Understanding Accounts Receivable in Medical Billing

The Financial Pulse of Medical Practices

The financial stability of any healthcare practice has a direct impact on its ability to manage Accounts Receivable (AR). It is the backbone of healthcare revenue cycle management. In the constantly shifting landscape of US healthcare, the regulatory changes, evolving payer policies, and rising patient deductibles are becoming the new normal. Hence a robust AR strategy is not just beneficial but a critical aspect for sustained growth and success. denials potentially threatening the viability even of superior practices.

This blog provides an in-depth look into accounts receivable in medical billing, its impact, modern strategies to improve AR, and how Shoreline Medical Billing Company partners with healthcare providers to streamline and enhance AR outcomes.

What is Accounts Receivable in Medical Billing?

AR means the outstanding payments that healthcare providers are waiting to collect from patients and insurance companies for medical services delivered. It represents the unpaid balances and is a vital asset on a practice’s balance sheet as it directly impacts cash flow.

The Imperative of Efficient AR Management: Why It Matters More Than Ever

Successful AR management, will help us maintain the cash flow, reduce bad debt, and increase profitability.

According to a study submitted by Grand View Research, the U.S. revenue cycle management market estimate was USD 172.24 billion in 2024 and is expected to grow at a rate of 10.1% through 2025-2030. This highlights the need for an efficient and proactive AR management. The AR process begins when a provider submits a claim to the insurance company or bills the patient. If the payment is received, the account is cleared from AR. However, delays in payment, denials, or non-payment by patients can lead to various financial challenges.

The Role of AR in Medical Billing Cycle

Accounts Receivable is a core part of the entire RCM process, which starts with the Patient registration & Eligibility Verification and goes through the entire cycle of medical billing, which is Coding, Charge Capture, Claim Submission, and Payment Collection. By understanding how AR fits into the medical billing lifecycle we can have an effective management strategy. Let’s have a brief look into it.

1. Patient Registration and Eligibility Check

This is the first step to have clean claim and lower AR days. It involves,

2. Medical Coding and Charge Capture

This involves precise coding as per the latest guidelines (CPT, ICD-10, HCPCS) this ensure services are billable and reimbursable.

3. Claims Submission

Timely filing to primary and secondary payers is essential. Delays can push AR into aging buckets unnecessarily.

4. Insurance Adjudication

The payer processes the claim, approves payment, or denies/rejects it.

5. Patient Billing and Follow-Up

Remaining balances are communicated to patients, followed by collection efforts.

Key Factors Contributing to Rising AR

Due to the unique nature of healthcare reimbursement structure managing AR is becoming more challenging and tough. Some common factors that contribute for increase in AR are:

1. Claim Denials

The denials can delay payments and increase AR days. As result of coding errors, incomplete documentation, or lack of medical necessity claims submitted can be rejected/denied.

2. Increased Responsibility on Patient

With the rise of high-deductible health plans, the financial responsibility on patients have increased, leading to higher out-of-pocket costs. This increases the likelihood of delayed or unpaid patient bills.

3. Aging AR

Unpaid claims beyond 90 days are harder to collect. Studies show that after 120 days, providers recover only 10 cents for every dollar owed. Aging AR ties up funds and increases the risk of write-offs.

4. Regulatory Complexity

The changing federal regulations and payer policies keeps adding complexity to AR management. Non-compliance can result in claim denials or penalties, further delaying reimbursements.

5. Administrative Burden

Manually processing the bills or follow-ups, are time-consuming and prone to errors. These inefficiencies contribute to backlogs and delayed collections.