Healthcare finance has always been a tricky business, likely due to the sheer number of patients that many healthcare providers have and the different aspects that play into what one particular patient’s bill might be. In general, a healthcare provider will typically look at the metric of Days in Accounts Receivable, otherwise known as DAR, as a way to analyze how strong their financial performance is going. Once a healthcare provider determines what their median DAR is, their goal is to bring this figure down as low as possible. What a lower number of AR days means is that bills are getting paid more efficiently and effectively. When this is the case, a healthcare provider will be better able to avoid debt accumulation and maintain steady cash flow. While the prospect of reducing AR days may seem daunting and complex, it can more easily be managed by following these steps.
Determine Your Current State In Terms of DAR
Before you can begin working on reducing AR days, you need to determine what your current position is in terms of DAR. If you’re not yet aware of what your current DAR figure is. This is easy to figure out, as long as you can look back within the last six months at your total charges and know what your total accounts receivables are. From there, the figure you’re looking for can be achieved through a simple two-step formula. First you’re going to determine an estimate of your average daily charges. To do this, simple divide your total charges for the past six months by the number of days in the last six months. Got it? Now you’re going to take your total of accounts receivables and divide that by the number you just came up with, or your average daily charges. That will give you your DAR.
Hopefully this number is between 40 and 50. If so, your billing performance would be considered average in comparison to the DAR of other healthcare providers. If that number is below 40, congratulations! You’re billing performance is more efficient that average! This doesn’t mean that you should stop working towards bringing that number down, but it does mean what you’re doing right now is working well. If your DAR is above 50, you’ll know that your billing performance needs work in order to avoid debt collection and ensure healthy cash flow.
Utilize Data to Get An Idea of Where You’re At In Terms Of AR
How can you better manage your revenue cycle if you don’t have a clear understanding of where you’re at? Healthcare providers should strike to improve their revenue cycle as much as possible while implementing purposeful changes that are inspired by data that depicts where your performance currently stands. This is your chance to look for any trends that may exist within the data. Does one particular payer tend to often not pay in time? Once you have this information, you can address the issue with the payer and hopefully reduce this problem in the future.
Hire a Quality Coder
If you’re really looking for ways to enhance your financial performance, you need some trained and certified employees on your side. It might be prudent to invest in a certified coder who can help you ensure your accurately documenting your finances, meeting any payer requirements necessary, and getting an understanding of industry trends. This is really just another way to ensure you are covering all your bases and taking every possible step to successfully reduce AR days. This individual can also potentially help provide patients with any assistance they might be looking for as far as copayments and deductibles.
Change Your Timeframe In Regards To Billing
If you notice that you’re consistently having your patients pay bills late, there might be an issue with the time frame you’re utilizing for billing. In an effort to increase bills being paid on time, consider adjusting the amount of time you’re providing patients with. Make sure you’re sending out bills as fast as possible. The sooner you can send the bill after the time of service the better. Do away with weekly or monthly billing and instead decrease the time between the date of service and date of billing.
Invest in Technology that will Help Reduce AR days
Provide Patients with as Many Ways as Possible to Pay their Bills
These days we’re moving further and further away from paper billing and heading in the direction of only digital bills. Technological advancements such as artificial intelligence, or AI, as well as the 5G network are leading to the great shift from paper to digital faster than could have ever been expected. This is in part due to the additional security measures such advancements offer, for example providing patients with multiple ways of confirming their identity before gaining access to their accounts or financial information. We’re now seeing two factor verification in a lot of bill processing centers, whether this may be in the form of thumbprint identification, security questions, and even facial recognition with some of the newer devices coming out. In short, all these precautionary measures are all ways to avoid a patient’s information being compromised, prevent hacking or scamming, and keep confidential information secure. These advances not only prevent hacking, but alert financial institutions within seconds if an account has been compromised. Heightened security is also vital whenever you’re dealing with finances, but is even more important for healthcare providers because of the sheer volume of classified information and patient data they’ve been entrusted to protect.
This shift will help even those most technological hesitant feel more confident about paying their bills. Many people, particularly those among the older generation, have been slow to jump on board with digital payments out of the fear of their information being compromised. However, new technological advancements make it all the more difficult for security breaches to occur.
Another way for healthcare providers to reduce AR days as much as possible and prevent debt accumulation is to offer their patients as many ways as possible to pay their bills. They should most certainly encourage digital payments, whether this may come in the form of an online portal or perhaps a phone application that synchs up with their financial institution. Digital payments not only allow bills to be paid faster and more efficiently, but are also often more secure.
While healthcare providers should encourage digital payments and continue to remind patients that this is an option for them, this does not mean they should neglect providing paper billing as an option. The more options they better in terms of ways to pay bills.
To conclude, it’s possible for any healthcare provider to reduce their AR days by simply determining where they are currently in terms of their DAR and deciding where the goal is for the future. From there they can invest in modern software programs that make bill payments easier and more efficient. Finally, never neglect to provide patients with as many ways as possible to pay their bills.