Medical Accounts Receivable Guide: From Claim to Payment

In the healthcare industry, it is rare to find that providers receive payment immediately after providing medical services. Instead, the revenue goes through a complex reimbursement cycle of medical claims processing, patient billing, and claims follow-up. This is where efficient medical accounts receivable services become pivotal to the process of proper reimbursement of services.

Efficient accounts receivable (AR) management is essential to ensure that healthcare providers receive timely payment for services they deliver. Proper AR management also improves financial stability, reduces the number of outstanding claims, and supports the overall revenue cycle management of medical practitioners. In this article, we would learn about how accounts receivable operates and how providers can reduce accounts receivable with effective billing methods.

What are Medical Accounts Receivable?

Accounts receivable or AR in medical billing refers to the amount of revenue a healthcare provider has earned by delivering medical services but has not yet received payment. Once the provider renders a service, claim or patient statement is generated. These payments, also known as outstanding balances, might be overdue from insurance companies, government payers such as Medicare and Medicaid, or patients themselves.

Types of accounts receivable

There are mainly two types of accounts receivable, insurance AR and patient AR.

• Outstanding payments from private insurance companies or government health programs are known as insurance AR. After the claim is submitted, it is processed against the patient’s insurance plan benefits. The insurance company issues an Explanation of Benefits (EOB) which explains the amount that needs to be paid, adjusted, or denied.
• Payments outstanding from patients including deductibles and copays, are referred to as patient AR. With high-deductible health plans, patient AR now contributes to a growing and increasingly significant share of total revenue. Patient balances outstanding for more than 90–120 days become difficult to collect. They frequently require external collection agency involvement, that usually recovers only a minor part of the original balance

Let us consider the following example for a better understanding of the concept. A patient visits the primary care physician for an annual checkup. After providing the necessary services, the physician’s billing team submits a $300 claim to the patient’s insurance company as charges for the service. The insurer processes the claim, approves $280 under a contracted rate, and mentions the remaining $20 as patient responsibility. Until both the amounts are received, they are considered accounts receivable for the provider.

The role of Medical AR in Revenue Cycle Management

***Medical accounts receivable*** play an important role in revenue cycle management by ensuring that providers collect payment for the services they have rendered to patients. Effective AR management helps maintain financial stability and improves the efficiency of the entire revenue cycle.

Efficient AR management impacts the revenue cycle in the following ways:

• Ensure timely reimbursement — With proper AR management, providers can track unpaid claims and patient balances. It also promotes prompt follow-up with insurance companies and patients to accelerate payments.
• Improves cash flow — Effective medical accounts receivable services help reduce delays in collections, making way for a consistent flow of revenue. Additionally, it gives healthcare organizations the opportunity to meet operational expenses and invest in patient care.
• Reduces claim denials — The identification of rejected or denied claims becomes easier with AR management. This supports timely claim corrections and resubmission, increasing reimbursement rates.
• Monitors outstanding claims — A streamlined accounts receivable management process prioritizes overdue accounts based on aging reports. This helps staff prioritize claims with high value and time constraints.
• Improves patient billing — Patient statements and timely collection of patient-responsibility amounts are maintained accurately. These amounts include deductibles, copayments, and coinsurance. It also reduces billing disputes through accurate account management.

Accounts Receivable Workflow Roles and Responsibilities

Effective AR management requires ownership and clear communication across every billing team member. The billing and collection problems include the following roles and responsibilities:

1. Front office staff — They verify insurance eligibility and benefits prior to every patient visit. Their services also involve collecting co-pays, capturing accurate patient demographics, and confirming prior authorizations.
2. Providers — Physicians or healthcare specialists provide the necessary treatment or other medical services to patients. This includes surgeries, imaging tests, or medications.
3. Billing teams — The medical billing teams assign accurate codes to the services, scrub and submit clean claims. Their other responsibilities include assigning accurate codes, conducting AR follow-ups, and maintaining AR aging reports.

The journey from Claim Submission to Payment

The accounts receivable in medical billing does not begin with claim denials. Rather it begins before the patient enters a physician’s office or healthcare clinic, which is the virtual appointment scheduling. The AR process ends when revenue has been collected, adjusted, or resolved. Medical accounts receivable services focus on the eight-stage workflow which comprises the complete lifecycle of a medical insurance claim and its receivable. The journey of accounts receivable includes the following stages:

1. Patient registration — The moment a patient walks into the physician’s office, the billing team registers all the necessary information. Accurate patient registration is the foundation of clean claims that helps in proper reimbursement. The billing staff document patient details like date of birth, medical history, social security number (for some companies), insurance policy number and other relevant information. A single misplaced digit in the date of birth or incorrectly spelled names can result in immediate claim rejections.
2. Insurance verification — The insurance eligibility verification process confirms active insurance coverage, insurance plan benefits, co-pay, and deductible amounts. It also includes the process of prior authorization, which refers to the obtaining of approvals before services are rendered. The use of real-time eligibility verification tools detects gaps in coverage policies and authorization requirements. The major tasks involved in the insurance verification process are:

• Documentation of eligibility results in the patient record
• Confirmation of active coverage and effective dates
• Verification of co-pay, deductible, and out-of-pocket amounts
• Prior authorization for the required services

