Key Features Of Effective Accounts Receivable Management

Key Features Of Effective Accounts Receivable Management

Table of Content

Key#1 Code It Right
Key#2 Submit Clean Claims
Key#3 Correspondence Is For A Reason
Key#4 Effective Denial Management
Key#5 Payer Contract Enforcement
Key#6 Stick to the Follow up Promises
Key#7 Stay on top of your Credit Balances


Arguably the trickiest piece of the puzzle, Accounts Receivable Management is the holy grail of RCM business. With everything that can be done to send out the cleanest of claims in a timely manner, the insurance would still deny a whole bunch of them for a variety of reasons & it takes skills, understanding & expertise with a consistent ability to keep working on them to resolve such claims. The ever-so-changing healthcare landscape has more dynamic forces working right now, with the ICD-10 in place and several looming changes to the Medicare, Medicaid, and the CHIP plans.

As a result, the Accounts Receivable for an independent practice keeps growing but the reimbursements keep shrinking. According to industry sources most practices, unfortunately, leave as much as 30 % potential revenue on the table. The onus of providing the best care to the patient is demanding & on top of it the pressure of converting the AR into cash flow makes it far from ideal. Payer policies around coding, payer contracts, denials, correspondence coming from the payer they all need to be accounted for to make sure the AR is within the control and the cash flow is optimized.

Per some industry estimates, many leave an average of 25 to 30% money on the table. According to industry sources, this happens because almost 50 % of denials never get re-worked resulting in a 5-7% loss of potential revenue. The primary reason being the lack of time & knowledge to effectively dispute this. Not to mention the cost to collect on these claims & it can add up fast.

In this white paper, you will learn how by incorporating some industry approved best practices you can stay on top of your accounts receivable and optimize your collections with the potential of up to 25-30 % additional revenue.

Key Element#1: Code it Right!

Correct coding initiative is the first step towards an Optimized revenue cycle management. Accurate coding is not only mandatory from a compliance perspective but goes a long way in reducing the denial rates & ensuring appropriate reimbursements for the service.


While talking about denials, keep in mind the average cost per claim to resubmit denials is anywhere between $10-15. For the fiscal year 2017 for Medicare FFS programs, reported improper payment rate was 9.51%. The % of denial that is preventable – 90 %.

*according to MGMA, AAFP, CMS

So, we believe before the claim is sent out of the door, in the best interests of Optimized Collections, it should be accurate & appropriate coding is a huge part of it.

Incorporate the following in your Coding Initiatives to Collect More and stay away from Denials:

  • Use 100% certified medical coders to code your cases, it is the job of a specialist & only a specialist should be doing it.
  • Stay away from non-specific diagnosis codes. ICD 10 requirements for dx documentation are much more detailed than the previous ICD 9 requirements.
  • Incorrect modifier usage is the second most common reason for the loss of potential reimbursement & claim denials.
  • Incorporate payer specific guidelines in your coding to stay clear of denials & underpayments, this includes billing modifiers recognized by the payer.
  • Stay away from upcoding – either it is because of lack of clear communication between the physician & coder or intentional, never use a higher level of code or expensive procedures as compared to the level of service. This will not only result in delays & denials, it is illegal.
  • Stay away from undercoding – omitting or exchanging codes for a lower level of code or less expensive code is leaving money on the table.
  • Design & Implement a reliable charge reconciliation process in place to effectively ensure zero charge leakage.

Download Whitepaper: 7 Key Elements of Effective Accounts Receivable Management 

Key Element#2: Submit Clean Claims

As an independent practice you may wonder how much time & money you spend on resubmitting claims. Higher the number of rejections higher the cost. So, one of the very first things to do while thinking of your Accounts Receivable & Optimizing Collections is to make sure that you are submitting clean claims the first time.It is interesting that with so much talk about clean claims submission still the industry average of First Pass Acceptance of claims is between 79-85%. While the minimum that you should aim for is 97% or more.


