Ever feel like you’re working harder and harder, but the numbers just don’t add up? In healthcare, we give everything to our patients, yet so much of the money we’ve earned gets stuck in billing or lost to denials.

Did you know hospitals submitted around $3 trillion in claims, but $262 billion (9%) were initially denied? Better staff, resources, and care could have been provided with the money that was lost. So, where does it go? More importantly, how do we get it back? Let’s break it down.

What is Accounts Receivable Management?

Accounts receivable (A/R) in healthcare refers to the money owed to medical providers by patients or insurance companies. It includes unpaid bills for services already provided, such as patient invoices or insurance reimbursements.

A well-organized accounts receivable process is important for the financial health of healthcare providers. It requires careful handling of billing, claims, and follow-ups. Success depends not just on efficient workflows but also on understanding insurance rules, patient coverage, and changing healthcare regulations.

Why Is Accounts Receivable Management Important?

Keeping A/R under control is crucial for a steady cash flow. The longer an invoice remains unpaid, the lower the chances of receiving full payment. High A/R levels can strain operations, making it harder to pay staff and manage expenses. If payments remain overdue for too long, they may have to be written off as bad debt, leading to financial losses.

How Healthcare AR Changes Over Time

The A/R cycle starts when a provider submits a claim to an insurance company or bills a patient. Once the payment is received, the account is no longer considered A/R. Healthcare providers track A/R by age, usually in 30-day segments:

• 1-30 days

• 31-60 days

• 61-90 days

• 91-120 days

• 120+ days

Key Metrics for Healthcare Providers

Tracking performance indicators helps keep A/R in check. Important metrics include:

• Average Days in A/R: Measures how long it takes to receive payment after billing. Keeping this under 35 days is ideal.

• A/R Over 90 Days: The percentage of outstanding payments older than 90 days. Experts suggest keeping this below 10%.

Key Features of Accounts Receivable Management in Medical Billing

• Claim Submission

• Payment Posting

• Denial Management

• Patient Billing

• Aging Reports

• Follow-Ups

• Automated Reminders

• Compliance Management

• Payment Plans

• Performance Analysis

Key Roles of Accounts Receivable in Medical Billing

Accounts receivable (AR) plays a big role in handling payments. Below are the key functions that keep the billing process running smoothly.

1. Submitting Claims on Time

Insurance claims must be sent quickly and correctly. Using proper codes and complete details helps avoid rejections.

2. Recording Payments

When payments come in, they need to be posted to the correct patient accounts. This ensures all balances are updated.

3. Fixing and Resubmitting Denied Claims

If a claim is denied, AR specialists find out why, correct the issue, and send it again to get paid.

4. Managing Patient Bills and Collections

After insurance pays its part, patients are billed for any remaining balance. Clear communication helps reduce overdue payments.

5. Tracking and Analyzing AR Data

Regular reports help spot problems in the billing process. Aging reports show unpaid invoices and help improve collection efforts.

Step-by-Step Process of Accounts Receivable in Medical Billing

From patient registration to final payment, each step matters. 

Step 1: Patient Registration

Accurate patient detail is the first step in any successful billing cycle. Staff must collect correct information, including insurance details, to prevent payment issues. Verifying insurance and getting pre-authorizations early can save time and reduce billing headaches.

Step 2: Recording Services

Accurate medical records are essential for correct billing. Healthcare providers must document treatments properly to support claims. Without clear records, getting reimbursed becomes difficult.

Step 3: Billing and Claim Submission

After recording services, billing specialists translate them into standardized codes. These codes help insurance companies process claims. Errors in coding can lead to denials, so attention to detail is crucial.

Step 4. Payment Collection

Receiving payments isn’t automatic. Practices must track claims, follow up on unpaid bills, and address any issues. Regular monitoring helps avoid financial strain and keeps cash flow steady.

