Accounts receivable aging refers to the time it takes to completely resolve a claim, also known as A/R days. A good rule of thumb is to view any claim over 180 days old as one that is in serious danger of not being collected. Generally, days in A/R should stay below 50 days (as a minimum threshold), though 30 to 40 days is ideal.
If you see your A/R aging go higher, that’s a red flag that your financial health is in jeopardy. Below we outline how you can focus on reducing your A/R days.
Reduce A/R Days and Improve Your Revenue Cycle
All too often, financially struggling hospitals and health systems are victims of poor A/R turnover rates. You can reduce A/R days by identifying which business operations and revenue cycle management components are causing a delay in revenue capture.
For many hospitals, patient collections (a 2015 study found that hospitals only collect payments upfront from 35 percent of patients, accounting for just 19 percent of patient-owed fees and a number which has likely risen since) and claim denials (The Advisory Board reported that 90 percent of claim denials are preventable) are areas in need of significant improvement.
Steps to Reducing Your A/R Days
1. Determine Your Goal
What does an ideal number of A/R days look like for your organization? This number will differ depending on several factors such as the type of facility/facilities and your payer mix. As we stated before, a good rule of thumb is to try and keep the number below 50 days. Setting specific goals for reducing your A/R days will help you create a roadmap to the improvement of your current processes. We suggest working with your team to discuss where improvements could be made and getting their input on realistic goals for your organization.
Of course, it is also never a bad idea to consult with other professionals. Third-party collection and billing teams are used by many healthcare providers and can provide experienced counsel on what goals will help you achieve a healthier revenue cycle.
2. Gather Data and Accurate Documentation
The next step to reducing your A/R days is making sure that your staff are keeping timely and accurate documentation of all your coding and billing cases. By having organized, up to date documentation to refer to, you can more easily find any inefficiencies in your revenue cycle that need to be corrected. This step may take some time and effort, but it is an absolutely vital part of the process of reducing your A/R days.
3. Using Documentation to Avoiding Claim Denials
Create a team to review the data you have gathered and investigate claim denials, which as we stated, can play a huge role in increased A/R days. Assuming that people know how to work through the data and analytics you have gathered in step two can cause a lot of problems.
Provide transparent data in reports circulated throughout your team, including the current state of denials, and take the time to thoroughly explain the information. This is the best way to identify and resolve the root issues causing claim denials. Sometimes solutions can be as simple as implementing automated workflows or giving staff additional training to increase point-of-service collections from your patients. By ensuring you have processes in place for tracking and resolving denials, you can be well on your way to reduced A/R days.
4. Improve Patient Collection Processes
Make sure that you are putting in the time and effort necessary to educate your staff on how patient collections should be handled, whether it’s Medicare, Medicaid, self-pay or other avenues. The goal here should be to give your team the tools they need to collect payment as quickly as possible, make billing easier to understand for patients and resolve outstanding accounts.
You should start utilizing automated, digital options for appointment setting, cost estimates and bill pay. According to a survey conducted by HIMSS, after receiving a cost estimate 46 percent of patients said they’d be more likely to pay a larger portion of their bill upfront, before or during the time of service, and 68 percent said they’d be more likely to return for future care.
In addition, 71 percent of consumers want to receive electronic statements from healthcare providers but are currently underserved, as only 17 percent of patients receive their medical bills online. Giving patients more digital options will make it more convenient for them to a pay a larger portion of their bill at the point of service, but what about when their accounts are already outstanding and need to be collected?
Give Outstanding Accounts the Attention They Need
Accounts that remain outstanding require active communication between the patient and your billing team. Effectively explaining the medical bill, listening to the patient’s concerns regarding the bill and providing payment options is the best way to get these accounts paid off.
Outsourcing Your Revenue Cycle Management and Reducing A/R Days
After you’ve assessed your revenue cycle infrastructure, you may come to consider outsourcing some or all of your efforts to a trustworthy vendor. Forging a partnership with a revenue cycle service provider can help you resolve claims, implement analytics for proper documentation, set up patient payment plans and closely monitor and work outstanding accounts.
When A/R gets to an advanced enough age, it can be very difficult to turn it around and increase cash flow before massive debts are accumulated. Contact RevCycle to learn about the services we provide which will help your organization reduce A/R days and optimize your bottom line.