If your first pass acceptance rate is not over 97%, we recommend you should look at the following areas:

  • The #1 reason for rejections is eligibility, be sure to use real-time eligibility or batch eligibility.
  • Make sure you have the right technology partner, checking eligibility manually is not relevant anymore.
  • Right technology also means a comprehensive rules engine, but no matter how comprehensive the rules engine is, you will still have to configure it, to best suit your needs as a practice.
  • Analyze your rejections, instead of just fixing them. With Data from this analysis, you can configure your rules engine better, you can also improve your billing practices for better accuracy.

A clean claim sent out the door means faster reimbursement & serves as a natural step, towards Optimizing Collections. Using a Billing Service that has the right blend of technology & expertise would help you achieve your goals for over 97% first-pass acceptance rate & subsequently saving approx $5000 annually  per provider for reworking claims. Many report 25-30% reduction in days in AR as their FPA rate went up.

Key Element #3: Correspondence is for a Reason

One of the most ignored pieces of the whole Revenue Cycle Management is the timely action on the correspondence received from both payer or patient. A Correspondence could be a vital information regarding the processing of your claims, like an additional document needed to further process the claim or a questionnaire regarding a suspected pre-existing condition. When not responded to, it can result in significant delays or denial.  These need to be worked on the same day basis so that further information could be shared with the payer in a timely manner and the claim could be processed accurately and to your expectation


We recommend the following as part of a sound correspondence management strategy:

  • Correspondence should be worked on a 24 hour turn-around time.
  • ALL correspondence should be logged to the relevant patient ledger.
  • Log the correspondence as a zero pay & use pre-defined action codes to route the case to the best-suited employee for further follow up with the payer.
  • Logging every correspondence to the patient ledger also gives you the ability to report off, of it in future.
  • Some correspondence could be critical, and they need to be flagged accordingly & referred to the appropriate authority to handle.

A well-organized workflow for the correspondence will not only help you get paid more but faster as well.

Key Element#4: Payer Contract Enforcement

Underpayment by payers is another huge problem for any practice trying to optimize collections. According to industry estimates by MGMA 7-11 % is the general underpayment by the payers to US practices. Then there is the additional factor of different payers paying differently for the same level of service. Clearly, this is a lot of revenue loss to the practice if the payer contracts are not managed & enforced effectively. That said, tracking each underpayment down is by itself a big challenge & this is where you need robust technology to be able to do so & a partner who knows how to use technology to not only track each of these underpayments but how to effectively dispute them with the payers & get you the right reimbursement.

We advocate the following as part of an effective payer contract enforcement model:

  • You need the right technology to be able to upload all your contracts & negotiated fee schedules.
  • Clearly define if you have any thresholds for under or overpayments if any.
  • Any claim that has an exception outside of the threshold, should be flagged down with specific claim adjustment reason code (CARC) & sent to the dispute queue/ bucket.
  • Do not apply any threshold on a large payer trend, $2 on each claim, for 500 claims over 3 months is a lot of money & it is totally worth to pick up the phone & call a provider rep to get this fixed.
  • ERAs are great, they save a lot of time & money, but they need to be set up properly, first up. Remember with ERA posting the only control you have is the checks & balances you defined at the time of set up.
  • Partner with the right billing service that offers full suite practice management services & can handle your payer contract negotiations.

Payers will always find ways to reduce your reimbursement, be it denials or underpayments. But if you are equal to the task by implementing best practices throughout your revenue cycle you could increase your net collections by 25-30 %.

Key Element#5: Effective Denial Management

In the ever-changing environs of the healthcare industry, effective Denial Management is practically the key to maintaining a healthy cash flow. Everyone strives to keep the clean claim ratio at 97% or above, but there will always be some denials. These denials put a lot of pressure on the cash flow by increasing the AVG number of days in AR, not to mention the extra cost to the collection drive. According to industry sources, 50% of the denials never get reworked & this results in 5-7% net loss of potential revenue. Try the above recommendations on correct coding initiatives & Submitting clean claims to reduce your denial rate but at the end of the day there will be some denial and unless you have the right strategy to effectively manage these denials they have the potential to rob you of your well-deserved reimbursement.

