When managing your practice’s financial health, it’s vital to address challenges such as claim denials and delayed payments. Because an efficient billing process is key to the smooth operation of your practice.
But how can you ensure every operation runs smoothly and payments are accurate?
Medical billing reports play a central role in identifying and resolving any issues with your billing procedures. These reports offer valuable insights into payments, claims, and other important areas of your practice. While many reports are useful, some deserve special attention.
In this post, we will be discussing the importance of accounts receivable (A/R) reports in medical billing and highlight the key aspects that practices need to monitor closely.
Accounts Receivable Aging Report
The accounts receivable aging report tracks outstanding balances from patients and insurance claims that have remained unpaid for over 120 days. A lower percentage indicates better performance, and this information is provided both as a percentage and a monetary amount.
This report serves as an important indicator of a practice’s financial health and highlights the effectiveness of the billing team. While it is possible to generate this report manually, the process is time-consuming and impractical, especially for practices with a steady patient flow of 15 to 20 per day. Without the use of specialized software, a practice could be losing money.
| To efficiently manage billing and ensure accuracy, it is crucial to implement a practice management system and robust billing software. These tools allow you to monitor billing processes, address denied claims, and make data-driven decisions using precise A/R reports. If your practice struggles with claim denials, MedCare MSO’s medical billing software can help streamline the process and improve your financial outcomes. |
An experienced medical professional can evaluate the performance of a practice’s billing department by examining the “150 days plus” column on the A/R report. This section indicates claims that have been outstanding for more than 150 days, offering insight into the efficiency of the billing processes.
A/R Report Tracking
The A/R report tracks claims based on how long they have remained unpaid, allowing you to assess the time they have spent in the receivables cycle. While most claims are typically paid within a month, this report provides a broad overview of payment delays. Follow-up reports can then give you a more detailed look into the specific areas causing these delays.
Warning Signs
Prolonged delays in claim payments may signal technical issues with insurance providers. If a practice is experiencing delays of two, three, or even four months with claims from a particular insurer, it may indicate unresolved technical problems. These issues can lead to significant delays in payments, which can harm the practice’s financial health. It’s crucial for practices to promptly address any issues with insurance providers to ensure that claims are processed and paid on time.
Importance of Account Receivable Reports
Accounts receivable (A/R) reports are essential for effective medical billing claims management, offering critical insights into the financial health of a medical practice.By optimizing the collection process and improving cash flow, practices can strengthen A/R management. Identifying potential credit risks, maintaining patient communication, and assessing the payment process further help increase profitability.
Optimize the Collection Process
Aging reports of accounts receivable can guide medical practices in refining their collection efforts. For example, if a significant portion of outstanding payments is overdue by 60 to 90 days, it may signal the need for improvements in your collection strategies.
Improve Cash Flow
Aging reports show outstanding receivables, helping practices track who owes money. They also highlight potential risks, ensuring financial stability.
Identify Credit Risks
The A/R aging report can help estimate the likelihood of uncollectible debts, offering insights into which receivables might not be recoverable for various reasons. This information is valuable for assessing the overall risk and managing uncertain accounts.
Maintain Communication with Patients
Effective patient communication is a key component of successful A/R management. Keeping patients informed and engaged can help resolve issues with denied claims and ensure smoother billing processes.
Assess the Payment Process
A/R reports also support the development of an efficient payment system. Practices can refine cash flow management by adopting strategies such as offering payment discounts to patients.
