Strategies for Accounts Receivable Management in Rural Health Clinics

Strategies for Accounts Receivable Management in Rural Health Clinics

By Judy Monestime, DBA, RHIA, CPHI, CDIP, CPC, CPC-I; Roger Mayer, DBA, CPA, CIA, CRMA, FACHE; and Anthony Medel, DBA

The pressure on healthcare organizations, and specifically rural health clinics, is for improved financial performance and sustainability. The challenge of this task increased during the COVID-19 pandemic, where face-to-face interactions were limited and millions of Americans lost their jobs. The concern over financial sustainability is predominant in rural healthcare settings, characterized by many indigents and uninsured patients, a shortage of healthcare providers, low reimbursement rates, and other structural and economic disparities. Undoubtedly, accounts receivable (AR) management is a critical component of rural healthcare clinic sustainability and viability.

Creating a sustainable revenue cycle requires cooperation among office leadership, patients, and payers to optimize accounts receivable. The management of ARs requires continuous monitoring, open communication, and a commitment to never letting up on the pursuit of collecting cash. AR management is not just an accounting function; both the clinical and the health information (HI) staff need to add their input by ensuring the steps from the point of contact with the patient, billing, and eventual payment are accurate.

The communication also needs to extend to the patient. A basic assumption embedded in a successful AR management process is that the patient is a partner in the clinic’s success. Strategies that improve the clinic’s financial stability increase the well-being of individuals by making needed clinical services available to patients in the surrounding community.

Monitoring

Measurement and tracking are critical to a successful collection process. Measurement tools that are used start with a periodic AR trial balance analysis. Clinics should analyze the trial balance at least monthly. Once accounting generates the report, balances outstanding for 90 days are isolated analyzed. Questions should include: When was the patient or insurance provider last contacted? Has the bill been sent to the insurance provider or patient? Finally, should this account be written off?

Ultimately, the AR balance should include only those accounts where there is a reasonable expectation of collection. If the account is deemed uncollectable, the clinic should write off the account as bad debt. The decision to write off is not one to be taken lightly. Specific policies should include controls such that someone outside the AR process should approve and complete the write-off.

Once the clinic removes uncollectable accounts from the AR files, the clinic should calculate AR management ratios used to monitor its success with cash collection. Two key performance indicators (KPIs) to include in the analysis are AR turnover and days sales outstanding (DSO). The turnover ratio tracks how often AR accounts convert to cash. The ratio provides helpful insights into a company’s liquidity and cash flow. DSO is a measure of the average collection period of AR balances.

These ratios should be a part of a management report that measures performance against objectives, benchmarks, and goals. Table 1 provides an example of a management report.

 

Table 1

Total Weekly Billings Cash collected AR Balance AR Balance > 90 days AR Turnover DSO
Week 1
Week 2
Week 3

 

The table might include other variables, such as the number and dollar value of denied claims and write-offs. The goal of the report is to provide a holistic assessment of the status of collections and billings. Each clinic needs to develop its list of relevant KPIs. There needs to be a balance between providing sufficient quality data and the timeliness of the reports.

Communication Audit and Leadership

To effectively manage billings and receivables, the clinic should establish a standing billing committee. The committee should be responsible for monitoring the KPIs. Best practices suggest that the committee schedule a regular standing meeting. This meeting could be as often as weekly. However, meetings are only valuable if relevant current data is available. When deciding how often the committee meets, the clinic needs to allocate resources to collect, validate, and analyze data. The clinic should not over-commit by providing metrics that are difficult or time-consuming to obtain. Nor should the clinic schedule a meeting without having the appropriate metrics in place and ready for the meeting. The meeting’s consistency related to scheduling and content will allow for a high awareness of emergent issues and changes within the environment.

The committee must include staff from billing, accounting, and medical services. Extending the committee beyond the core group of participants directly responsible for the bill’s accuracy may be counterproductive. However, having a committee member from the clinical team with responsibilities related to coding is critical. The clinician will be able to provide a holistic understanding of the care provided and services billed.

Besides reviewing KPIs, the committee should be responsible for conducting periodic AR audits. The audit should include an assessment of coding and insurance information. The committee should randomly choose patient bills and audit all denied claims. The audit goals should include assuring that bills include all services provided. Also, the audit should vouch that billed services were provided and appropriately documented. Besides, the audits should identify potential errors that could impede processing by insurance providers. The final goal should be to assess the business process to reduce the risk of billing errors.

The most critical part of communication relates to communication with patients. Successful collection strategies must include a high level of communication with patients. Many patients are uninsured, and those who are insured have high-deductible insurance plans and high co-payments. Meeting face to face with patients is essential to developing strategies for full or partial payments. However, in the COVID-19 environment, the ability to meet with patients is sometimes still restricted.

Before the patient exits the clinic, the patient should meet with patient billing and collections. The goal of this interaction is to collect payment or co-pay for services. The meeting also provides an opportunity to develop a relationship with the patient. A friendly interaction at this point in the billing cycle will add value to the overall patient experience.

Given that many clinics restrict the interaction with personnel due to COVID-19, billing staff need to be creative in recreating the patient interaction experience. Alternative means of communication for example can include a phone call, virtual meeting, email, or text message.

For this communication to occur, registrars need to collect accurate contact and insurance information. At the initial point of entry into the care system, registrars should explain the communication patients will receive from the billing department. After the clinical visit, the biller should explain what is covered by insurance, co-pays, and out-of-pocket expenses.

When the patient meets with billing, the communication should not be a surprise. If registrars inform the patient appropriately, the communication from billing will be seamless. The clinic should set up regular notices via text of amounts due along with thank-you messages for payments. Text messages tend to be the most immediate form of communication. In some ways, text messages are superior to phone calls. If the clinic focuses on appropriate, respectful communication, patients will generally respond favorably.

Leadership needs to communicate policies related to collections. These policies need to include clearly defining when the billing clerk can offer alternative payment options. These options that need to be delineated include payment plans options and sliding scale payments. To be fully engaged, billing staff need a predefined authority level that allows flexibility when negotiating payment plans with patients.

Bringing It All Together

A successful strategy requires a high level of leadership commitment. The cash collection cycle begins at registration and ends with collected cash. At the start of the revenue cycle, registrars collect accurate data and communicate. Next, clinical staff properly document services. Finally, HI and AR staff code, bill, and communicate effectively to assure that patients and insurance providers pay for services rendered. For all this to occur effectively and efficiently, leadership needs to invest in training and support the resources necessary for a successful billing process.

Judy Monestime (jmonestime@fau.edu) is a faculty/researcher at Florida Atlantic University Health Administration Program.

Roger Mayer (mayerr@oldwestbury.edu) is an associate professor of accounting at SUNY Old Westbury.

Anthony Medel (anthony.medel@waldenu.edu) is the director of client observation and inpatient services at Horizon Health and Wellness.

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