restrictive modes of payment are yet another challenge giving rise to AR aging and recovery issues. It is essential to accept multiple and various modes of payment methods to better meet your customer needs. Failing to do so can put your organization at a massive competitive disadvantage, as your patients will likely go for services from a healthcare provider who offers flexibility in payment modes.

Furthermore, it is important to collect and organize patient information, including payment needs. Doing so sets the patients interactions and billing transactions up for success moving forward. However, this can become time-consuming and cumbersome if your practice is still using manual processes or systems. Plus, without these modern information capturing tools you may risk claim rejections and denials along the way, delaying billing payments and affecting liquidity.

Best Practices to Improve AR Aging

The best practices to improve AR Aging include the following:

1. Timely and Accurate Billing

The most important factor for reducing AR aging is to ensure accurate medical billing, that too in a timely manner. The process includes verification of patient insurance information, timely claims submissions, and accurate medical coding.

2. Denial Management

Claim denials directly and significantly impact AR Aging therefore it is important to have a strong denial management process in place. What this can do is help identify the root causes of denials, and help you in taking corrective actions for preventing such issues from happening in future.

3. AR Follow up on Outstanding Claims in Medical Billing

Regular AR follow up in medical billing for outstanding claims is important for reducing AR aging. The process includes tracking of claims that are rejected or denied, and then resubmitting them promptly.

4. Patient Collection

Collection of patient payments at the time-of-service delivery or shortly after can reduce AR Aging. It can be done through multiple methods including offering payment plans, accepting credit card payment, or sending out patient statements.

5. AR Aging Reports Analysis

Regular analysis of AR aging reports helps identify trends and areas of improvement. The process includes identification of high-risk accounts, payment trends tracking, and monitoring the efficiency of collections and billing processes.

6. Staff Training

Offering your staff regular training on collection and billing processes can help enhance the accuracy and efficiency of operations, ultimately reducing A/R aging.

7. Using Technology

Use of technology like the RCM software can help your practice automate processes, reduce errors, and improve overall efficiency. All of it ultimately leads to a reduction in A/R Aging.

Through implementation of all these best practices, healthcare practices can improve their AR Aging, and improve their bottom line.

Conclusion

Mastering AR aging is important for optimizing healthcare revenue cycle management.

Implementing the best practices, including accurate billing, efficient denial management, and proactive AR follow-up, can significantly reduce outstanding accounts and improve cash flow. The use of technology and regular staff training further simplify the process, which leads to better financial health for healthcare practices and providers. Focusing on these strategies, medical billing service providers ensure on time payments and maintain the financial stability necessary for the delivery of quality patient care services.