Accounts receivable in healthcare refers to the money owed to doctors, hospitals and other medical providers for the services they’ve provided to patients. Effective AR management is critical for a healthy bottom line and operational stability.

However, 84% of healthcare organizations are experiencing financial losses due to outdated AR practices. Over half of payment leaders worry about the growing delays in processing payments and claims. Learn more about how AR impacts cash flow and revenue, and discover methods for effectively collecting outstanding payments.

Understanding the Healthcare AR Landscape

When payments are overdue, AR becomes “aged” and is often sent to debt collections. The longer these debts go unpaid, the less likely healthcare providers are to recover the full amount, if anything at all. While aged AR is problematic in any industry, it’s especially tricky in healthcare due to the high cost of medical services, the involvement of insurance and government programs, and the increased bad debt risk.

The key challenges of AR management in healthcare include:

• High-deductible health plans (HDHPs): Unpaid invoices lose value over time, regardless of the industry. However, healthcare organizations face a specific threat — the rise of HDHPs. Due to the lower premiums, employers are increasingly offering these plans to their workforces. With HDHPs, patients are responsible for a bigger share of their medical bills. Because of this greater financial burden, many organizations only expect to receive a small percentage of what they’re owed. 
• Costs to collect: The increase in patient responsibility demands a shift in collection strategies. In addition to dealing with insurance companies, healthcare providers must engage with patients. As many patients misunderstand their financial obligations or how their insurance coverage works, collection management in healthcare can be a lengthy, complex process. Time is money — chasing down payments can drain your organization’s resources. 
• Bad debt: In 2023, 53% of bad debt write-offs stemmed from patients who had insurance. It’s getting harder for them to pay their medical bills due to greater out-of-pocket costs linked to HDHPs and confusing collection systems. With revenue becoming more dependent on collecting patient balances, nearly half of all revenue cycle leaders view timely collections as their biggest obstacle.
• Heavy administrative burden: Managing denied claims and tracking payment follow-ups can be time-consuming and resource-intensive, especially if your organization doesn’t have the right tools. This can result in revenue leakage and prolonged AR cycles. Administrative healthcare teams already face significant pressure from the many tasks on their to-do lists. Inefficient AR management processes can add to workers’ burnout. 

The Impact of AR on Revenue and Cash Flow

A steady revenue stream from patients is essential for the success of any healthcare facility or practice. AR is a crucial financial metric, allowing payment leaders to monitor revenue streams and maintain a stable cash flow. Reflecting uncollected but recognized revenue, AR is recorded as a current asset on the balance sheet. Its value is continuously updated with each new service, reimbursement, write-off processed or billing adjustment. 

Partially paid bills, missed payments and aged accounts slow the patient revenue cycle. According to 90% of chief financial officers, claim denials are a critical concern for revenue cycle management (RCM) teams. Plus, payers are increasingly rejecting claims. In 2023, 18.6% of in-network claims were denied in the United States, whereas only 16.6% were rejected in 2021. 

When claims are caught in a back-and-forth between payers and providers, or patients are slow to pay, getting a clear picture of your organization’s finances can be tough, especially with payments scattered across different stages of the collection process. The time spent resolving billing and coding errors or getting patients to pay results in delayed payments, ultimately disrupting cash flow for practices. 

Cash flow in healthcare is the lifeblood of any hospital or practice, allowing them to cover operating expenses, invest in the latest innovations and maintain a high standard of patient care. However, with significant funds stuck in AR, organizations risk missing investment opportunities and struggling to meet financial obligations. Bad debt in healthcare is often written off, but this should be avoided as much as possible. While individual write-offs can seem small, they accumulate over time, leading to substantial revenue loss. 

Optimizing Your Healthcare AR Process

Improving the AR process in healthcare facilitates a stronger patient revenue cycle and consistent cash flow. Here are three strategies to help decrease delays and missed payments.

1. Streamline the Billing Process

Effective insurance verification is key to avoiding claim rejections, with accurate billing and coding at the center of revenue collection. Automated technology streamlines this process by confirming patients’ insurance coverage, verifying network status and determining patient responsibility, allowing copay collection at the time of service. This kick-starts the payment process, ensuring you receive their balance. 

With automatic insurance validation, these tools increase the likelihood that claims get accepted on the first submission, translating to less paperwork and lower processing costs. By investing in the right solution, the average facility can generate millions in additional revenue. 

2. Improve AR Follow-Up Procedures

Following up on late payments is essential to good AR management, and consistent and proactive communication can help you boost your organization’s collection rate. For example, you can set up an automatic reminder to alert patients when they miss a deadline. A follow-up call the next day lets your administrative team explain late fees and what happens if their bill isn’t paid.

Additionally, this strategy allows patients to share the reason for the delay. This way, you can decide on a solution that works for everyone.

3. Enhance the Patient Payment Experience

Beyond the financial burden causing late payments, medical bills confuse 38% of patients. The lack of transparency in billing practices, such as vague itemized charges, complex codes and technical terminology, creates uncertainty regarding their financial responsibility. A one-size-fits-all payment approach also fails to meet diverse patient needs. While some prefer traditional mail-in checks, others demand digital options. Additionally, paying the full balance upfront isn’t always possible for everyone.  

To increase your chances of getting paid, enhancing the patient payment experience is a must:

• Simplify patient statements: Send statements in patients’ preferred format, whether print or digital. Include a clear breakdown of charges, payments and the outstanding balance. 
• Allow multiple payment options: Empower your patients by giving them control over how they pay. Offer various options, from mobile pay to a user-friendly online patient payment portal.
• Offer payment plans: Large medical bills can overwhelm patients, causing them to become unresponsive to your payment requests. Allowing them to split up payments makes settling their bills more manageable. Receiving funds in increments is better than losing the entire balance, making payment plans crucial for effective AR management. 

Millennia: A Solution for Healthcare AR Challenges

Millennia understands that patients’ financial obligations have increased, but revenue collection rates are declining. We developed the Millennia Patient Payment Solution to help healthcare organizations manage the patient side of the revenue cycle. This unified solution is designed to collect outstanding patient balances, combining technology, services and artificial intelligence (AI) to: 

• Increase patient payments: From flexible payment plans and digital and mobile pay to transparent billing, our solution makes payments easier and more accessible for patients. When implementing the Millennia Patient Payment Solution, healthcare organizations have achieved a payment increase of 210%. Additionally, 52% of patient payments are collected in the first 30 days, compared to the industry average of just 28%.
• Reduce administrative costs and burden: By integrating with your existing digital strategy, such as your hospital information systems and electronic health records, our platform automates the billing process and helps streamline patient payment intake and collection. Our personalized patient support services also provide trained specialists to answer patients’ questions, delivering live, email, text and chat support. With Millennia, your organization can reclaim valuable time and resources — our clients have enjoyed a 50% reduction in their cost to collect.
• Deliver a positive patient financial experience: Millennia fosters positive patient-provider relationships. Along with offering a user-friendly, navigable design for patients, our platform sends automatic billing reminders. Once patients pay, they’ll stop receiving alerts from all payment channels, from calls to paper statements. Our digital solution has a patient adoption rate of 93%, with patient satisfaction reports of 98%. 

Optimize Your Healthcare AR Management 

The Millennia Patient Payment Solution helps you get paid more, spend less on collections, reduce bad debt and keep your patients happy. We provide a single solution that benefits patients and providers, promoting healthcare payment accountability among all parties. 

Want to learn more about how Millennia’s advanced technologies and features can optimize your payment process and improve profitability? Schedule a consultation today.

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