Cosentus recommends adding the following as part of your denial management strategy:

  • Denial should be always prioritized while doing insurance follow-up & should be typically worked within 48 hours of being received.
  • Create a well-defined list of CARC (claim adjustment reason code) & group them by the similarity of further follow-up actions. This makes it easier for users to identify and work one type of denials at a time & gives you the ability to assign a certain kind of denial to users who would be best suited to work them.
  • Some denials would need dispute/ appeal with the payer. Define your dispute strategy clearly. What is worthy of dispute VS what is acceptable, not every denial needs to be appealed on.
  • The appeal success rate is highly dependent on the content of the appeal, this is where having standard appeal templates with approved standard verbiage is a must.
  • Use preventive denial analysis for the root cause study. The time & effort that goes into this exercise is totally worth it because it has the potential to reduce your future denial rate.

Denial Management is the job of a specialist, let the experts handle it for you.

Why Settle When More Awaits!

Key Element#6: Stick to your Follow-up Promises

Most people do some insurance follow-up to collect on their accounts receivable, however with varying degrees of success. The real key is to make sure you have a plan in place to close the loop on the claim by working your follow-up promises. It sounds really basic & it is, however, if this discipline is lacking it results in more efforts & less collections. The Accounts Receivable keeps growing & soon starts getting out of hand, pushing the practice to approve writing off money that was collectible, well, not so long ago



Try following these best practices to stay on top of your follow up promises:

  • Create a list of well-defined disposition/ action codes & train your collectors on the standard usage of these codes.
  • Link every code to a standard “next follow-up promise date” based upon the nature of the follow-up action. Give some flexibility to the collectors to either prepone or postpone the date, but not more than a week.
  • Factor in the average time taken by the different payers to process a certain kind of follow-up request, while developing the matrix for codes and their standard time frames.
  • Clearly identify the responsible parties for each kind of “Follow-up Action”, so the responsibility & accountability to continue to work with the payer till resolution could be well established.
  • In addition to tracking the aging of the AR, also track the aging of follow up promises. Define the matrix for acceptable deviation from the standard.

If you have a well laid out workflow & the right resources to execute the follow-up, your collection can typically go up by 25-30% or more.

Key Element#7: Stay on top of your Credit Balances

Credit balances (Over payments) are tricky & many tend to ignore them mostly due to lack of knowledge, time or resources required to accurately work these. Compliance risk, false assessment of AR, hidden liability—these are all true about credit balances & yet it is your fiduciary responsibility to manage your credit balances in the most compliant way.

That said, according to industry sources, about 50% of all credit balances are due to wrong interpretation/posting of the allowance. And, this is where the challenge really doubles up for a practice. While you want to stay compliant, you certainly want to make sure the money being sent out the door is a true overpayment, for obvious reasons.

Following is why we believe you should try to stay on top of your credit balances:

  • Some of the credit balance in your AR qualify as “unclaimed property” & as an independent medical practice, you do not want to become a target of unclaimed property audit.
  • Credit balances give a false impression of key AR metrics.
  • Overpayments are a hidden liability & do not allow you to understand your consistent cash flow.
  • Not informing payers of possible trends of overpayment compounds the problem as the payer would continue to keep incorrectly processing your claims.
  • When a major private payer does a mass re-coup upon figuring out the overpayments, it can lead to a significant disruption in cash flow for a specified period.

Clearly resolving the credit balances effectively is the job of a specialist.

Key Takeaway:

Sustained Cash Flow is practically the lifeline of any business & a medical practice is no different. You have worked really hard to provide the best care to your patients & you need to be reimbursed accordingly. Effectively managing your Accounts Receivable is the key to Optimizing Collections & you need a billing partner with cutting-edge technology & domain expertise to implement best practices throughout your revenue cycle.

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