Revenue Cycle Management Blog | GroupOne Health Source

4 Core Benefits of Effectively Managing Your AR

Written by Kaitlyn Houseman | February 11, 2016

Developing a clear strategy for managing accounts receivable (A/R) is a step that isn't easy, but that has significant, noticeable payoff. When a medical practice doesn't track A/R consistently, the average number of days accounts spend in A/R increases, which means the practice is not collecting what it is owed as efficiently as it could be.

Excellent A/R management requires tracking accounts, having a dispute resolution process, taking steps to minimize bad debt and maximize collections. Are you doing all of these things today?

According to CMS, a full 30 percent of claims are denied or ignored on first submission. 70% are payable if resubmitted correctly. However, 60% of claims denied on the first submission are never resubmitted.

Accounts receivable are among the top assets of most companies, so why are some practices not focusing on their AR efforts? Here are some of the core benefits of effectively managing your practice's AR.


1. You Improve Your Financial Standing

When you monitor and manage the entire "quote to cash" system, you can identify problems before they get out of control, reducing expenses and bad debt. The money you free up from A/R that you might not have bothered chasing down before can be used to repay debt, make acquisitions, invest in new technology, or hire more staff.

Improving your financial standing helps you pay expenses without worrying about having to increase your patient volume. Getting paid accurately for the 20 patients you see in a day makes more sense than increasing your patient volume to make up for any missed revenue. 

Some medical practices don't feel like they have the resources to track down accounts languishing in A/R, but making the effort to do so can increase revenue and help you develop ways to reduce average time in A/R. Managing receivables well improves your facility's financial standing, freeing up more cash and opening new doors for your practice.


2. Better Customer Service

You may have the idea that you can only run a tight A/R ship at the expense of good relationships with customers, but this is not true. Throughout the patient encounter, you and your staff must make it clear that you expect to be paid according to your terms.

This doesn't mean hounding patients, but providing patients with a copy of your financial policy annually and providing contact information for the office personnel in charge of making arrangements for paying off big bills. Dispute resolution, solid collection procedures, and risk control steps are all important parts of strengthening relationships with patients.

Commitment to excellence in tracking accounts often has the side effect of improving customer service and satisfaction. This can be especially true for physicians in smaller communities where sending a patient to collections can really harm your relationship or reputation. Keep your patient balances from ever getting to the point of collections by setting a clear financial policy and collecting payments up front when possible. 

3. Lower Practice Expenses

The longer the average account spends in A/R, the slower cash flow, and the less you can do to put revenues to work for you. Furthermore, letting accounts linger excessively in A/R before half-heartedly tracking down problems and making an effort to solve them is expensive. Preventing problems in the first place is always preferable, and you do this by having strong A/R management procedures in place and ensuring all relevant personnel are trained in these procedures.

Collecting co-payments up front keeps money from slipping through the cracks, and lowers the time and talent spent tracking down long overdue accounts with no gaurantee they will get paid.

4. Better Cash Flow and Solvency

The pace of cash flow in a medical practice is a determinant of how financially stable and solvent the practice remains. Positive cash flow is, of course, necessary to keep your practice running. Balance sheets reflecting tens or hundreds of thousands in services rendered don't mean much if you haven't been paid for any of them, yet still have to meet utility bills and payroll.

Managing A/R effectively speeds up cash flow. Moreover, it makes cash flow smoother, rather than "lumpy," as happens when accounts spend too much time in A/R before finally being followed up and settled. Long term positive, and relatively predictable cash flow is going to represent a growing practice that is working to improve their operations.