Rethinking Your Hospital A/R Services? Start With These Steps

Rethinking Your Hospital A/R Services? Start With These Steps

Hospital A/R services are a complex mix of moving parts. Revenue cycle leaders who have found even small issues in their A/R face a decision-making process that covers the end-to-end revenue cycle, including patient registration and eligibility, POS collections, billing, and beyond. To address any challenges, they have to take into account staffing choices, technology decisions, and a broad mix of revenue cycle vendors. This makes issues with A/R difficult to diagnose, even as they directly impact hospital margins, debt, and organizational financial health.

Starting with a few fundamental elements that influence A/R will support your leadership in making informed decisions around A/R services and help them navigate an increasingly complex revenue cycle environment.

Track Critical KPIs.

Decisions around hospital A/R services should start with insight into the current state of your revenue cycle, and that means working with the right revenue cycle KPIs. When assessing and optimizing the root causes of your A/R issues, we recommend the following key performance indicators as a starting point.

Net Days in Accounts Receivable

Use this KPI to develop insight into the general efficiency of your revenue cycle processes. While it might not yield a granular perspective on specific A/R challenges, it is a useful metric to establish a baseline as you make changes and evaluate the effectiveness of your decisions.

Aim for general industry standards. Below 30 days is above average, 40-50 falls under the average category, and anything over 60 days will put your performance in the below average range. 

Aged A/R as a Percentage of Billed A/R by Payer Group

Use this KPI to understand A/R from the perspective of specific payer groups. While your entire approach to A/R might need to be reformed, it’s highly likely that specific payers are causing more issues than others. This metric will help you identify and rank key offenders so you can properly allocate resources and attention.

Aged A/R as a Percentage of Total Billed A/R

This metric provides high-level insight into general collectability and helps paint a picture of how effective your revenue cycle processes are at liquidating A/R. It will be especially helpful if you are reforming downstream workflows, technology, or staffing.

While these KPIs are useful, they’re only helpful if you’re working with reliable data. Ensuring your working with trustworthy data may require an evaluation of your software, a talk with your vendors, and a review of your data governance policies.

Beef Up Denial Management.

Chances are, if you’re having issues with hospital A/R services, your denials are a major contributing factor. While only about two out of every three denials are up for recovery, almost 90% are preventable. With hospitals writing off about $262 billion to denials in one year, most organizations will find that improving their approach to denial management can have real impact on their A/R.

Most importantly, start with nailing down your specific root causes. This might vary by payer and even service line, so prioritize specificity in your KPIs and a multi-faceted approach to any reporting you perform. Keep an eye out for issues such as duplicate claim submission, timely filing challenges, service coverage requirements and missing information.

One of the most overlooked solutions to improving denial rates is engaging clinical staff. Since the transition to ICD-10, there has been a higher demand for specificity in medical billing. If an organization hasn’t properly educated clinicians, they may still be in the dark in their clinical documentation practices. Make sure your clinical documentation specialists and clinical staff are working together to continually educate each other and lift your denial rates.

Additionally, don’t forget the front end. It’s highly possible that something as simple as eligibility issues are contributing to high denial rates. Front-end root causes can point back to training and staffing issues, or even technology selection, so it’s worth rethinking multiple aspects in this first-phase of the revenue cycle.

Improve Clean Claim Rate.

Taking on your clean claim rate can go a long way to improving your A/R. Every claim that is rejected is more work for your staff, a blow to your A/R metrics, and additional costs that could have been prevented. When addressing clean claim rate, look for issues such as

  • Lack of prior authorization
  • Canceled coverage
  • Claims included as part of a bundled payment program
  • Services covered by another payer or plan
  • Failing to demonstrate medical necessity

These may overlap with some of the other issues discussed, but clean claim rates are worth tackling on their own. The issues here frequently require digging into deeper causes such as human error and how your organization or a department determines medical necessity.

Another way to address many of these issues is to find a billing partner who understands hospital A/R and who can help you optimize your approach to billing so that it is a minimal contributing factor to your A/R services issues. If you’re ready to get started, we can help.