Top 10 AR Scenarios In Medical Billing

Top 10 AR Scenarios In Medical Billing

The management of accounts receivable should be done by an experienced team. The best medical billers are able to find fast solutions to the most common challenges with AR so your organization doesn’t face financial loss consequences. By being familiar with the top 10 AR scenarios in medical billing, you will minimize the risk of unsettled and denied claims.

To assist you in achieving seamless revenue cycle management, we decided to share our experience with you and reveal the most common challenges in medical billing. In addition, we will share with you some effective strategies we use to turn the scenarios to the advantage of our clients. 

Understanding AR Scenarios and Their Importance in Medical Billing

Managing the revenue cycle of your healthcare organization can be a challenging process. There are many important metrics that you should consider, with one of the most important ones being accounts receivable (AR). AR are funds that the healthcare provider should get for services patients have received and a claim has been submitted for.

As cash flow is significantly important so healthcare facilities can continue offering high-quality patient care, understanding the common AR scenarios and how they should be resolved is crucial for the financial performance of the organization. Being familiar with the AR challenges makes every medical billing team more prepared to tackle every situation and, most importantly, ensures timely and accurate collection of payments.

Top 10 AR Scenarios in Medical Billing

The AR scenarios range from claim denials and underpayments to eligibility issues and pre-authorization. Here are the most common scenarios in the day-to-day activities of a medical biller.

Scenario 1: Claim denials

Claim denials are situations when the insurance company refuses to cover the expenses for the healthcare services and treatment a patient has used. The reasons for claim denials include but are not limited to:

  • Lack, limitations, or exclusions of insurance coverage
  • Patient data errors
  • Missing or incorrect information
  • Medical coding errors
  • Duplicate billing
  • Medical necessity or treatment considered experimental
  • Claim filing mistakes
  • Claim submission after the deadline
  • Non-covered services
  • Reporting certain services separately instead of in a bundle
  • Claim amount exceeding the payer limit

Unfortunately, the list doesn’t end here, also making the solutions to this type of AR scenario diverse. Knowing how to match the right solution with the problem will allow your organization to guarantee timely response and fewer delays in reimbursements.

The number of denied health insurance claims is on the rise. According to the latest research, one in five patients has experienced denied claims. Comparing these numbers to the standard claims denial percentage, which ranges between 5% and 10%, we will see that they are higher than usual.

Claim denials

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How to solve denial claims

The best way to solve denial claims is to invest in a good medical billing team. You can either have an in-house medical billing department that you will have to manage, or you can outsource the process.

The second option is, in most cases, the better one because companies like CLICKVISION BPO have more experience and know how to quickly resolve denial claims. In addition, your healthcare facility will minimize the risk of having a claim denied because of a human error, such as late claims submission, coding errors, incorrect patient data, and duplicate billing.

Also, the entire process from claims preparation to payment receiving, should be carefully reviewed. One of the most important things is the evaluation of the electronic remittance advice or the explanation of benefits.

Generally looking, a denied claim can be solved by following these steps:

  1. Understanding the reason for the denial
  2. Gathering of documentation that might overturn the decision
  3. Filing an appeal
  4. Negotiating with the insurance company

Other important strategies for effective claim denial management in healthcare we tend to utilize are preventive measures and conducting analysis on the billers, payers, and root causes. All in all, we are experts in developing a preventive denial management system.

Scenario 2: Underpayments

When it comes to claims, their denial or rejection is not the only challenge in accounts receivable management. Another common scenario in medical billing is underpayments. In fact, underpaid claims can result in net patient revenue losses between 1% and 3%.

In medical billing, an underpaid claim is a situation when your healthcare organization receives less money than the contracted amount. The causes for underpayments are various and can come from both the payer and service provider side.

The reason for underpaid claims might be contractual errors on the payer’s side. In our experience, this often happens when the contracts between insurance companies and healthcare providers have unclear or not specifically regulated clauses.

On the other hand, the reason for underpayment is also errors made by the provider’s side. The most common errors from this group are related to coding, billing, and documentation.

Also, it may happen for the providers to be unable to identify the errors payers make. Typically, this is regarding the calculation of the allowed amount.

