The Centers for Medicare & Medicaid Services projects national healthcare expenditures grew 8.2% in 2024, yet hospitals face a troubling reality (AHA reports). Bad debt and charity care surged 32% from 2022 to 2025. This financial squeeze makes accounts receivable in healthcare management more critical than ever. A/R, or accounts receivable in healthcare, needs constant monitoring to avoid flushing rightful payments down the drain.
This guide explores what Accounts Receivable in healthcare (A/R) is, clears the confusion between accounts payable and accounts receivable, discusses common challenges, and provides strategies to keep your days in A/R short for better financial health.
What is Accounts Receivable A/R in Medical Billing?
Accounts receivable in healthcare represent money owed to providers for services already delivered to patients. These outstanding balances originate from insurance companies, government payers like Medicare and Medicaid, and direct patient responsibilities. The moment a claim leaves your billing system or a patient statement prints, that amount enters your AR of your medical billing cycle.
Accounts receivable in healthcare is a financial indicator that allows providers to manage revenue streams for consistent cash flow. It represents uncollected but recognized revenue and is classified as a current asset. It is continually changing as providers add new services, while reimbursements, write-offs, and modifications are applied.
How Is Medical Accounts Receivable Unique?
Medical accounts receivable differs fundamentally from AR in other businesses. Healthcare providers deliver services first and pursue payment later sometimes months later. The involvement of third-party payers creates a triangular relationship: provider, patient, and insurance company.
High-deductible health plans have transferred financial burden to patients. However, collection rates remain problematic, with providers struggling to collect even half of the amounts owed. Bad debt write-offs result in billions of dollars in losses each year.
Healthcare receivables management must adhere to HIPAA, FDCPA principles, state legislation, and No Surprises Act restrictions. Medical AR loses collection probability faster than regular receivables, with claims older than 120 days showing significantly lower collection rate than newer claims.
Quick Facts:
- Bad debt write-offs totaled $17.4 billion in 2023 (Kodiak Solutions).
- PMC research (2025) found 36 percent of U.S. households carry medical debt, with $194 billion in active collections.
- Regulatory requirements add burdens—healthcare receivables management must comply with HIPAA, FDCPA guidelines, and No Surprises Act provisions.
Difference Between Accounts Receivable and Accounts Payable in Healthcare
Are you confused about the difference? Here’s a quick breakdown for healthier RCM.
| Accounts Payable | Accounts Receivable | |
| Origin | Originates from purchasing goods/services on credit from suppliers, vendors, and other creditors | Originates from providing healthcare services to patients |
| Meaning | Money the healthcare facility owes to suppliers and vendors | Money patients or insurance companies owe to the practice |
| Classification | Classified as a current liability on the balance sheet | Classified as a current asset on the balance sheet |
| Types | Wages payable, interest payable, sales tax payable, trade payables, loans payable | Trade accounts receivable, notes receivable, insurance receivable, patient receivable |
| Offset Allowance | No offset against payables | May have offset against doubtful accounts (bad debt reserve) |
| Impact on Cash Flow | Results in a cash outflow on the cash flow statement | Results in cash inflow on the cash flow statement |
| Responsibility | The healthcare facility is responsible for payment | The patient or insurance payer is responsible for payment |
| Audits | Involves monitoring the general ledger, vendor invoices, purchase orders, payment approvals, and vendor statements | Includes overseeing doubtful accounts, invoices, cash receipts, general ledger, aging reports, insurance payments, and patient payments |
| Management Goal | Extend payment terms without damaging relationships; capture early-payment discounts; maintain strong vendor relations | Accelerate collections; minimize days in AR; reduce bad debt; maximize collection rates |
Effective accounts receivable and collection for the medical practice accelerates cash inflow by reducing days in AR calculation for healthcare, minimizing bad debt, and maximizing collection rates.
Accounts Receivable Challenges in Healthcare
A/R is a key metric in the RCM process and comes with challenges. By managing it and keeping the days to a satisfactory number, practices can avoid bumpy roads ahead.
Insurance Claim Denials
Frequent claim denial by third-party and government payers delays payments and affects financial health. Payers reject claims due to missing information, late filing, duplicate submissions, coding errors, and lack of medical necessity.
Excessive Write-offs
Writing off unpaid charges is like leaving money on the table. If you unnecessarily write off payments recoverable through effective A/R management, you strain your revenue cycle. Your billing office must follow streamlined processes. Without stringent procedures, unnecessary write-offs become financial losses, leading to bad debts.
Slower Reimbursement and Patient Collections
Insurance companies often take 30-60 days to process claims due to administrative backlogs. The rise in patient responsibility requires practices to chase patients directly. Most patients struggle to understand their financial obligations. Practices must communicate transparently about charges from the beginning.
Disorganized Processes and Technology Gaps
Practices without structured workflows see denial rates 40% higher and bad debt write-offs that are double the industry average. Many organizations struggle with outdated technology, yet those implementing modern solutions report meaningful improvements.
How to Improve Healthcare Accounts Receivable?
Streamline Insurance Verification
To avoid greater claim denials, incorporate eligibility verification before patient contacts. Integrate your EHR system with a real-time eligibility tool and set up weekly batch-checking processes.
Payment Estimates and Up-front Collections
Charge patients up front to avoid accounts receivable completely. Send cost estimates before appointments to avoid post-appointment billing and speed up reimbursement.
Proactively Track Claims
Regular tracking ensures financial stability. Monitor payer and patient trends to keep your A/R statistics strong.
Automate Your Claim Process
Manual billing is time-consuming and error-prone. Automate claim scrubbing and submission to reduce mistakes, mitigate denials, and achieve faster reimbursements.
Pull AR Aging Reports
Industry experts advocate keeping Days in AR between 30 and 40 days. Use aging reports to discover bottlenecks that require attention.
Follow Up Systematically
Establish clear workflows for claim submission, payment posting, denial identification, appeal processing, and patient billing to prevent aging into high-risk categories.
Hire Experienced Staff
Specialized expertise in ICD-10 coding or ICD-11 coding, payer requirements, and denial management becomes invaluable for effective AR management.
Ensure Regulatory Compliance
Maintain compliance with HIPAA, FDCPA, state legislation, and No Surprises Act provisions through frequent training and audits.
Conclusion
Managing accounts receivable in healthcare is crucial to your practice’s financial health and operational stability. Understanding A/R, continuously reviewing your metrics, and following the improvement strategies outlined above can help you maintain healthy cash flow and reduce bad debt.
Effective AR management necessitates ongoing monitoring of aging reports, rigorous follow-up on outstanding claims, and keeping up with payer obligations. When you keep your days in A/R low and respond quickly to denials, you may make more informed financial decisions for your clinic.
Many healthcare providers choose to outsource medical accounts receivable to professional companies such as Nexus io. When you delegate billing and collections to skilled professionals, your staff can focus on what matters most: providing exceptional patient care. Instead of spending valuable time following up on unpaid claims, the team can concentrate on patients, while AR Recovery specialists handle your Accounts Receivable (AR) Recovery Services with precision and efficiency.
