Best Practices to Optimize your AR days for DME facilities

Accounts receivable days is an accounting concept related to accounts receivable (as is obvious). It’s the length an entity takes to receive money for all the services it provides or goods it sells. This is important in that it allows the entity to determine how efficient it is at receiving short-term payments it’s owed. In other words the measurement determines how effective the entity’s credit and collection efforts tally against each other. Note that the term ‘entity’ here is used to refer to a business enterprise (which could be a company, store, a pediatric clinic, medical facility of DME Company).

Importance of low AR days
What does it mean for you to have low AR days? In practice, it means that you get paid for your services prior or that you take a very short time to collect all monies owed to you. This implies that you can effectively ramp up service delivery by acquiring the necessary equipment and supplies (which is of interest in our case) early in advance or before your stock runs out. You’ll never be limited by cash flow.
This concept may be counter-intuitive at times so it would be wise for you to tread with care. All in all, to avoid cash constraint, you should aim at minimizing the number of AR (Accounts Receivable) days.

Here are a few key steps you can take to optimize your AR days for DME facilities
  1. Determine goals for AR days for the facility the ideal number of AR days varies depending on the type of facility and its specific mix of payers. Defining a goal for AR days is step one to achieving that goal.
  2. Work toward timely, accurate documentation by ensuring timely and accurate documentation for coding and billing cases and adequate revenue cycle staffing, AR days can be reduced. Reviewing transcription turnaround times can find inefficiencies that can be corrected, and having consistent communication with doctors on outstanding dictation can ensure timely completion of this critical process.
  3. Verify insurance eligibility and demographic information prior to each visit. Does you have the correct address, phone number, and email address on file? Is the patient’s insurance active? Will a copayment and/or deductible be due? If so, what is the amount? Let patients know this information in advance.
  4. Consider a batch eligibility system. This system provides a report showing each patient’s current coverage and eligibility status. Run this report two days before each patient appointment to identify potential errors in data input as well as any undetected gaps in coverage. The system ensures up-to-date information, and it helps practices catch any changes that might occur between the booking of the appointment and the actual date of service.
  5. Collect 100% of all copayments at the time of service—when the patient checks in for his or her appointment. Let patients know in advance of this expectation.
  6. Set “clean claim” goals. Make sure your coders and billers (or billing company) understand your expectations for clean claims. Set a goal of getting clean claims out within 48 hours of receipt of the required documentation. Also, make your goals for follow-up on electronic rejections on uploaded claims crystal clear.
  7. Manage the claims denial process effectively meeting your goal for days in AR is essential for keeping the healthcare revenue cycle on track.
  8. Ensure you have processes in place for tracking denials and that your personnel understands how denials are to be handled to minimize time to payment. Communicating the claims denial process as part of your revenue cycle staffing procedures can effectively reduce AR days.
  9. Educate personnel on payer-specific policies to ensure that your personnel has access to training on requirements for Medicare, Medicaid, and major private insurers. Many payers have online access to policies as well as webinar-style training for this purpose.
  10. Revise patient statements to communicate effectively with patients. Include the dates of service as well as a detailed breakdown of the services rendered, insurance payments, fees collected at the time of service, and a total amount due.
  11. Send two patient statements and then follow up with a phone call for 90-day past due balances. Then decide whether to send the account to collections or write off the amount. Sending more than two statements is typically unfruitful, and it wastes valuable time and resources.
  12. Send bills to patients and/or insurers as soon as possible (i.e., weekly rather than monthly). Lengthening the time between the date of service and the date of billing oftentimes causes downstream effects in terms of payment delays. Patients are more likely to pay their bill when it arrives as close as possible to the date of their appointment.

As hospitals deal with the everchanging financial environment, the billing and collections operation are one of the most crucial aspects of managing a healthcare business. Cash-starved health systems are the victim of a declining AR turnover rate and a deteriorating AR aging schedule.
Turning around a troubled revenue cycle is no easy feat. Most hospitals first need to determine what is wrong with the infrastructure of their revenue cycle and then construct a work plan that will achieve the necessary changes while maintaining cash flow in the interim.
When AR ages to the point of no return, hospitals need to recover cash quickly and work down aging receivables.
Whichever road you decide to take during a revenue cycle turnaround attempt, remember that proper planning and allocating the right resources to produce maximum performance are the keys to any successful AR turnaround effort.
When practices are implemented that effectively shorten the healthcare revenue cycle, the impact can be tremendous. By decreasing a payment cycle by only five days, cash flow can increase and hospital accounts receivables can significantly decrease.

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