Healthcare Accounts Receivable Management Best Practices

The UK’s healthcare sector battles dire cashflow constraints rooted in unpaid invoices, denied insurance claims and account receivable management inefficiencies. It's common to find:

• patients, insurers and other NHS organisations or local councils owing NHS trusts millions of pounds.
• home care companies at risk of bankruptcy due to outstanding invoices (aged six months plus).
• pharmaceutical companies awaiting payment worth millions of pounds from supplies to cash-constrained NHS organisations for over a year.

As a finance personnel of a UK-based healthcare provider with these issues, good accounts receivable (AR) management can help you improve payments and collections, avoid bad debt and increase cashflow.

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What is healthcare accounts receivable and how does it work?

Healthcare accounts receivable is money owed to a medical practice or a business for goods and services it has delivered. Recorded as a current asset on your balance sheet, it reflects the total value of unpaid invoices for products and services offered to patients, insurance companies and third-party customers.

To illustrate, 157 of the 1000 patients treated by Highland Hope Hospital, Inverness, in 2024, owed invoices worth about £1,250. This summed up to about £196,250. They also had about £305,000 in unpaid invoices for insurance claims. The total money value of these outstanding invoices (£501,250) is the hospital’s accounts receivable.

Healthcare accounts receivable management differs from other industries in that it:

• is highly regulated and dependent on government funding: The UK government heavily regulates the healthcare sector. For example, the NHS policy mandates NHS Trusts to provide free medical services at the point of care to everyone except patients who are not ordinary residents of the UK seeking non-emergency healthcare.

  Cash flow in the UK’s healthcare system depends on the government. Sometimes, delays in releasing funds can increase healthcare providers' accounts receivable.

• involves billing patients and insurance companies: Hospitals bill both patients and insurance companies, like the NHS, Aviva and Axa.

• has a complex billing system using clinical coding: The NHS and private insurers require hospitals to record the care given to their patients using clinical codes like the International Classification of Diseases 10th edition (ICD-10) with over 16,000 codes and the OPCS-4 which classifies procedures and operations in over 4,000 codes.

Why is accounts receivable management important for healthcare providers?

Here’s why accounts receivable management matters for healthcare providers:

• UK healthcare providers have a low profit margin as the government regulates medical services and medicine prices¹. So, AR management is crucial as revenue lost through unpaid accounts receivable significantly reduces their cashflow and survival rates amidst rising operational costs.
• Poor AR management causes financial losses, wastes resources on chasing invoices and lowers cashflow, which can hinder your practice from meeting financial obligations. This strains vendor and employee relationships, leading to legal actions and high medical staff turnover.
• A well-established procedure for receiving patients and verifying insurance claims lets you accurately communicate financial responsibilities to patients, follow up on late payments and engage a collections service if necessary. This protects your practice from bad debt and losses.
• Good AR management improves cashflow, operational efficiency and the quality of healthcare your practice can provide patients.

What are the challenges related to healthcare accounts receivable?

NHS Trusts, home care service companies, pharmaceutical brands and private hospitals face healthcare AR-related challenges including:

• Hitches recovering debts from foreign patients: Many health tourists in the UK owe medical bills and health practices struggle to collect these foreign payments. For instance, London hospitals wrote off £112 million in unpaid treatment bills for foreign patients between 2018 and 2023².

• Insurance claim denial risks

  Medical practices lose cash when insurance companies deny claims. This could be because:

• The insurance doesn’t cover some of the services rendered

• Some patient details or clinical codes were incorrect

• Claims were submitted later than 90-180 days.

• Delayed payment from insurance providers

  Many corporate and individual customers receiving healthcare invoices do not adhere to the UK government's Prompt Payment Policy. The policy states that customers should pay 90% of undisputed and valid invoices from small and medium-sized enterprises (SMEs) within 5 days and 100% of all invoices should be paid within 30 days³.

  For instance, NHS hospitals owed pharmaceutical suppliers almost £40 million in unpaid invoices⁴. Also, one-fifth of home care firms were on the brink of closure because invoices worth more than £679 million had been due for over 30 days⁵.

• Poor AR aging and claim denial management

  Since some healthcare providers manually manage AR and are understaffed, they fail to follow up on denied claims and aging invoices, leading to bad debts and huge financial losses.

Medical accounts receivable best practices

Here are some accounts receivable best practices your healthcare company can observe to improve cashflow:

Set up a clear insurance verification and payment policy

Create a clear payment system to verify patient insurance eligibility and communicate accepted payment methods, timelines, late payment fees, and financial responsibilities. Add late payment fees and compensations – backed by law⁶ – to your terms and conditions to encourage early payment and clearly communicate these policies to patients.

Train your staff in clinical coding

Train your staff to write accurate clinical code. Doctors should write clearly and avoid using shorthand in patient notes. This improves the data quality of clinical codes and minimises the risk of insurance claim denials.

Collect accurate information and triple-check

Collect accurate patient information including necessary documents to verify insurance coverage. Read through the policies of different insurance companies covering your patients before contact, if possible, to minimise the risks of claim denials. Confirm the accuracy of patient details at least three times as it's cheaper to avoid errors than to resubmit insurance claims.

Send invoices to customers, NHS and third-party payors within 48 hours

Promptly send invoices to patients, insurers, local councils or other customers to encourage prompt payment and avoid late claim submissions. Ideally, issue invoices within 48 hours of rendering services to customers. The sooner patients know their bills, the sooner they can pay.

Track invoices and send statements

Keep tabs on issued invoices and send reminders in compliance with stipulated timelines. Send statements to customers to remind them of their financial responsibilities. Use address verification tools to ensure direct mails are sent to the right home addresses

Use medical billing accounts receivable software

Medical billing AR software can help you quickly access real-time financial data by integrating health records and revenue cycle management information on one dashboard.

Provide payment options for customers

Provide multiple and flexible payment options to increase the chances of being paid promptly. Some payment options are:

• Instalment payment
• Automatic billing
• Online payment with Wise Business
• Cash
• Check
• Credit Card

Software solutions for medical billing accounts receivable

Accounts receivable medical billing software can help you to accurately and efficiently manage thousands of patients' records and payments. Some software solutions can confirm patient insurance claims before contact, minimise errors and track aging invoices.

Always read reviews and compare features before choosing software. Here are a few medical billing accounts receivable software to begin with:

• CareCloud
• AthenaOne
• AdvancedMD

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FAQs on healthcare accounts receivable management

Here are some commonly asked questions answered:

How can I reduce claim denials?

To reduce claim denials

• Verify the scope of patients’ insurance coverage.
• Send insurance claims promptly – at most, 48 hours after providing care.
• Ensure patient medical records are accurately filled and coded.

Why is AR management in healthcare important?

AR management is crucial in healthcare because

• It improves cashflow and the quality of healthcare you can provide patients.
• Healthcare providers have a low-profit margin, and it protects your practice from running at a loss.
• It reduces the administrative burden of pursuing claims and chasing invoices.

How is healthcare AR management different from AR management in other industries?

Healthcare AR management is different from that of other industries in the following ways:

• It involves billing patients, insurers and third-party payors.
• It is regulated by government policies.
• It involves complex billing requirements like clinical coding

Being faced with rising operational costs, brain drain and millions worth of unpaid invoices, healthcare AR management hasn't been more important. You can make your medical practice more financially resilient by proactively maintaining AR management best practices.

Sources used:

Sources last checked on date: 28-Jun-2025