For healthcare practice owners, providing exceptional patient care is always the top priority — but maintaining financial health is what keeps the practice sustainable. One of the most critical components of that financial stability is accounts receivable (AR) — the money owed to your practice for services you’ve already delivered.
When AR isn’t managed effectively, even a busy, profitable practice can experience cash flow bottlenecks, delayed payroll, or operational strain. According to the Medical Group Management Association (MGMA), between 15%–25% of practice revenue is often tied up in AR over 90 days — a significant financial burden.
This guide will help you understand the essentials of accounts receivable management for healthcare practices — from mastering key AR metrics to implementing effective billing strategies and improving collections.
By the end, you’ll have a practical roadmap to strengthen your cash flow, optimize operations, and maintain the financial stability your practice deserves.
1. Understanding Accounts Receivable: The Foundation of Practice Financial Health
What Is Accounts Receivable?
Accounts receivable refers to payments owed to your practice for services already rendered but not yet paid. In a healthcare context, this often includes unpaid patient balances, pending insurance reimbursements, and claims in progress.
AR is a current asset on your balance sheet — money expected soon — but delays or inefficiencies in collection can create serious cash flow issues. For healthcare practices, effective AR management directly influences liquidity, profitability, and growth.
Why Accounts Receivable Is Unique in Healthcare
Unlike many industries where customers pay at the time of service, healthcare AR is more complex. Common challenges include:
- Insurance delays caused by lengthy claim processing.
- Patient co-pays and deductibles requiring multiple reminders.
- Claim denials or underpayments that demand appeals or corrections.
This multi-layered structure makes AR management one of the most vital — and complex — parts of running a successful healthcare practice.
2. The Accounts Receivable Process: From Service to Payment
The AR lifecycle begins the moment a patient is scheduled and continues until full payment is received and reconciled. A streamlined AR workflow ensures steady cash flow and minimizes aging receivables.
Step 1: Patient Intake and Eligibility Verification
Before care is provided, verify patient eligibility and coverage. According to the Centers for Medicare & Medicaid Services (CMS), eligibility errors are among the top causes of claim denials.
Checklist:
- Confirm patient demographics and insurance details.
- Identify co-pays, deductibles, and non-covered services.
- Obtain authorizations or referrals when required.
Step 2: Accurate Documentation and Coding
Proper medical documentation and coding ensure claims are processed correctly the first time. Coding errors (CPT, ICD-10) can delay payments by weeks or trigger rejections.
Tip: Schedule quarterly internal audits to catch errors early.
Step 3: Charge Capture and Claim Submission
Timely claim submission is essential. Submit claims within 24–48 hours post-visit. Using electronic claims systems minimizes manual errors and accelerates reimbursements.
Step 4: Payment Posting and Reconciliation
Match incoming payments accurately with their corresponding claims. Misapplied or delayed postings can skew financial reports and hide revenue leaks.
Step 5: Follow-Up and Collections
Establish a consistent follow-up cadence based on AR aging (30, 60, 90+ days). Proactive communication — not reactive — keeps balances under control.
Step 6: Reporting and Review
Generate AR reports regularly to identify slow-paying insurers, recurring denials, and patient trends. Continuous monitoring allows you to correct issues before they impact cash flow.
3. Why Accounts Receivable Management Is Critical for Practice Success
Cash Flow and Liquidity
Even profitable practices can experience financial stress if too much revenue is tied up in AR. A consistent cash flow ensures payroll, rent, and vendor obligations are met on time.
Patient Satisfaction
Confusing or delayed billing frustrates patients and damages trust. Transparent, timely billing processes improve both collections and patient relationships.
Operational Efficiency
A well-managed AR process reduces administrative burden and enables accurate financial forecasting — vital for decision-making and growth planning.
Compliance and Risk Management
Inefficient billing processes risk HIPAA violations, inaccurate reporting, or missed payer deadlines. Effective AR systems maintain compliance and audit readiness.
4. Key Accounts Receivable Metrics Every Practice Should Track
Monitoring AR performance metrics helps practice owners detect financial red flags early.
1. Days in Accounts Receivable (DSO)
Measures the average number of days it takes to collect payments.
Formula: (Total AR ÷ Average Daily Charges)
Benchmark: Under 40 days for healthy practices.
2. Net Collection Rate
Indicates how effectively your practice collects allowable reimbursement.
Formula: (Payments ÷ (Charges – Contractual Adjustments)) × 100
Benchmark: Above 95% is excellent.
3. AR Over 90 Days
Shows how much of your receivables are overdue.
Benchmark: Keep under 10% of AR older than 120 days.
4. Denial Rate
Measures how many claims are rejected.
Benchmark: Below 5% signals strong performance.
5. Bad Debt Ratio
Tracks uncollectible balances written off. Maintaining a low bad debt ratio improves profitability.
Together, these KPIs reveal how quickly and efficiently your practice converts services into cash.
