AR process
Photo credit: Getty Images
By Jerry Godwin
May 7, 2025
In the final article of our three-part series, “Why Am I Not Getting Paid?,” we’re diving into aspects of a practice’s Accounts Receivable (AR) process that contribute to lost revenue.
Click HERE to read part one of this series and HERE to read part two.
What is an Efficient AR Process?
An efficient AR process makes possible the cash flow necessary to operate your practice. The more efficient your AR process the quicker you collect the money you have earned leading to your profitability. Practices cannot afford to leave money on the table or be slow in collecting receivables.
There are two types of receivables: Insurance and Patient. According to research by the Centers for Medicare and Medicaid Services (CMS) only 70% of claims are paid the first time they’re submitted. The other 30% of claims are either denied (20%), lost or ignored (10%). And, of those claims, 60% are never resubmitted to payers. That means medical practices never collect on a full 18% of claims outstanding.
Is Your Staff Capable of Helping You Improve AR Process?
Is your staff capable of performing the key tasks to identify any breakdowns that delay payment, including clearinghouse issues, technical issues, process issues and personnel issues?
We have discovered that AR management is often a low priority for many practices. AR is the task that always gets pushed off when the office gets busy, and patient AR is an even lower priority – out of sight and out of mind until there is a cash flow crisis.
Here are some of the biggest challenges we often see practices face in their AR management process, as well as best practices for improving and benchmarks to be targeting.
The Biggest Challenges in AR Process
1. High Outstanding Balances & Aging AR
One of the most significant issues in AR management is overdue balances. When payments are delayed or missed, cash flow becomes unpredictable, making it harder to cover operational costs.
Many practices lack a structured AR follow-up process, allowing balances to age beyond 90 days, making them increasingly difficult to collect.
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Some common AR process breakdowns include:
- Payments are not being posted in a timely manner.
- Lack of follow-up on rejected and denied claims, leading to lost revenue.
- Uncollectible bad debts not being written off, skewing financial reports.
- Balances not being transferred to the patient correctly, creating confusion and non-payment.
- Monthly reviews of aging reports going unmonitored.
- Lack of Clear Patient Payment Responsibilities
Confusion over patient financial responsibility is another leading cause of AR issues. When patients don’t understand what they owe, or are not informed about their financial obligations upfront, balances go unpaid. This is often caused by either a lack of communication to the patient, or staff not fully understanding the patient’s benefits themselves.
Key issues include:
- Lack of benefits verification, leading to unexpected out-of-pocket costs for patients.
- Patients being billed after their visit instead of paying at check-in.
- Failure to collect co-pays or deductible payments before the service is provided.
- Staff members not fully understanding insurance benefits and being unable to answer patient questions or communicate expectations effectively.
- Key Revenue Leakages in AR Process
Beyond outstanding payments and clear patient responsibilities, many practices experience revenue leaks due to overlooked inefficiencies in their billing and collection processes. Some of the biggest sources of lost revenue due to AR process include:
- Ineffective patient billing communication: Confusing or delayed billing statements resulting in unpaid balances.
- Neglecting small balances: While individual small balances may seem insignificant, they add up over time and can represent a substantial loss in revenue.
- Write-offs that could have been collected: Many balances are written off unnecessarily due to lack of follow-up or outdated collection processes.
- Billing fees under the allowable reimbursement rates: Practices may be losing revenue by not charging up to contracted payer rates.
- Outdated fee schedules: Failing to review and update fee schedules annually can lead to under-billing.
- Over-reliance on insurance: Practices often assume insurers will cover more than they actually do, leading to unexpected patient balances.
Identifying if these AR challenges are impacting your revenue is the first step toward improving cash flow and reducing the administrative burden on your staff.
Next we’ll take a look at best practices to help overcome these challenges.
Best Practices to Improve AR Process & Get Paid Faster
- Collect Payment at the Time of Service
As mentioned above, one of the biggest AR pitfalls is allowing patient balances to go unpaid beyond the point of service. The longer a bill remains unpaid, the less likely it is to be collected. Data shows that patients are 50% less likely to pay their bill once they leave the practice, and collectability continues to decline every 30 days after they leave.
To help reduce outstanding balances:
- Require upfront payments at check in for co-pays, deductibles and outstanding balances.
