Accounts Receivable in Healthcare: A Guide for Small and Mid-Sized Practices

Good financial management is vital to your healthcare practice. One key metric to be tracking continually is accounts receivable, which indicates the money owed to your practice for services already delivered.

Managing accounts receivable in healthcare well can make the difference between running a financially stable practice and one that is constantly chasing down payments from patients and other payers. But if your practice is like many, you’ve been experiencing an increase in claim denials and rising patient financial responsibilities that impact your ability to receive timely payments.

Many practices also struggle with disorganized collection processes that allow payments to slip through the cracks. Below, learn the importance of strong AR management and how proactive patient communication can help you streamline collections.

What is accounts receivable in healthcare?

Accounts receivable in healthcare represents the money owed to your practice for services rendered. This figure includes outstanding payments from patients, insurance companies, and any other payers (such as government agencies).

The four key components of the AR process are:

• Charges
• Payments
• Adjustments
• Denials

Errors in any of these stages can affect your overall AR balance.

Healthcare practices list AR as an asset on their balance sheets, and monitoring this figure gives practice owners a real-time view into their financial health. Keeping a close eye on AR and taking steps to reconcile overdue payments is key to running a financially sustainable organization.

Why accounts receivable management matters for small and mid-sized practices

Overdue payments directly impact your practice’s financial health, which translates to:

• Trouble paying staff
• Difficulties covering operating expenses
• Less capital to invest in technology or services

Small practices benefit the most from effective AR management, as cash flow disruptions hit harder when there is little or no financial cushion.

Monitoring accounts receivable in healthcare helps practices avoid missed revenue and collections opportunities that compound over time. Practices that do not manage accounts receivable well can experience significant losses that impact their financial stability.

Strong accounts receivable processes also support practice growth by ensuring that revenue already earned is actually collected. By tracking payments consistently, your practice can be aware of which accounts are overdue at a given time and continue nudging those payers for payments until they follow through.

Common challenges with accounts receivable in healthcare

Healthcare practices often experience a few common challenges that make managing accounts receivable difficult. They may have the best of intentions to reliably collect payments, but certain barriers interfere with their efforts and cause them to lose track of missing payments or give up on collections altogether.

Overcoming these challenges in your practice can help you maintain a healthy cash flow and prevent unpaid claims from slipping through the cracks.

Insurance claim denials

Claim denials are a common point of contention in healthcare practices, and they can directly impact accounts receivable. Insurance companies often deny claims due to issues like:

• Missing or incomplete information
• Medical coding errors
• Lack of documented medical necessity

The longer your practice is dealing with a claim denial, the more time the bill will spend in accounts receivable, where you have yet to reconcile the charges. Denied claims do not generate payment until they are corrected and resubmitted, which can take weeks to finish in even the most efficient practices.

Preventing denials upstream is an important step in mitigating this concern. Ensure that healthcare documentation is complete and accurate at every stage, and perform benefit verification prior to a patient’s appointment to confirm that they have the necessary coverage for the procedure.

Rising patient financial responsibility

Healthcare costs have been increasing steadily for patients in recent years, which has also impacted patients’ ability to make medical payments. This is true regardless of whether or not patients are insured, as many insured patients are facing higher deductibles, higher out-of-pocket maximums, and lower coverage.

Your practice needs flexible payment options and upfront estimates to increase the likelihood of receiving patient payments. Without these critical steps, you will be more vulnerable to bad debt and write-offs.

Be sure to communicate patient responsibility clearly as early in the patient journey as possible. This will help patients anticipate their expected costs and avoid being caught off guard by surprise bills.

Disorganized collections processes

A messy or disorganized collections process can lead healthcare practices to overlook unpaid invoices and delay billing for extended periods. Many practices feel disorganized when they do not have convenient methods of communication between front office and billing staff, or when they rely on outdated or inadequate technology.

Claims that sit for weeks or months before being submitted are more likely to be denied, adjusted, or written off entirely. Instead of seeing this as a staffing problem, understand that disorganized processes are often due to unclear accountability or lack of technology that your practice can resolve by fine-tuning your workflows.

Key benefits of effective AR management

Taking the time to improve accounts receivable in healthcare offers measurable benefits for practices like yours, including:

• Faster cash flow: By reducing the days in AR, your practice can benefit from faster cash flow and greater financial predictability.
• Revenue recovery: Minimizing unwarranted write-offs allows you to recover more revenue that your practice has already earned without needing to rely on new patient acquisition or service expansion.
• Reduced reactive management: Prioritizing proactive management of accounts receivable and collections reduces the reactive burden on billing staff, giving them more time to focus on patient communication and scheduling.
• Patient satisfaction: Patients who receive clear, timely billing communications are more likely to pay their bills on time and return for future care.