Underpayments

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How to avoid underpaid claims

Avoiding underpaid claims is important because they have a financial impact on your healthcare facility and the quality of care. To avoid having underpaid claims and feel all the consequences that come with them, we would advise you to:

  • Keep your coding system updated and compliant with the regulations at all times
  • Include the underpaid and overpaid claims in your denial management process
  • Having a medical billing and coding team that is capable of identifying the reasons for underpayments and potential errors that are made
  • Carefully review contracts with insurance providers and adapt fee schedules when necessary
  • Using KPIs to identify detrimental payment trends
  • Collaborate and negotiate with the insurance companies

Scenario 3: Delayed payments

The financial stability of your healthcare organization might be affected by delayed payments. Hence, the third place in the top 10 AR scenarios in medical billing is reserved for delayed payments. 

According to a recent analysis, one-third of the claims providers have submitted to commercial insurers haven’t been paid for more than three months. However, this issue is also present in traditional Medicare claims but at lower rates. In general, the average claims delays range between 37 and 115 days.

Besides the insurance providers and health plans, the payments can be delayed by the patients. Although the number of adults who are having trouble paying their medical bills has decreased in recent years, it still represents a challenge for AR management.

The delays in payments have a negative influence on the days in AR, which is an important financial metric for all healthcare organizations. The most common reasons for health claim prolonging are:

  • Incomplete and incorrect information
  • Missing supporting documentation
  • Fraud investigation
  • A high volume of claims submitted to the insurance companies
  • Administrative issues
Delayed payments

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How to avoid delayed payments

As a healthcare provider, you can utilize different strategies to reduce delayed payments. Minimizing delays can be achieved with several preventive measures. 

Being a healthcare facility, you have a number of options available such as obtaining preauthorization and verifying whether the patient’s insurance will cover the service before you provide the treatment.

The delayed payment rate can also be reduced by carefully reviewing a claim before you submit it. As medical billers, we are required to check all the forms and ensure they are fully and accurately filled. The claims submission should be done according to the procedure codes and the contract with the insurance companies.

Scenario 4: Unbilled services

Unbilled services represent a special group of services that your healthcare facility has provided to the patient, but you still haven’t submitted a claim for them. Considering the fact that they are already provided services, they are part of the account receivable management.

The unbilled services can be divided into two categories – unbilled insurance and unbilled patients. Typically, issues with billing insurance might occur if a claim is not accepted by the payer without a follow-up after it has been submitted to the clearing house.

On the other hand, the reason for unbilled patients might be a failure to send patient statements. Invoice delays and advanced payments are also common reasons why unbilled services might occur.

Unbilled services

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How to deal with unbilled services

One of the best ways to conquer unbilled services is by investing in an integrated system for documentation and medical billing. Adding a special section on the AR balance sheet for unbilled receivables might assist you in having a more organized revenue cycle management.

Scenario 5: Rejected claims

Many confuse rejected claims with denied claims. However, they are not the same. A claim will be categorized as rejected if it can’t be processed due to specific reasons. Compared to them, denied claims have been processed and denied.

There are four main reasons why claims get rejected:

  • Clerical errors
  • Patient data errors
  • Missing information
  • Incorrect diagnosis and procedure code pairing
Rejected claims

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How to avoid rejected claims

Avoiding rejected claims in healthcare requires expertise, attention to detail, and a thorough medical billing process. The best resolution for this AR scenario is to hire a medical billing company, like CLICKVISION BPO, guaranteeing claims are only submitted when they’re accurate and complete. In addition, we will ensure you stay up to date with all coding and billing regulations. 

Scenario 6: Patient balances

Patient balances are defined as the amount that healthcare providers are allowed to charge the patient. Patient balances can be a challenge to collect since the patients themselves are responsible for the payment.

There are various methods that can be used for the collection of patient balances, with collecting at the point of service being the most effective and beneficial for the organization’s cash flow. The one that might cause issues is billing the patient after they have gotten the services or treatment. 

Patient balances

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How to collect patient balances

The most effective way to reduce the days in AR and improve cash flow is by practicing point-of-service or charging the patient before they get the services or treatments. However, that can be tricky to do which demands us to seek other solutions.

To collect patient balances, your healthcare facility should practice verification of insurance eligibility. Also, setting clear and concise due dates and frequent follow-ups will ensure the patient is reminded and aware of the amount they own.

Next, to make the patient experience with paying the remaining funds to you seamless, you should make your payment process easy and straightforward. Offer different payment options and inform every patient about the payment policies.