1. Medical coding — This is an integral part of medical billing on which reimbursement rates are dependent. Medical coding refers to the process of translating clinical documentation into standardized codes. Coding accuracy determines whether claims are paid, denied, or underpaid. Some of the common coding errors include unbundled procedures, incorrect modifiers, and diagnoses that do not support medical necessity. Frequent coding audits in compliance with coding guidelines are necessary to maintain coding accuracy.
2. Prior authorization — Once documentation is completed, prior authorization must be obtained from the insurance company before any service is provided. Insurance companies review the medical treatment plans to determine if the proposed treatment is medically necessary. Prior authorization plays an essential role in medical billing due to the complexity and advanced nature of medical procedures. The documents required for prior authorization include patient demographics, physician referrals, clinical documentation supporting medical necessity, and any additional relevant information.
3. Claim submission — The coded insurance claims with the correct information are submitted electronically with the help of a clearinghouse. These clearinghouses, as the name suggests, validate the claim format before it is submitted to the insurance company. They use claim scrubbing techniques to detect formatting errors and missing information. The main objective of these clearinghouses is to ensure first-pass claim acceptance.
4. Payment posting — This process reconciles payments against the submitted claims. It involves applying EOB and ERA data to patient accounts, documenting contractual adjustments, and identifying errors. The electronic method of posting payments reduces manual errors and improves the accuracy of AR reports.
5. Denial management — The claims that are denied by the insurance company require systematic AR follow-up by the medical accounts receivable services. It also includes identifying the reason behind denials, rectifying the denied claims, and resubmitting the corrected claims within the timely filing limit. The denial management process categorizes denials by type, payer, and department, which helps to improve reimbursement rates.
6. Patient collections — It refers to the process of collecting the healthcare costs that the patient is responsible for paying after the insurance company has processed a claim. In many cases, insurers do not reimburse full expenses for the services. This is when patients must pay the remaining amount to the providers for the treatment they have received.
7. Reporting of payments — The use of real-time dashboards and AR aging reports gives providers the transparency to identify trends and detect issues. The key metrics include denial rates, clean claim rates, and AR aging bucket distribution. An efficient billing platform automatically sends notifications when billing benchmarks are breached.

Impact of AR delays in medical billing

If claims are not submitted and corrected promptly, they lead to backlogs in medical accounts receivable. Growing AR backlogs pose a major financial challenge for healthcare providers. It causes the following problems for medical providers:

1. Higher risk of revenue leakage — As claims remain outstanding for longer periods, the likelihood of successful reimbursement declines. Medicare, Medicaid, and commercial insurers have defined timely filing requirements. Denied claims that are not addressed and resubmitted within payer-defined deadlines lead to denials. For example, claims under 30 days old generally have a significantly higher collection rate compared to AR aged over 120 days. Payers may deny reimbursement for claims submitted beyond the specified timeframe, resulting in significant revenue loss for providers.
2. Increasing rate of claim denials — High workloads within in-house billing teams can lead to accelerated claim processing, which may increase the risk of coding errors and missing supporting documentation. These errors result in claim denials, placing additional strain on billing teams. As denial volumes increase, AR backlogs continue to grow, creating a cycle of delayed reimbursements and revenue loss.
3. Inefficient billing operations — A growing AR backlog forces billing teams to prioritize older claims, requiring frequent transitions between follow-ups, appeals, and claim corrections. This disrupts overall billing operations and delays reimbursement for delivered services. High-value new claims may receive less attention as billing teams focus their efforts on resolving denied claims.
4. Reduced satisfaction of patients — Patient satisfaction has become a key component of achieving successful value-based care outcomes in the modern healthcare industry. Patients may receive billing statements months after their healthcare encounter due to delayed billing processes. Delays in communicating outstanding balances can negatively affect patient trust and confidence in the healthcare provider.

How efficient billing teams manage AR in healthcare reimbursement

Expert medical accounts receivable services implement the following best practices to effectively manage AR:

1. Verifying eligibility before every appointment — Insurance eligibility verification must be conducted before every patient visit. In the healthcare industry, insurance coverage lapses, plan changes, and deductible resets are quite common. With the integration of real-time eligibility verification into EHR system workflow, providers can ensure claims are submitted with active coverage plans. This method of AR management significantly reduces eligibility-related denials, which are very frequent.
2. Implementing front-end claim scrubbing — The claim scrubbing software reviews every claim before they are submitted to the insurance company for payment. This includes checking the ICD-10, CPT, and HCPCS codes, modifier combinations, required information, and payer-specific policies. Healthcare clinics that have the habit of scrubbing claims before submission usually achieve 90% and above first-pass resolution rates.
3. Automating the AR tasks — With the advancement of technology, robotic process automation (RPA) and AI tools can now manage high-volume and repetitive AR tasks. These include eligibility verification, inquiries on claim status, and patient statement delivery. Medical billing software and other technological tools are used for denial predictions, detecting errors, and reducing the time in resubmitting the rectified claims.
4. Conducting regular reviews — Monthly denial management reviews help to analyze denial volume by insurance companies, denial codes, and staff members. This AR analysis transforms denials into possible opportunities for identifying which payers are denying claims at a higher rate. It also helps to detect which codes are leading to most claim denials. With this analysis report, the billing teams can work on the ways to improve claim submission and reduce denial rates

Choosing the right solution for better AR management

Implementing these best practices can significantly improve AR management and primarily reduce revenue leakage. Providers usually have two options to manage the task of medical accounts receivable, i.e., in-house billing and outsourcing. Every provider has their own requirement when it comes to healthcare reimbursement. Outsourcing a ***medical accounts receivable company*** can give several benefits to healthcare practitioners. However, they do come up with certain constraints that pose a major challenge for providers. For example, in case of third-party medical accounts receivable services, breach of sensitive patient information is a serious concern when compared to in-house billing services. When we look at in-house billing, it requires extensive training of staff which is both expensive and time-consuming. Thus, to conclude, it could be said that managing accounts receivable efficiently is achievable both through in-house and outsourced teams, provided the medical practitioners and clinics are transparent about their specific requirements.