All of these benefits point to a more sustainable healthcare practice with better revenue cycle management overall.

How accounts receivable in healthcare connects to patient communication

If your practice often struggles with delayed payments from patients, the issue may partially lie in your communication strategy. Many payment delays are not intentional; they instead result from confusion about what the patient owes, when the bill is due, and how they can make a payment. Rather than immediately spending time investigating the matter, they may set the bill to the side and plan to worry about it another day.

When you provide patients with an easy, convenient method of asking billing questions, you can streamline collections for confused patients. One way to do so is through Weave’s communication platform.

Weave allows practices to send automated payment reminders when patients have outstanding balances, preventing any patients from slipping through the cracks. Patients can also receive automated text-to-pay links that allow them to pay their bills directly through a link sent to their smartphones, offering a more flexible payment experience.

With two-way texting features, billing staff can answer patient questions about their medical accounts quickly and conveniently. Instead of setting a confusing medical bill aside, patients can send a quick text to their healthcare practice and gain clarity about any concerns.

Connecting accounts receivable in medical billing to patients’ preferred communication channels, such as text, email, and phone, can accelerate collections while improving the patient financial experience overall.

AR management best practices for small and mid-sized healthcare providers

Following a few best practices can help your healthcare practice more reliably manage medical accounts receivable and minimize delayed or missing payments.

• Collect payment at the time of service: Collecting payments before a patient leaves your practice is one of the most effective ways to reduce outstanding balances. Providing upfront cost estimates will help patients prepare for the payment before their appointments, improving collections further.
• Offer multiple payment options: Giving patients the option to pay through their preferred method, such as online payments, text-to-pay, or even Apple Pay, can make resolving overdue accounts simpler. Payment plans can also remove friction for patients who are willing to pay their bills but need flexibility.
• Monitor AR aging reports regularly: Keep a close eye on aging accounts to catch balances before they become bad debt. Create a protocol for how you approach these accounts, such as nudging them a certain number of times or offering payment plans at certain points in the process.
• Automate AR follow-up: Using tools to automate statement delivery and payment reminders can reduce the manual workload on your front desk staff and streamline processes without needing to hire additional team members.

What to look for in an AR management solution

Adopting certain tools and technology in your practice can help you manage accounts receivable more reliably while saving time on a range of administrative processes. Look for the following core capabilities in a platform to start your search process:

• Automated follow-up
• Integration with existing EHR and billing systems
• Patient-facing payment options
• Real-time AR reporting

Prioritize solutions that reduce manual data entry and connect billing workflows directly to patient communication. This can make it easier to address outstanding balances promptly through built-in workflows.

Your practice can also benefit from tools that make AR aging visible in a single view rather than needing to log in to multiple platforms or manually check patient accounts. Practice managers can prioritize follow-up on the balances most at risk of becoming uncollectible and better “rank” accounts in order of importance.

Finally, your practice should focus on proactive instead of reactive AR management. The former involves building a workflow that prevents balances from aging, while the latter involves chasing down old balances that have already aged. Proactive management saves time and increases the likelihood of eventually resolving accounts.

How Weave supports healthier accounts receivable in healthcare

Weave’s communication platform enables practices to automate patient billing communication and move outstanding balances toward resolution faster. This software includes all of the following features:

• Automatic reminders sent to patients via text and email regarding overdue payments and balances
• Two-way texting, so that patients can communicate with front desk staff quickly when they have questions regarding the payment process or the costs of medical services
• Text-to-pay links that allow patients to pay bills through a link sent to their inboxes
• Other flexible payment options, such as online payments and other digital methods
• Automatic insurance eligibility checks
• And more

Weave integrates seamlessly with existing EHR and billing systems, ensuring that information stays accurate and up to date across platforms. With its versatile communication tools, Weave ensures that patients receive AR follow-up through their preferred channels.

Reducing billing confusion with Weave can lead to faster payments and support your long-term patient retention strategy.

Ready to improve your patient communication and AR workflow?

Strong management of accounts receivable in healthcare often relies on having a robust communication strategy and the right tools to streamline patient interactions. Weave helps practices automate billing communication and improve the financial experience while offering a range of other benefits for operational efficiency.

To learn more about Weave’s features and see for yourself how this platform can support your medical practice, request a demo today.