Why Your Medical Practice AR Keeps Growing — And How to Fix It

If you are wondering why medical practice accounting receivable (AR) is so high, you’re definitely not alone. Many providers experience medical practice accounts receivable problems and often wonder why they have to wait so long to get paid although the number of patients have significantly increased.

While medical billing AR issues are common, they are one of the most damaging issues as well. In this blog, we will break down the reasons why medical practice AR is so high, what is really causing insurance reimbursement delays in medical practice and some proven strategies on how to reduce accounts receivable in medical practice.

What Is Accounts Receivable (AR) in a Medical Practice?

Accounts receivable refers to the money owed to your business for services already provided for but not yet paid. The most common ARs are from patients and insurance companies.

For your practice to stay strong and avoid liquidity issues, claims should be submitted as soon as possible while payments should arrive within a month to 45 days at most. Also, aging balances should be actively followed up to prevent them from being written off.

Why Medical Practice AR Is So High

Determining the root cause as to why your AR keeps growing is the first step towards fixing it.

1. Inefficient Onboarding Process: Front-end issues need to be addressed such as having an efficient process in place to collect and verify patient information and insurance eligibility.
2. Denial Rates: Claim denials often occur because of incorrect insurance information, coding errors, or lack of medical documentation. These claims can age quickly making collection even more difficult.
3. Insurance Reimbursement Delays: Insurance reimbursement delays in medical practice are one of the biggest factors for increasing AR figures. This is because claims get stuck in pending status for a while, requests for additional documentation, authorization issues or backlogs from the payer. Just one issue can push a claim up by months.
4. Undertrained Billing Staff: AR can get out of control if your billing team is either understaffed or poorly trained. This can result in a lack of follow-ups, leaving denials unresolved.
5. Poor Medical AR Aging Management: AR balances can quickly go old if not actively managed. Once claims pass 90 days, it’s almost impossible to collect them. Many firms focus on new claims, rather than old ones, which is a costly mistakes.
6. Lack of Accountability: Many practices do not track key AR metrics, leaving AR growth unnoticed. Consider monitoring AR days, having regular AR review meetings etc. to strengthen your cash flow.

The Real Cost of Medical Billing AR Issues

Growing AR is not just an accounting issue, it affects your entire business. Some major issues include:

1. Cash Flow Problems: With delays in payments, your practice will face issues in paying for rent, supplies, working capital and salaries.
2. Administrative Burden: Time is lost in chasing old claims which could have been spent elsewhere in efficient activities.
3. Burnout: Many practices feel they are overwhelmed with frustration when they see that their revenue doesn’t match with their effort.
4. Higher Write-Offs: Aging AR often turns into bad debt, significantly affecting your profit and cash flow, especially when they build-up.

How to Reduce Accounts Receivable in a Medical Practice

1. Strengthen Front-End Processes: The most efficient method of reducing AR build-up is to prevent problems before they even start. Best practices include:
   • Verifying insurance eligibility every visit
   • Confirm benefits, copays and deductibles
   • Obtain referrals and authorizations in advance
   • Collect copays and outstanding balances at check-in. Having stricter front-end processes ensures timely approval and receipt of claims.
2. Submit Claims ASAP: The quicker a claim is submitted, the sooner you receive the outcome for it, whether it’s paid or denied or a correction is required, action can be taken promptly. Consider submitting claims within 48 hours of the visit, stay up-to-date on modifier updates and keep systems in place to detect errors.
3. Improve Medical AR Aging Management: This can be done by following these steps:
   • Reviewing AR aging reports weekly
   • Prioritizing follow-ups on aging debts 31-90 day balances
   • Escalate claims approaching 90 days
4. Create a Strong Denial Management Process: A strong denial management process would include:
   • Tracking denial reasons by category and payer
   • Identifying and analyzing recurring denial trends
   • Focus on correcting root causes rather than individual claims
   • Aggressively appeal denials within payer timelines.
5. Improve Collections from Patients: This is an increasing portion of AR balances nowadays. The longer patient balances remain uncollected, the difficult it becomes to receive it. Some strategies to improve collections are to:
   • Provide clear cost estimates upfront
   • Offer multiple payment options or payment plans
   • Send timely statements and payment reminders
6. Monitor Key AR Metrics Consistently: Monitor the following metrics on a weekly or monthly basis:
   • AR Days (ideally below 45 days)
   • Over 90 days AR percentage (need to minimize this)
   • Clean Claim Rate
   • Denial Rate by Payer
7. Regular Follow Up With Insurance Companies: They won’t pay on time unless you push them. Keep the following activities in your follow up practices:
   • Documenting every payer interaction
   • Regularly checking claim status
   • Escalating stalled claims
   • Resubmitting corrections promptly
8. Consider Outsourcing to Reduce Medical Practice Accounts Receivable Problems: Outsourcing is often the best way to fix persistent medical billing AR issues. Key benefits of outsourcing include:
   • Reaping the benefits of professional billing and AR staff
   • Faster follow ups and appeals
   • Reduced burden on administrative staff
   • Improved cash flow and forecasting

Outsourcing enables businesses to gain synergies from experienced professionals – allowing you to focus on what matters most – growing a sustainable business.

Can Medical Practice Accounts Receivable Problems Be Resolved Overnight?

While it can’t be cleaned overnight, visible changes can be quickly seen with the right approach. Typical timelines:

• 30 days: Improved claim submission speed and follow-up
• 60 days: Reduced denial rates and faster payments
• 90 days: Noticeable drop in total AR and days in AR

Consistency is key. Small improvements compound over time.

If your AR keeps on increasing, it’s not necessarily that it’s because your practice is failing. It could likely be because of the industry you operate in. Luckily, medical practice accounts receivable problems are not permanent and can be solved.

When you understand why AR gets stuck, address insurance delays and stay on top of aging claims, you can take control once again. You’ll already see your cash flow improve, stress drop and can finally concentrate on patient care.