A Quick Comparison Between Manual A/R Reports Vs. Automated A/R Reports
| Feature | Manual A/R Reports | Automated A/R Reports |
| Speed of Processing | Typically slower due to manual data entry | Much faster as processes are automated |
| Accuracy | More chances of human error due to manual work | Reduced errors due to automation, but depends on software reliability |
| Scalability | Difficult to scale up for a larger volume of claims | Easily scalable, can handle large volumes efficiently |
| Workforce | High; requires more manual effort and workforce | Low; most processes are handled by software |
| Consistency | Can vary depending on the person doing the work | Consistent output as it’s based on a set algorithm |
| Customizability | Flexible as it depends on human input | Depends on the software; may require developer changes |
| Integration with Other Systems | Limited unless manually integrated | Often designed to integrate with other billing systems |
| Audit & Tracking | Harder to track changes and edits | Easily tracked and logged for transparency |
| Storage & Retrieval | Physical space or manual digital filing required | Digital and cloud storage makes retrieval efficient |
| Security | Depends on physical security and manual digital safeguards | Often has built-in security features; depends on software |
5 Key Metrics to Watch in A/R Reports
Accounts receivable reports are essential tools that help medical practices and providers make data-driven decisions to address denied claims. There are several critical metrics in A/R reports that can provide valuable insights into a practice’s financial performance. These include:
- A/R Days
- A/R Percentage
- Claim Rate
- Net Collection Rate
- Denial Rate
Let’s break down each of these metrics:
- A/R Days
A/R days, or accounts receivable days, represent the average number of days it takes for a healthcare facility or billing department to collect payment from an insurance company for services provided to insured patients.
Why is this important?
Tracking A/R Days helps identify potential bottlenecks in the revenue cycle and assess the efficiency of the billing team. High A/R Days can signal issues with the payment collection process, which could negatively impact the practice’s cash flow. To reduce A/R days, timely claims follow-ups and fast-tracking reimbursements can be beneficial.
Key Insights from A/R Days:
- Helps pinpoint revenue cycle management issues.
- Assesses billing team efficiency.
- Shows the typical duration for receiving payments.
How to Calculate A/R Days:
A/R Days are typically calculated over periods such as 3 months, 6 months, or 12 months.
- Formula:
A/R Days = (Accounts Receivable ÷ Total Charges) × Number of Days in Period (e.g., 365 days for one year)
- Example:
For a pediatric clinic with $100,000 in A/R and $600,000 in total charges, the calculation would be:
A/R Days = ($100,000 ÷ $600,000) × 365 = 60.8 A/R Days
This means the clinic takes, on average, 60.8 days to collect payments.
- Percentage of A/R Over 90 Days
The percentage of accounts receivable that is older than 90 days is an important metric in healthcare revenue cycle management. It offers a clear picture of how effectively a practice is handling its billing and collections processes.
Why is this metric important?
A high percentage of A/R over 90 days indicates that the practice is struggling to collect payments in a timely manner, which can lead to cash flow issues and negatively affect profitability. Conversely, a lower percentage suggests that the practice is efficiently managing collections and recovering payments promptly, keeping the revenue cycle healthy.
Key Insights:
- Gives a snapshot of the overall financial health of the practice.
- Reflects the efficiency of billing and collection efforts.
- Acts as an indicator of potential cash flow problems.
How to Calculate:
The percentage of A/R over 90 days is calculated by dividing the total amount of A/R that is more than 90 days overdue by the total outstanding A/R, then multiplying by 100 to express it as a percentage.
- Formula:
(Total A/R over 90 days ÷ Total A/R outstanding) × 100
- Example:
If a healthcare practice has $500,000 in A/R and $100,000 of that is over 90 days past due, the calculation would be:
($100,000 ÷ $500,000) × 100 = 20%
- Claim Rate
The claim rate refers to the percentage of claims that are paid by the insurance provider on the first submission without requiring rework. This metric is vital in assessing the efficiency of a medical practice’s billing and claims process. A higher first-pass claim rate (FCRR) typically correlates with lower accounts receivable (A/R) and faster payment cycles. Common causes for a low FCRR include errors, oversights, and poor billing practices. To optimize your revenue cycle management, focus on improving processes like insurance verification, accurate invoicing, and coding to reduce FCRR.
Why is this important?
The claim rate is an indicator of how effectively claims are being submitted and processed. A low claim rate points to inefficiencies within the claims process, highlighting potential issues in submission accuracy or team performance.
Key Insights:
- Identifies inefficiencies in claim submission and payment processing.
- Reflects the proficiency of your claims and billing team.
How to Calculate:
Claim Rate = (Number of claims paid on first submission ÷ Total number of claims submitted) × 100
- Industry Benchmark:
A standard benchmark for a well-managed practice is a first-pass claim rate of at least 90%, with the industry target typically being 98%.