- Offer digital and automated payment options like text-to-pay, online portals or card-on-file transactions to make payments easy and convenient.
- Provide payment plans or third-party financing for patients with high out-of-pocket costs to prevent overdue balances.
- Streamline & Assign AR Follow-Ups
Following up on unpaid balances can be time-consuming, but assigning clear staff responsibility to the tasks and automating parts of the process can significantly reduce AR aging. Best practices for establishing strong processes:
- Assign a dedicated team member to track and follow-up on outstanding payments. Consistent follow-ups prevent balances from aging beyond 90 days.
- Conduct a monthly AR review to identify trends, flag overdue accounts and take action before they become uncollectible.
- Automate patient billing reminders via text, email or phone calls to prompt payments before accounts become past due.
- Enroll in EFTs (electronic funds transfers) instead of checks or virtual credit cards to speed up reimbursements.
- Use Tools and Resources to Reduce AR Aging
Modern billing solutions can streamline AR management, reducing administrative burden and improving collection rates. Some tools and resources to consider include:
- Running and reviewing Insurance AR and patient AR reports monthly, taking action to resolve balances.
- Using patient self-pay portals, such as software apps or text-to-pay options, to simplify payments.
- Integrating billing software with your EHR/PMS for real-time tracking, automated payment posting and consistent financial reporting.
- Outsourcing AR management to a team of experts ensures that billing and collections are handled efficiently, allowing your staff to focus on patient care. This also eliminates bottlenecks from staff vacations or turnover.
Taking a proactive approach to AR management ensures your practice gets paid faster, maintains a steady cash flow and reduces the administrative burden on your team.
Now that you have identified pitfalls and reviewed best practices, let’s take a look at some benchmarks your practice should aim to achieve.
Key AR Benchmarks for a Healthy Optometry Practice
Tracking and optimizing key AR metrics is essential for maintaining a strong cash flow and knowing where you can make tweaks for improvements. Here are some key industry benchmarks your eye care practice should aim for:
- AR Insurance Aging by Category
- 0–30 Days: Aim for 65% of AR in this range. This is critical, as the faster you collect, the healthier your cash flow.
- 31–60 Days: Typically 18% of AR. This indicates timely follow-up on unpaid claims or balances.
- 61–90 Days: Target 9% of AR. In optometry, anything over 60 days becomes less likely to collect, so monitoring this range is essential.
- 91–120 Days: Keep under 5% of total AR. Accounts in this range may require more aggressive follow-up, such as collections calls.
- 120+ Days: Aim for 3% or less. Optometry practices often struggle with collections beyond this point, and these accounts may require alternative collection methods or write-offs.
- Average Days in AR
Optometry practices typically aim for an average of 30-40 days in AR. This metric shows how quickly receivables turnover with lower days indicating more efficient cash flow. - Patient Responsibility Collection Rate
As a growing portion of optometry AR comes from patient out-of-pocket expenses, a high collection rate is crucial. The goal is to collect over 95% of patient balances within 60 days of billing. - Point-of-Sale Collections
Many optometry practices aim to collect 30–40% of patient revenue at the time of service. This includes co-pays, deductibles and non-covered services. - Denial Rate
A low denial rate is key to ensuring cash flow. Optometry practices should aim for a denial rate under 6% by addressing issues such as insurance verification, coding and documentation upfront.
As you can see, there are many things that impact the success of your practice’s AR management. And one thing we consistently see is that owners and doctors are often removed from the process and put most of this responsibility on their staff without oversight.
Taking the time to think through the importance of reviewing your practice’s AR process is the first step. If you find yourself short-staffed or overwhelmed at the thought of adding one more thing to your plate, outsourcing AR management to a team of experts can help you get back on track and ease the stress of missing revenue.
AR management is commonly the last thing reviewed due to the time it takes to research claims, and operational and administrative challenges must be addressed to establish an effective AR management process. This will lead to a culture of training, improvement and accountability, which will ensure timely payments and maintain the financial stability of a practice.
Jerry Godwin is the President of OMS, a trusted partner dedicated to improving the patient care cycle by streamlining clinical and administrative workflows. With a focus on revenue cycle management, OMS helps practices operate more efficiently and profitably. Contact Jerry at: jgodwin@optmedsol.com