5. Common Accounts Receivable Challenges (and How to Solve Them)
| Challenge | Solution |
| Delayed Claim Submissions | Automate billing workflows and set a 24-hour submission rule. |
| High Denial Rates | Conduct monthly denial audits and fix recurring coding or eligibility issues. |
| Slow Patient Payments | Use automated reminders and offer online or installment payment options. |
| Inaccurate Reporting | Adopt practice management software with real-time dashboards. |
| Inadequate Follow-Up | Assign staff responsibility by AR aging bucket and track outcomes. |
Efficient follow-up can raise recovery rates by 20–30% according to HFMA benchmarks.
6. Proven Strategies to Improve Accounts Receivable Performance
1. Strengthen Front-End Processes
- Verify insurance in real time.
- Collect co-pays at check-in.
- Secure signed financial responsibility agreements.
2. Shorten the Billing Cycle
Submit claims within one day of service. A shorter cycle means faster reimbursements and fewer write-offs.
3. Automate AR Management
Use automation for reminders, payment matching, and denial tracking. This reduces manual errors and enhances staff productivity.
4. Create Transparent Payment Policies
Post payment expectations clearly in your office and online to avoid misunderstandings.
5. Segment and Prioritize AR
Focus efforts strategically using your AR aging report:
- 0–30 days: Normal process
- 31–60 days: Early reminders
- 61–90 days: Escalate follow-up
- 90+ days: Collections or write-off review
6. Train Your Team Continuously
Ongoing education ensures staff remain up to date on payer requirements, claim formatting, and compliance changes.
7. How to Read and Use an Accounts Receivable Aging Report
An AR aging report shows how long balances have been outstanding, usually in 30-day intervals. It’s your most powerful diagnostic tool for identifying collection issues.
Key Buckets:
- 0–30 days: Normal
- 31–60 days: Needs light follow-up
- 61–90 days: At risk — prioritize these
- 90+ days: Critical — immediate action
How to Use It:
- Detect payer or patient delay patterns.
- Prioritize accounts strategically.
- Forecast upcoming cash inflows.
- Monitor staff accountability.
According to HFMA, practices that review aging reports weekly collect payments 15% faster than those that review monthly.
8. Compliance and Best Practices in Healthcare AR
Protecting Patient Information
Comply with HIPAA standards:
- Restrict data access.
- Encrypt billing data.
- Use HIPAA-compliant communications.
Adhering to Fair Debt Collection Laws
Follow the Fair Debt Collection Practices Act (FDCPA):
Avoid repetitive calls, misleading statements, or aggressive tactics. Always communicate respectfully and document thoroughly.
Meeting Insurance and Documentation Requirements
- Keep complete records of claims and remittances.
- Respond promptly to payer audit requests.
- Adhere to CMS timely filing and appeals deadlines.
Embedding compliance into your AR workflow ensures legal safety, patient trust, and long-term financial resilience.
9. The Future of Accounts Receivable: Trends Transforming Medical Billing
The AR landscape is rapidly evolving. Forward-thinking practices are adopting technology-driven solutions to streamline cash flow.
AI and Predictive Analytics
AI can anticipate claim denials and prioritize follow-ups automatically.
According to the American Hospital Association (AHA), AI can improve cash flow by up to 30% through smarter prioritization.
Automation and Integrated Workflows
Cloud-based billing software integrates EHR, scheduling, and payments — cutting manual work and accelerating reimbursements.
Real-Time Dashboards
Data visualization tools display AR performance, DSO, and denial rates instantly — allowing immediate corrective action.
Patient Self-Service Portals
Secure online payment options and text reminders make payments easier, improving satisfaction and collection rates.
Value-Based Care Impact
As reimbursement models evolve, accurate documentation and billing integration become essential to success.
10. Building a Culture of Financial Accountability
Establish Ownership
Assign staff to specific AR aging segments. Track and discuss progress weekly.
Promote Education
Encourage team members to participate in MGMA or HFMA webinars and CMS compliance training.
Leverage Data
Analyze AR data to identify weak payer performance, negotiate better contracts, and predict seasonal cash flow shifts.
Embedding accountability and continuous improvement into your team culture turns AR management into a long-term strength.
11. The Financial Pulse of a Healthy Practice
Strong AR management keeps your practice’s financial pulse steady.
By tracking the right metrics, streamlining billing, leveraging automation, and empowering your team, you can:
- Improve cash flow consistency.
- Reduce claim denials.
- Enhance patient satisfaction.
- Build a financially resilient practice.
Partner with Experts Who Understand Practice Finances
Managing accounts receivable requires precision, persistence, and deep expertise. That’s where a trusted partner makes the difference.
Medviz Systems helps healthcare practices improve accounts receivable and medical billing operations using proven technology and decades of experience.
Our team accelerates collections, reduces denials, and ensures full regulatory compliance — freeing your staff to focus on patient care.
👉 Ready to reduce outstanding AR and boost cash flow?
Want expert guidance? Call +1 (727) 214-2749 or email sales@medviz.ai to schedule a consultation and learn how to streamline your PCM program for maximum results.
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