Percentage of A/R in Legal Status

Percentage of A/R in Legal Status is a key metric in healthcare revenue cycle management that measures the percentage of outstanding accounts receivable (A/R) that are in a legal status. This metric is used to track the amount of revenue that is tied up in legal disputes or collections, which can have a significant impact on a healthcare organization's cash flow and financial performance.

The legal status of an account refers to any outstanding balances that have been sent to collections or are in the process of being litigated. This can include unpaid bills, denied claims, or any other outstanding balances that have not been resolved through normal billing and collection processes.

By tracking the percentage of A/R in legal status, healthcare organizations can identify areas where they may need to improve their billing and collection processes, as well as identify any potential legal or compliance issues that may be impacting their revenue cycle. This metric can also be used to benchmark performance against industry standards and identify areas for improvement.

Overall, Percentage of A/R in Legal Status is an important metric for healthcare organizations to track as part of their overall revenue cycle management strategy. By monitoring this metric and taking steps to improve billing and collection processes, healthcare organizations can improve their financial performance and ensure that they are maximizing revenue while minimizing legal and compliance risks.

Percentage of A/R in Legal Status is calculated by dividing the total dollar amount of accounts receivable (A/R) that are in a legal status by the total dollar amount of A/R outstanding, and then multiplying the result by 100 to express it as a percentage.

The formula for calculating Percentage of A/R in Legal Status is: (Total dollar amount of A/R in legal status / Total dollar amount of A/R outstanding) x 100

For example, if a healthcare organization has $1,000,000 in A/R outstanding and $50,000 of that is in a legal status, the calculation would be: ($50,000 / $1,000,000) x 100 = 5%

Therefore, the Percentage of A/R in Legal Status for this healthcare organization is 5%. This metric is important because it helps to identify the percentage of A/R that is tied up in legal disputes or collections, which can impact cash flow and revenue cycle performance.

Best practices to improve Percentage of A/R in Legal Status are:

1. Timely and Accurate Documentation: Ensure that all patient information, including insurance details, is accurately documented in the system. This will help in reducing the number of claims that are denied or rejected due to incomplete or inaccurate information.

2. Regular Follow-up: Regular follow-up with patients and insurance companies is essential to ensure that claims are processed and paid on time. This will help in reducing the number of claims that are sent to legal status.

3. Denial Management: Implement a robust denial management process to identify the root cause of denials and take corrective action to prevent them from occurring in the future. This will help in reducing the number of claims that are sent to legal status.

4. Staff Training: Provide regular training to staff on the importance of timely and accurate documentation, denial management, and follow-up. This will help in improving the overall efficiency of the revenue cycle process.

5. Technology: Implement technology solutions such as revenue cycle management software to automate the revenue cycle process. This will help in reducing errors, improving efficiency, and reducing the number of claims that are sent to legal status.

6. Outsourcing: Consider outsourcing revenue cycle management to a third-party vendor who specializes in healthcare revenue cycle management. This will help in improving the overall efficiency of the revenue cycle process and reducing the number of claims that are sent to legal status.

The industry standard benchmark for Percentage of A/R in Legal Status is typically around 5% or less. This means that healthcare organizations should aim to have no more than 5% of their A/R in a legal status at any given time.

Having a high percentage of A/R in legal status can be a sign of poor revenue cycle management practices, such as inadequate billing and collections processes or ineffective denial management. It can also lead to increased costs and decreased revenue for healthcare organizations.

To improve this metric, healthcare organizations should focus on improving their billing and collections processes, implementing effective denial management strategies, and ensuring timely follow-up on outstanding claims. By doing so, they can reduce the percentage of A/R in legal status and improve their overall revenue cycle performance.

Revenue cycle software can significantly improve the Percentage of A/R in Legal Status metric by automating the entire revenue cycle process. The software can help identify and flag claims that are at risk of being denied or rejected, allowing healthcare providers to take corrective action before the claim is submitted. This proactive approach can help reduce the number of claims that end up in legal status, ultimately improving the metric.

Additionally, revenue cycle software can help streamline the claims submission process, reducing the likelihood of errors and delays that can lead to legal status. The software can also provide real-time visibility into the status of claims, allowing healthcare providers to quickly identify and address any issues that arise.

If you're interested in seeing firsthand how MD Clarity's revenue cycle software can improve your Percentage of A/R in Legal Status metric, we encourage you to book a demo with our team. Our software is designed to help healthcare providers optimize their revenue cycle management processes, ultimately improving their financial performance and patient outcomes. Contact us today to learn more!