Accounts Receivable Review and Evaluation
Accounts Receivable (AR) Review is the process of analysis and work flow necessary to adjudicate medical claims that have not been paid within a certain time frame. Adjudication of AR may lead to payments, dis-allowances, or write-offs of the original claim.
In today’s environment, collection of medical claims is rarely a simple process. With the abundance of managed care plans, stricter Medicare and Medicaid regulations, and the need for frequent authorizations for payment, the amount of older AR continues to rise dramatically. C-MD’s Medical Billing Specialists can help you refine your AR processes and secure proper payment by working closely with the billing agent to identify and correct problems in the collection process.
Elevated values for older AR may have a variety of correctable causes. It is important to examine the details of every step in the billing process (including provider numbers, managed care contractual terms, and encounter tracking) in order to discover bottlenecks.
Once problems that directly impact AR are identified, it is critical to put processes in place to avoid re-occurrence.
Collection and dis-allowance percentages will be impacted by changes to the provider fee schedule. For carriers with fixed reimbursement schedules (Medicare and Medicaid), a fee increase will naturally lead to a decrease in collection percentage.
AR Frequently Asked Questions
Q: What is the most accurate method of calculating collection rates?
A: Although every billing agent is not capable of tracking payments, dis-allowances and write-offs back to the original charge, this is the most accurate method of calculating collection rates: if reviewing a time period that spans the previous fifteen months, calculate the percentage of payments vs. the original charge, allowing for some future collections for the AR still in an active status. Then, factor variables such as change in volume, new physician fee schedules, and/or new payer schedules to predict future revenue streams. However, every collection rate is different, and therefore the billing agent must be knowledgeable about the variations that exist within the system. C-MD’s billing agents are at the top of their field and are prepared to handle virtually any collection process that they come in contact with. It is because of this that our clients see payment on claims that they thought were lost a long time ago.
Q: What formulas should the physician or billing agent follow to determine adequacy of collections?
A: The most important figure in determining the adequacy of collections is the net revenue per patient visit. This calculation avoids differences in collection percentages that can be artificially altered by different fee structures. If possible, this calculation should be derived from reports that track payments back to the original charge. Two other important parameters to follow are “Days in AR” and “% of AR Greater than 120 days”. It is critical that the physician or billing agent understand the flow and structure of all billing reports, as the parameters may appear ‘acceptable’ even though problems such as premature write-offs of AR to the collection agency have occurred.
Q: How does the physician or billing agent know if accounts are being handled properly?
A: The only way to properly assess this is to examine each step of the billing process. Find out how many claims and statements are routinely submitted. Inquire about what happens when payment is not received. Track what kind of follow-up work is done on unpaid accounts. Confirm that the billing agent is assigning adequate resources to the “back end.” Physician billing is an intensely detailed, invoice-by-invoice process that must be evaluated in the many areas where errors often occur.
Key AR Definitions
- Days in AR – A term derived by dividing the amount of active AR by the average daily charge (gross days in AR). Net Days in AR is similar, but substitutes net AR and net charges.
- Percentage of AR Greater Than 120 Days – Calculates the amount of AR greater than 120 days old, divided by the total AR, multiplied by 100. NOTE: Other age dates can be used.
- Ultimate Collectibility – Collection percentage expected to be achieved after all AR is adjudicated. Depending on the internal policy addressing write-offs of bad debt, ultimate collectibility is usually expressed as a percentage after 12-24 months post date of service.
- Disallowances – Amount of AR that cannot be collected secondary to provider accepted fee schedules or contractual terms. Disallowances can be expressed in absolute terms, or as a percentage of AR.
- Aged Trial Balance Report (ATB) – A billing report that lists remaining AR values from historic periods. ATB reports typically list remaining AR for the past 4-6 individual months, plus a value for all AR older than the oldest individual month.
- AR Considerations – Low Days in AR, and a low % of AR greater than 120 Days, are often indications of an efficient billing operation. However, these values can also be favorably impacted by premature write-offs to bad debt, or inappropriate disallowances.