Step 5: Measuring Financial Health

By tracking AR metrics, providers can better understand their financial situation. Reports on unpaid balances, collection rates, and claim denials highlight problem areas. Monitoring these indicators ensures better financial stability.

Challenges in Healthcare Accounts Receivable

1. Complicated Billing and Insurance Claims

Handling medical billing means dealing with many codes and different insurance policies. Every patient visit adds more paperwork, increasing the chances of mistakes that delay payments.

2. Slow Payments and Cash Flow Struggles

You do the work, but the money doesn’t show up right away. Insurance companies take their time, and patients may struggle to pay. Meanwhile, bills pile up, and cash flow takes a hit. It’s a waiting game no one wants to play.

3. Strict Compliance Rules

Healthcare is one of the most regulated industries. Staying compliant is a must, but keeping up with constant policy changes feels like a full-time job. One misstep? Denied claims, fines, or more red tape.

4. High Costs of Managing AR

Following up on denied claims and unpaid bills takes time and resources. The money spent on these tasks reduces overall profits and makes financial planning harder.

5. Adapting to New Technology

New billing systems and automation tools can improve AR management. However, switching to new technology requires staff training, which takes time and effort.

6. Limited Payment Options

Not everyone can pay a bill in full, and not every patient has the same payment preferences. Offering flexible options, like online payments or installment plans, can speed up collections.

7. Unpaid Bills and Patient Debt

Medical bills can be overwhelming. When patients can’t afford to pay, providers are left with unpaid balances, and patients face financial stress. It’s a no-win situation.

Best Ways to Manage Accounts Receivable in Healthcare

Keeping track of payments is essential for healthcare providers. Below are simple ways to manage accounts receivable effectively.

1. Check Patient Insurance Before Appointments

Make sure the patient’s insurance details are up to date. This helps confirm coverage and payment responsibility. Before each visit, check:

• How much the insurance will pay

• What the patient owes

• Any unpaid balances from past visits

2. Help Patients Understand Their Payment Responsibilities

Patients should know what they owe before receiving care. A clear payment policy should explain:

• When payments are due

• How co-pays and deductibles are handled

• Accepted payment options

• What happens with unpaid balances

Collecting payments upfront reduces unpaid bills. After visits, send reminders with due dates and contact details for billing questions.

3. Keep Track of Insurance Payments

Check if insurance companies are paying on time. Some take longer or deny more claims. Reviewing payments regularly helps fix delays. If a claim is denied, correct mistakes and resubmit quickly.

4. Find and Fix Common Billing Mistakes

Errors in patient details, coding, or billing can slow down payments. Identify frequent mistakes and take steps to prevent them.

5. Use Medical Billing Software

Billing software helps track unpaid accounts, send reminders, and reduce manual work. It speeds up claim processing and minimizes errors.

6. Work with Billing Experts

Having the right team makes a big difference. An experienced billing company can handle AR management, follow up on payments, and prevent backlogs.

The Role of Technology 

Faster and Accurate Claims Processing

Automated billing systems reduce manual work, lowering claim errors and ensuring faster insurance reimbursements.

Real-Time Monitoring of Claims & Payments

Providers can track claims, denials, and patient payments instantly, which allows quick action to maintain steady cash flow.

Easy Integration with EHR & RCM Systems

AR tools connect with electronic health records (EHR) and revenue cycle management (RCM) platforms that keep financial data updated across departments.

Better Patient Payment Experience

Online portals let patients view bills, set up payment plans, and make payments easily, which reduces outstanding balances.

Data-Driven Financial Insights

Analytics help identify denial patterns, predict revenue cycles, and improve financial decision-making for healthcare providers.

What Is the Future of AR Management in Healthcare?

The future of healthcare accounts receivable (AR) is shifting with new technologies and industry demands. Here are key trends shaping AR management:

1. Increased Automation

More healthcare providers will use automated billing tools to reduce errors, speed up payments, and simplify claims processing.

2. AI and Data Insights

AI will help predict payment trends, detect claim issues, and suggest the best ways to manage collections.