As a last resort, you might want to have a credit card from the patient on record.

Scenario 7: Coding errors

The fact that it is the seventh of the top 10 AR scenarios in medical billing doesn’t make it less important. Considering the complexity of the medical billing and coding process, errors can occur, which will probably later result in claim denials and even revenue loss.

According to the American Medical Association, the biggest medical coding mistakes are:

  • Unbundling codes
  • Upcoding
  • Not checking National Correct Coding Initiative edits for multiple codes
  • Using increased procedural services (modifier 22) too much
  • Not reporting infusion and hydration codes properly since they are time-sensitive
  • Trying to report unlisted codes without the needed documentation
Coding errors

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How to prevent coding errors

Regarding coding errors, there are three possible strategies you can utilize to minimize them and lower their effect on revenue cycle management. The first option is to utilize claims management software. 

Another option is closely monitoring the work of the medical billing and coding team, research, and looking for the common mistakes they make. This can be highly beneficial because it will give you insights into what areas of your team’s work need improving.

The last and probably the most cost-effective solution is to outsource your entire medical billing and coding team. We always work according to the latest standards and the updated medical coding manuals, reducing the percentage of coding errors.

Scenario 8: Eligibility issues

Every patient who comes to your practice should be evaluated, and their insurance eligibility should be verified. This is an important step because it reduces the unpaid or denied claims that have a negative impact on your organization’s revenue.

During the eligibility verification process, several errors might occur, such as transcribing incorrect patient information, not collecting data about a secondary policy, not getting a copy of the patient’s insurance card, and not verifying eligibility for SNF coverage.

Eligibility issues

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How to avoid eligibility issues

In cases where you are experiencing revenue issues because of eligibility issues, you should improve your eligibility verification process. Here are the main things you should keep an eye on:

  • Collecting accurate patient information and verifying their identity
  • Contacting insurance provider
  • Verifying patient’s eligibility and benefits
  • Updating patient records when necessary
  • Communicate any challenges in the eligibility verification process with the patient

Scenario 9: Pre-authorization

Pre-authorization is a process that is a vital step healthcare facilities should take if a patient requires complex treatment or prescription. In many cases, insurance coverage won’t be approved if it wasn’t pre-authorized. 

The pre-authorization confirms the necessity of the medical treatment and ensures the health insurance company will cover the prescribed procedure, service, or medication.

How to improve the pre-authorization process

Improving your pre-authorization process will allow you to have higher cost control and avoid claim denials and rejections that could result in high accounts receivable or even major revenue losses. Some of the best strategies for having an effective pre-authorization process are:

  • Creating a list of all services that require pre-authorization
  • Ensuring all of your staff and medical billing team are familiar with the list
  • Keeping up with the changes in the industry standards
  • Researching to find out the common denials from pre-authorization
  • Estimating the turnaround time for completing the process
  • Being transparent with your patients and always keeping them informed
Pre-authorization

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Scenario 10: Coordination of benefits (COB)

Coordination of benefits, or COB, is valid for patients who have insurance coverage from more than one plan. The billing process for patients who have secondary insurance coverage is somewhat more complicated. It requires COB to avoid duplication.

Generally, COB can create payment delays in two scenarios:

  • When the healthcare provider has incomplete or incorrect information about the COB and the plan
  • When the explanation of benefits (EOB) sent by the primary payer is not attached when billing the second insurance coverage provider
Coordination of benefits

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How to avoid COB issues

Avoiding COB-related delays is simple. First of all, it is important to determine which is the primary and which is the secondary payer. The primary insurance payers should be billed first, and then, along with the EOB from them, the claim is processed by the secondary payer.

For healthcare providers, it is extremely important to collect up-to-date and accurate data from patients about their primary and secondary insurance coverage.

Conclusion

Management for revenue optimization can’t be done without accounts receivable. Mastering the top 10 AR scenarios in medical billing is essential for ensuring smooth revenue cycle management in all healthcare settings. By addressing these challenges proactively and implementing effective strategies to deal with them, your organization can optimize its financial performance and increase patient satisfaction.

With a strong background in the marketing industry and healthcare leadership roles, Filip is responsible for CLICKVISIONBPO's sales strategies and onboarding new clients. With a passion for sharing insights gained from his experience, he also shares valuable knowledge through industry related articles.

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