Healthcare providers need to have a solid grasp of Accounts Receivable Management (ARM) language, as it plays a pivotal role in ensuring accurate billing, effective patient communication, and keeping insurance companies in the loop. It also ensures that providers comply with all regulations and that they can accurately track payments and monitor their accounts receivable.
Knowing the nuances of ARM terminology can help ensure efficient and accurate billing processes and recover debt faster.
7 Important ARM Terms & What They Mean
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Days in Accounts Receivable: Glimpse Into the Effectiveness of Cash Flow Operations
One of the most crucial metrics in ARM, Days in Accounts Receivable (DAR), also known as Days Sales Outstanding (DSO), reveals how long it takes to convert billing into payments. This metric demonstrates the effectiveness of your businesses ARM.
The shorter your DAR, the healthier your organization’s billing processes.
Practical Tip: Analyze the billing and collection process to spot bottlenecks and streamline the flow to expedite payments. Remember, a shorter metric means better cash flow and greater financial stability.
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Remittance Advice (RA): Insights into Payments and Discrepancies
Remittance Advice (RA) acts as a treasure map for decoding payments and adjustments from payers.
After a healthcare provider submits a reimbursement claim, payers send an RA document with a detailed breakdown of payment amounts, adjustments, and reasons for any discrepancies. In this way RA is like a decoder key, revealing the intricacies of the payment process and shedding light on the payer’s decisions.
Understanding the information contained within the RA is vital for healthcare organizations to ensure accurate reimbursement. It allows you to verify the accuracy of payments made by payers, ensuring you receive the right amount for the services rendered. This is especially crucial as payment errors or discrepancies can directly impact your organization’s revenue stream and financial stability.
Practical Tip: Thoroughly analyze each RA to verify payment accuracy and match it with corresponding claims. Pay close attention to any payment reductions or adjustments. Promptly address discrepancies with the payer to avoid revenue leakage.
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Denial Rate: Turning the Tide on Revenue
Denial rate is the percentage of claims that fail to get reimbursed by insurance payers. A high denial rate impacts your cash flow and raises red flags for potential compliance issues, eligibility issues, and operational inefficiencies (such as coding errors and missing documentation).
It is especially important for healthcare organizations to monitor their claim denial rate. Doing so will help to identify trends and patterns in denials, which will allow for corrective actions.
Practical Tip: Conduct a thorough analysis of your denial trends to uncover patterns and common reasons for rejections. From coding errors and missing information to authorization issues, each denial presents a unique puzzle to solve. Tailor your denial management strategies to tackle these specific challenges.
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Underpayment: Chasing the Missing Dollars
Underpayments, though seemingly small, can have a significant impact on your healthcare organization’s financial health. When payers reimburse less than the expected amount for a claim, it leaves you chasing after the dollars owed to your organization.
While underpayments might arise for various reasons, such as contract discrepancies or coding errors, addressing them promptly ensures that your revenue cycle remains optimized and your organization’s financial stability remains intact.
Practical Tip: Analyze each underpayment to determine the root cause. Engage in effective follow-up with the payer to resolve underpayments promptly. Implement solid procedures to prevent underpayments in the future and maximize your revenue.
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Collection Rate & Net Collection Percentage: Measuring True Collection Efficiency
Collection rate and net collection percentage are two disctint metrics that go hand in hand. The collection rate measures the percentage of outstanding debt collected. Net collection percentage factors in costs like write-offs and adjustments, giving you a more accurate picture of your efficiency.
Practical Tip: Track both metrics, but don’t be fooled by a high collection rate. Focus on optimizing your net collection percentage by minimizing write-offs and staying on top of adjustments. That’s the path to real collection success! Analyze trends over time to identify areas for improvement and drive your collections to new heights.
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Aging Reports: Prioritizing Collections Efforts
Aging reports are your trusted compass in the maze of outstanding accounts receivable.
These reports provide a snapshot of your accounts receivable, showing the aging of each outstanding debt in predefined time buckets. Typically, these buckets are segmented into 30-day intervals, such as 0-30 days, 31-60 days, 61-90 days, and beyond. The longer a debt remains unpaid, the higher its priority becomes in the collections process.
Practical Tip: Regularly review your aging reports to spot accounts with overdue payments. Focus on the older accounts first, as they are more likely to become delinquent. Implement a systematic follow-up process to ensure timely collections and improve cash flow.
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First Pass Resolution Rate: Enhancing First-Time Payment Success
The First Pass Resolution Rate is a crucial metric that measures how often claims get accepted and paid on the first submission. It’s a true indicator of your billing team’s accuracy and efficiency.
Keep in mind that a high First Pass Resolution Rate doesn’t happen overnight. It requires continuous training, clear communication, and the tools to support your team. Implement regular quality checks and feedback loops to address any recurring issues promptly.
Improving your First Pass Resolution Rate reduces administrative burdens and enhances your reputation with payers and patients. Successful first-time payments improve cash flow, strengthen provider-payer relationships, and boost overall revenue performance.
Practical Tip: Collaborate with your billing team to get claims right the first time. Verify patient information, ensure proper coding, and double-check insurance details. Investing time in thorough and accurate claim submissions will significantly impact your First Pass Resolution Rate.
It’s vital to employ the best collection practices to maximize your returns. Knowing and understanding these terms will make your debt collection practices even more efficient!
Would you like additional support in improving your collection rates? Please contact our collection experts today to learn how we handle and navigate through all of these ARM concepts.