Making Sense of Accounts Receivable at Your Medical Practice
Medical billing reports are key indicators of the financial health of your medical practice. Without these reports, you can be left floundering in the dark, wondering what you’re doing wrong and why your practice isn’t making enough money.
Monthly reports allow you to analyze important metrics – whether you’re getting paid in a timely manner and whether insurance carriers are paying you enough.
How do you determine which are the most important reports to analyze?
How do you evaluate individual providers at your practice?
How do you know which insurance companies are your biggest revenue source and which ones are not paying you at all?
How much money do patients and insurance carriers owe you?
Here are some pointers on making sense of accounts receivable at your medical practice. These metrics which will allow your practice to track performance and identify potential problem areas.
Accounts Receivable Aging Report
This report tells you how long your patient bills and insurance claims are outstanding. This can be expressed in both dollar terms and as a percentage of 120 days. A lower percentage is desirable as it indicates you are getting paid in a timely fashion.
Potential red flags are a double-digit percentage in accounts receivable or a large dollar amount. A quick glance at the 150-days plus outstanding column is a good indicator of your billing department’s performance.
Not all AR aging reports provide the same information. Some include balances payable up to 180 or even 360 days. A common categorization is in multiples of 30 days from 0 to 150-days plus.
The billing software can be programmed to show accounts receivable from patients and from insurance carriers for the different timeframes. A benchmark (national average) allows you to compare your performance with your peers and other practices in your specialty. The Medical Group Management Association publishes annual benchmark AR figures which can be purchased. Alternatively, your practice can use the free benchmark figures published by Medicare (CMS).
If the analysis shows your patients are taking considerably longer to pay compared to insurance companies, likely due to high deductibles, consider offering easy payment plans to assist them.
What the Numbers Should Show
- The 0-30 days column for both insurance carriers and patients should show the highest totals. This column shows recently submitted claims, reimbursement for which is awaited.
- The 31-60 days column should show the next highest totals as most claims typically get paid in this timeframe.
- The 61-90 days column should show a dramatic drop, especially for accounts receivable from insurance carriers.
- The 91-120 days column should show a further drop as this includes mostly overdue balances of patients who require aggressive collection efforts.
- The 120-days plus column should be minimum. This represents old, hard to realize claims. A single-digit percentage in this column is desirable and indicates a healthy accounts receivable.
Red Flags That Point to Problems
Totals in the 0-30 days column may be low due to one or more providers going on vacation. If this number is lower and the older AR remains the same, it will show a false increase in the 120-days plus column. This should be taken into account when analyzing the AR report.
If your practice is experiencing a technical problem with a particular insurance carrier, it can lead to delays in reimbursement of up to three or four months until the issue is resolved, and this must be considered when looking at the AR report.
Unresolved appeals can lead to high balances in the 120- or 150-days plus columns. This increased percentage or dollar amount can continue to increase until a decision is reached on the appeals.
Your numbers can look better than they actually are due to patient credit balances, for example, duplicate payments or unnecessary co-pays.
The proper accounting procedure is to write off an unpaid balance after all efforts to collect payment from a patient have been exhausted. This includes sending statements, collection letters, phone calls, and using a collection agency over a period of four months. If the patient still does not pay despite these efforts, the amount should be written off. Failure to write off unpaid patient balances will lead to a misrepresentation of percentages and a large outstanding dollar figure in the 150-days plus column because it will include money that cannot be collected.
Reports can be run according to date and responsibility. When analyzing patient accounts receivable, the report should be set up based on the date the patient assumed responsibility for the payment. In other words, if patients are allowed a grace period of 45 days after the date of service to clear their balance, the AR clock should begin ticking after this grace period. At the 45-day mark, the patient becomes liable and the amount goes into the 0-30 days column. This method ensures that the AR report provides a clear and accurate picture of outstanding patient balances.
On the other hand, insurance AR reports should be run by date of service. This gives a true picture of how long the carriers take to reimburse your practice. Also, last but not the least, the AR report will show you which insurance carriers owe your practice the most money. You can then focus your efforts on recovering unpaid or denied claims from these payers.
Word of Caution
Billing services can make the insurance AR report look healthier than it actually is by running the report based on date of claim submission. Using the last submission date rather than the date of service resets the clock and makes the 0-30 days column look good as old and resubmitted claims end up back in this column.