Top 5 Causes of Excess A/R Days in Acute Healthcare

The demand for acute healthcare isn’t shrinking, but hospitals’ windows of financial leeway are. It’s time for medical providers to cash in on outstanding claims and prevent future payment delays. Due to growing hospital expenses, heavier financial responsibilities for patients, and stricter regulations – 50% of U.S. hospitals are in serious financial trouble. Since 2015, hospital expenses have been outpacing revenue. But regulation and market shifts aside, healthcare organizations do have the power to take back control of their financial health. They can make sure their revenue comes in when it should.

Days in Accounts Receivable (A/R), or the length of time it takes for patients’ claims to get paid post-discharge, is one of the most important financial KPIs for hospitals to track. Reducing A/R days brings quick and tangible financial improvement.

General industry benchmarks:

• Above average: 30 or fewer days in A/R
• Average: 40-50 days
• Below average: 60+ days

So, what’s standing in the way of hospitals achieving “above average” A/R trends?

1. Sub-par RCM solutions: When it comes to the arduous task of tracking and managing payments, hospitals need to rely on some form of technology. But a recent KLAS report revealed that more than 1/3 of health systems regret purchasing their current revenue cycle outsourcing products. Despite hospitals’ tech investments, their back-office staff is still struggling to close the loop on outstanding claims. This could be due to the longstanding trend of hospitals’ financial and operational needs taking a backseat to its clinical needs, resulting in RCM solutions that work with the facility’s EHR (important), but not with other systems. We recently conducted a survey as well to examine the experiences of industry financial experts with their current RCM solutions, and what they are looking for from a new RCM vendor. See our results and learn how to prepare your team when transitioning to new revenue management tools and practices in our white paper, The Dollars and Sense of RCM.
2. Data silos: Most facilities use three or more RCM tools to manage revenue cycle – and these platforms rarely integrate with the other key functions that influence cashflow, such as patient data intake and enterprise scheduling. The result is a lack of clarity into the root causes of payment delays, cleanup work for staff, and a higher likelihood of claim denials due to missing or inaccurate data.
3. Frequent claim denials: Not only do claim denials delay payment, but they unfurl a trail of detective work, overtime, phone tag, and surprise costs. 20% of claims are denied, according to CMS. This can occur for reasons outside of a hospital’s power, but inaccurate or missing information shouldn’t be one of them. 90% of denials can be avoided with the help of automated revenue cycles – but as we’ll touch on shortly, many hospitals’ RCM approaches are mostly manual. Hospitals’ common lack of data integration can also lead to missteps like inaccurate registration info; noncompliance with regulations is another common culprit of denials.
4. Changing payment models and regulations: Hospitals’ billing and claims departments must be agile enough to keep up with ever-evolving regulations from third-party payers. As we just mentioned, non-compliance will result in delayed or denied reimbursements. Unfortunately, many hospitals implemented their RCM systems over five years ago, and since it’s a hassle to switch platforms, they’re left with technology that doesn’t accommodate today’s value-based reimbursement models.
5. Manual processes: Paper claims take about five times longer to get paid than electronic claims, yet many health systems are still using manual RCM processes. According to a 2019 Black Book survey, 80% of hospitals have yet to automate more than a quarter of their healthcare financial operations. This perpetuation of manual tasks and paper-based workflows breeds documentation errors and creates backlogs of paperwork for staff – significantly stalling the revenue cycle.

Do any of these roadblocks sound familiar? We hear you, and that’s why we’re leading the charge in delivering an integrated RCM solution that meets hospitals’ financial AND operational needs – all on a single platform. Learn how we’re redefining “end to end” RCM, and how we’ve helped clients lower their days outstanding by at least 50%.