- Net Collection Rate (NCR)
The Net Collection Rate is a metric that calculates the proportion of the expected revenue collected from both patients and insurance companies. A higher NCR suggests that the practice is efficiently handling billing, resolving claims, and collecting patient balances on time.
Why is this important?
This KPI provides a clear picture of the practice’s overall financial health. A high NCR indicates that your billing and collection processes are functioning well, ensuring that the practice receives the correct payments from both insurance providers and patients.
Key Insights:
- Measures the effectiveness of billing and collections.
- Reflects how well claims are processed and patient balances are collected.
How to Calculate:
Net Collection Rate = (Payments / (Charges – Contractual Adjustments)) × 100%
- Benchmark:
An NCR lower than 95-100% after accounting for write-offs suggests that there may be issues with the practice’s revenue cycle management.
- Denial Rate
The Denial Rate is the percentage of claims that are rejected by insurance payers. A low denial rate indicates that claims are being processed smoothly and paid quickly, while a high denial rate may suggest inefficiencies in claims management that need to be addressed.
Why is this important?
The denial rate is a key indicator of the efficiency of the practice’s revenue cycle management processes. A high rate of denied claims can negatively impact cash flow and delay revenue, making it essential to track and reduce denials promptly.
Key Insights:
- Reflects the effectiveness of claims submission and processing.
- Affects cash flow and overall financial stability.
How to Calculate:
Denial Rate = (Total Denied Claims / Total Submitted Claims) × 100%
- Benchmark:
An industry standard for a healthy denial rate is between 5% and 10%. Anything higher could indicate underlying issues in the claims process.
Maximize Your Practice’s Billing Potential with MedCare MSO
Is your practice struggling with claim denials or delayed payments? These issues can disrupt your revenue flow, affecting both your financial health and patient satisfaction.
MedCare MSO is here to help.
Medcare MSO offers a comprehensive range of AR management services, recovering outstanding revenue from old AR accounts that are aging more than 120 days.
How We Can Improve Your Billing:
- Comprehensive A/R Analysis: Gain an in-depth understanding of your outstanding balances, detailed breakdowns by payer, and aging accounts.
- Claim Issue Resolution: Detect discrepancies early, manage denied claims, and address potential challenges before they escalate.
- Actionable Insights: Receive tailored recommendations to boost billing efficiency and reduce future issues.
- Ongoing Support: Our dedicated team is here to guide you, offering continuous assistance to keep your billing on track.
Request A Free A/R Analysis Today!
Don’t let billing delays slow down the payment cycle of your practice. Discover the power of accurate A/R reports and tackle challenges before they become problems. Partner with MedCare MSO now to streamline your billing process. Request your FREE demo today.
Frequently Asked Questions
What are A/R reports?
Accounts receivable (A/R) reports offer valuable information about the financial status of a medical practice by monitoring unpaid patient balances and outstanding insurance claims. These reports help evaluate billing procedures, improve collection efforts, boost cash flow, and identify potential financial risks.
Why is the accounts receivable aging report important?
The accounts receivable aging report highlights the proportion of unpaid balances and insurance claims that have been outstanding for a specific period, such as 120 days. It provides key insights into the financial well-being of a practice and reveals the efficiency of the billing process. A high percentage of aged receivables may signal issues within the collection system.
How does the A/R report track claims?
The A/R report organizes claims based on how long they have remained unpaid. Typically, most claims should be settled within 30 days. By tracking this timeline, practices can identify any delays or issues with billing, allowing them to take action early to resolve potential problems.
What is the difference between manual and automated A/R reports?
Manual A/R reports depend on manual data entry, which can result in slower processing and a higher risk of errors. These reports can also be difficult to scale as the volume of claims increases. On the other hand, automated A/R reports are generated through software, allowing for faster processing, fewer mistakes, better scalability, and consistent results. However, the quality of automated reports is contingent upon the reliability of the software used.
Why should practices track the 5 key elements discussed in the article?
Tracking the key metrics, such as A/R days and denial rate, helps practices identify potential issues within their revenue cycle, assess the efficiency of their billing teams, and evaluate their overall financial health. By monitoring these factors, practices can take early corrective actions and improve their financial performance.