3. Blockchain for Secure Transactions

Blockchain may improve security, accuracy, and transparency in financial transactions between providers, insurers, and patients.

4. Patient-Friendly Payment Options

Flexible payment plans and digital payment options will help patients manage medical bills more easily.

5. Stricter Compliance Requirements

With changing regulations, staying compliant with billing and insurance rules will be more important than ever.

Getting Started with Accounts Receivable Automation

Automating accounts receivable saves time, reduces costs, and maintains steady cash flow. By automating claim follow-ups, patient payment reminders, and denial management, providers can focus more on patient care rather than administrative tasks.

Modern healthcare AR solutions offer features like:

• Automated Claim & Payment Reminders: It reduces delayed payments by reminding patients and insurance providers.

• Patient Payment Portals: It allows patients to view bills, set up payment plans, and pay online.

• Secure Digital Receipts: To ensure better record-keeping for audits and financial tracking.

• Recurring Billing for Long-Term Care: It supports subscription-based models for ongoing treatments.

• Automated Denial & Collections Management: Makes appeals and unpaid claim follow-ups easier.

• One-Click Payment Reconciliation: To prevent inconsistencies, compare received payments with unpaid invoices.

• Dispute Resolution Tools: It resolves claim disputes efficiently to reduce revenue loss.

Should You Outsource AR Management?

Deciding whether to manage AR in-house or outsource it is a critical choice for healthcare providers. While outsourcing can free up time, it often comes with high costs and less control over financial processes.

Many healthcare facilities outsource AR due to its complexity, but this can create challenges. External teams may lack insight into patient care, leading to billing errors or communication gaps. A strong provider-patient relationship is crucial, and outsourcing can sometimes affect trust and transparency.

Outsourcing should be strategic—not just a way to avoid administrative work. Managing claim submissions, reminders, and collections internally is made easier with the use of customized AR software. External billing companies may not fully understand your operations, which causes inefficiencies.

If outsourcing is necessary, choose a collaborative platform that keeps your team involved in critical billing tasks. No matter what, AR management always requires internal oversight to ensure accuracy and compliance.

Dilijent Systems offers reliable AR solutions that improve efficiency without sacrificing visibility. Contact us today for a free consultation!

Conclusion: 

Managing accounts receivable (AR) effectively is crucial for healthcare providers to maintain financial stability. A well-structured AR process ensures steady cash flow, reduces claim denials, and minimizes revenue loss.

By implementing clear billing policies, automated claim tracking, and proactive follow-ups, healthcare organizations can reduce delayed payments and avoid unpaid claims. AR automation simplifies the process by reducing manual errors, speeding up claim approvals, and providing real-time insights into outstanding payments.

FAQs

What impacts AR days in medical billing?

AR days are affected by late claim submissions, coding errors, insurance verification issues, and slow follow-ups on outstanding payments.

How can a medical practice reduce bad debt?

A practice can reduce bad debt by verifying patient insurance before services, collecting co-pays upfront, offering payment plans, and following up on overdue accounts.

Why is tracking AR days important?

Tracking AR days helps healthcare providers understand how long it takes to collect payments, identify cash flow issues, and make informed financial decisions.

How can medical practices speed up payments?

They can speed up payments by submitting claims promptly, using automated billing systems, sending payment reminders, and offering multiple payment options for patients.

What are common reasons for claim denials?

Common reasons include incorrect patient information, coding errors, lack of prior authorization, and expired insurance coverage.

How can practices reduce claim denials?

They can reduce denials by verifying insurance details, using correct medical codes, obtaining prior authorizations, and double-checking claims before submission.

What role does automation play in AR management?

Automation helps reduce manual errors, speeds up claim processing, improves payment tracking, and ensures timely follow-ups on unpaid claims.

What are the key financial indicators for AR performance?

Important indicators include AR days, denial rates, collection rates, and the percentage of outstanding claims over 90 days.