How do accounts payable and receivable affect a medical office

how do accounts payable and receivable affect a medical office

To address these challenges, medical offices often invest in revenue cycle management software and employ dedicated billing and coding specialists. Accounts receivable in healthcare is the money owed to healthcare providers and medical billing companies for the care provided to patients in a given year. It’s unique accounting for medical practices to AR in other industries because of the amounts owed, the involvement of insurance companies, and the increased risk of late payments (also referred to as “bad debts”). Along with an efficient accounts receivable process, healthcare needs to maintain coherent and secure communication with its patients.

how do accounts payable and receivable affect a medical office

Although one of the most important tasks of medical offices is to provide medical services, they cannot do so without an accounting department that is effective and successful. When it comes to what providers actually charge these payers, transparency is a major concern and one in which accountants are often involved. Some hospitals use a chargemaster, fee-for-service list, or bundled set of payments like MS-DRGs to determine prices.

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Tracking your accounts receivable every month gives providers the information necessary to identify those at risk of becoming leaked revenue and contributing to bad debt. Providers can compare ARs over time to recognize dangerous trends early and determine any outstanding reimbursements that may prove easy to close. Using a balance sheet to record accounts receivable, outstanding invoices, and customer payments is a great way to track AR. Improving your accounts receivable in healthcare requires active management of your revenue cycle and addressing any process inefficiencies. Dedicating efforts towards optimizing administration, running AR reports, and tracking claims help providers in the healthcare practice recover what otherwise would be lost revenue.

how do accounts payable and receivable affect a medical office

Healthcare consumer loyalty is influenced by how early and how often you communicate with patients about their estimated cost of care and their payment options. Consumers remember how they’re treated while they’re repaying their medical bill and will compare their experiences with friends. Patient collections should be delegated to staff who are trained how to communicate effectively through the collection process.

Accounts Payable vs Accounts Receivable

This can lead to a lack of confidence in the medical office’s financial health, affecting funding, investment, and partnerships. Although this example focused mainly on accounts payable, you can also do this with accounts receivables as well and we can demonstrate that with this next example. On the other hand, there are times when a company will sell goods or services “on account.” Again, it means that there is a transaction occurring where cash is not involved.

This method helps health care facilities obtain a more accurate picture of the transactions that may occur within a given time frame, like a quarter or fiscal year. This accuracy is the reason why large health care facilities will use this method in their accounting practice. The method of accrual accounting is an anticipatory model that enables a business to record revenue and expenses before they are received or paid out. In a care delivery situation, this model will build credits and debits into the system once a facility produces the means of generating a transaction, such as a bill for a hospital visit or prescription. To calculate the adjusted collection rate, divide payments (net of credits) by charges (net of approved contractual agreements) for the selected time frame and multiply by 100. As BrightView saw very soon after implementation, MineralTree carries several advantages over legacy systems and manual invoicing.


You should review and consider these materials at your own risk, and they should not be considered as client advice. We see a future where providers and payors can make more informed decisions together to build a strengthened healthcare system. When tracking accounts receivable, providers should run reports to determine their average AR cycles.

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