If there is a common problem that plagues the healthcare industry as a whole it is inevitably the ‘improper cash flow scenario’. Whether you’re running a busy general services clinic or a high volume specialists practice the threat of your ledgers slipping into the red is a constant companion. Your waiting room may be filled with patients, and your consulting rooms may be seeing a constant flow of traffic, but at the end of the day you’re struggling to stay in the black.

Improving Your AR Management to Avoid Negative Cash Flow

More often than not the culprit lying at the heart of your cash flow problems is a troubled accounts receivable program. How you process and manage your accounts obviously determines your business’ bottom line, but where the healthcare industry is concerned collecting payment for services rendered can be a complicated and often frustrating process. 

However, there are ways to tighten up your office’s accounts receivable program, and by avoiding some of the more common pitfalls you can improve your business’ cash flow and avoid falling into the red. So let’s look at some of the more common accounts receivable pitfalls plaguing the healthcare industry and talk about some easy to implement solutions that can help your medical practice avoid a negative cash flow.

Denial of Insurance Claims

One of the most common problems healthcare businesses face with their accounts receivable management programs is the denial of insurance claims. According to a recent survey conducted by the American Association of Retired Persons (AARP) more than 200 million insurance claims are denied each year. It’s estimated that these denials cut into healthcare business’ profits by between 10% and 15% per annum. 

The reasons for these denials vary greatly, and it would be easy to assume that payment is refused simply because procedures aren’t covered by the client’s insurance provider. The truth is, as often as not, these denials stem from a failure on the part of the business itself to properly process their insurance submissions. 

Consider the following common causes for claim denials:

  • Incomplete or inaccurate insurance information
  • Lack of pre-authorization for procedures
  • Missed filing deadlines

Any one of these issues can and will cause a claim to be denied, with the end result being a loss of revenue to the submitting healthcare firm. 

To avoid this problem it is vital that your accounts receivable team make it a habit to carefully review all claim forms prior to submission. Check and double-check that all submissions meet the necessary guidelines. There must also be a process in place to follow up on each and every denied claim to determine the cause of refusal and decide if the claim forms can be amended and resubmitted. Ideally, businesses in the healthcare industry should have no more than a 4% denial rate on their insurance submissions.

Unnecessary Write-Offs

One of the results of a spike in insurance claim denials is a concomitant rise in costly write-offs. This is not unique to independent medical service businesses. Over the last several years the healthcare industry as a whole as seen a 90% advance in total write-offs due to denied insurance claims or unrecovered patient copays. This loss of revenue not only impacts a business’ bottom line, it also directly impacts the firms’ ability to provide state of the art care for their patients. The money that is being lost (money that could be going into improvements to the business itself) cuts into performance as well as profits. 

Some write-offs are unavoidable, and those losses must be considered the cost of doing business. However, many write-offs are ultimately unnecessary and revenue can be recovered if your accounts receivable team applies themselves to the task at hand. 

For example, rather than immediately writing off any denied insurance claims it should be standard operating procedure to review all claim denials for possible filing errors. Quite often a simple correction on a submission form will result in the recover of previously denied funds. 

Unpaid accounts can be somewhat trickier to handle. However, it is important to carefully review each account, being sure to exhaust all possible payment options, before writing anything off as a loss. In most cases patients are willing to work with you to pay off their outstanding balances. Your accounts receivable team should never rush into a write-off. 

Here are a couple of tips to help your AR team better manage your medical business’ write-offs:

  • Set Internal Review Standards for All Write-Offs – While any potential write-off should undergo careful review it is often more productive to set clear guidelines regarding which write-offs require managerial approval. A standard should be set, according to dollar amount or situation, which streamlines the approval process and expedites the accounts receivable teams workload.
  • Monitor Write-Off Patterns – Write-offs should be monitored over time to identify any spikes or patterns point to problems with your reimbursement policies or procedures. You may find that there is a pattern to denials from certain payers or that specific procedures generate more bad debt write-offs.

Bad Debt and Patient Responsibility

Roughly 25% of all healthcare revenue in the United States is the responsibility of the patient. That includes patients with both private insurance and government-assisted support. If the past few years are any indication that percentage can be expected to rise in the immediate future. 2018 alone saw a 14% jump in out-of-pocket expenses for patients in the US. 

The rise in healthcare costs, and the percentage of those costs which the patient is responsible for, has made it increasing difficult for medical firms to collect on payments due. This leads directly to unwanted write-offs and loss of revenue for the firm. While it may not be possible to totally eliminate these losses there are steps your AR team can take to reduce the instances of patient related bad debts. 

Sprout Funding logoPatient collections should be addressed at every stage of the revenue cycle. Before any treatment is taken office staff should be gathering all pertinent insurance and billing information from the client. Out-of-pocket expenses should be calculated prior to any procedures and should be clearly explained to the patient or their representative. Office staff should also follow up with all patients post service to ensure prompt payment of any outstanding debts. 

By providing a clear and comprehensive billing experience for the patient it is possible to greatly reduce the instances of clients defaulting on their financial responsibilities.

Collection of Unpaid Debts

For the majority of people entering the healthcare field the main priority is to provide the best possible care and advice for their patients. That’s what they studied and trained for, so they are not necessarily adept at collecting payments due for services rendered. As a result, it is not unusual to find that accounts receivables take a back seat to the immediate health needs of patients and their families. However, getting paid for services is crucial to ensuring that your practice is in a position to continue to provide the best possible care to your clients. 

It is critical that businesses operating within the healthcare industry take steps to prioritize their accounts receivable strategies. In order to be successful in the industry healthcare organizations must learn to foster a culture of collections. Staff should be given the tools and training they need to collect payment when payment is due. They should be encouraged to check and double-check all insurance claims and to follow-up with any questionable denials. Office staff responsible for accounts receivable tasks should be given clear instruction in what procedures should be taken to recoup any losses due to unpaid out-of-pocket or service-on-demand costs. 

In the event of non-payment by any of your patients it may become necessary to partner with a medical collections agency to recovery any loss revenue due to unpaid patient debts. While providing care for patients is the chief tenet of your medical practice you should not hesitate to engage a reputable debt collector to ensure you receive the money you are due for services rendered. Remember, without that revenue you may become unable to maintain a successful and long-lived practice.

The Importance of Accounts Receivable Management

In the final analysis providing healthcare for the public is a business. It is important for healthcare providers both large and small to understand the importance of a well-trained and dedicated accounts receivable management team. These are the people who are tasked with keeping the doors to your general practice clinic or specialist consultancy open to the patients who need your medical help and advice.

Give them the tools they need to effectively manage your all-important revenue streams so that your firm can stay firmly in the black.

Sprout Funding helps small businesses secure the money needed to stabilize and grow. Keep your funding simple, and straightforward.  866-962-4922
We are available to talk with you weekdays, from 9-5 CST 

sprout-fundingThe Sprout Funding blog offers tips, reports, insights and other ideas to help small business owners learn and grow. Have a question for our team? Email us at: info@getsproutfunding.com, and tell us how we can help you.
If you are ready for the money to grow your business, let's get started!