A hospital recognises revenue at discharge and is paid whenever the payer decides. Reported as one receivable balance, that gap conceals a working capital position that can be very different from how it looks.
A healthcare provider bills three quite different payers. Cash patients settle at discharge. Insurance and third-party administrator cases are billed, queried, partly disallowed and settled months later. The clinical work is identical; the cash consequence is not.
Reported as one revenue figure and one receivable balance, that distinction disappears — and with it any ability to forecast cash or to see which payers are expensive to deal with.
Age by case, not by balance
A single TPA balance tells you how much is outstanding. It cannot tell you how much is genuinely collectible, because the balance contains cases at completely different stages: submitted, queried, part-settled, disallowed and under appeal.
Ageing at case level, with its status, turns one number into a pipeline. It also makes visible the cases that have quietly stopped moving — which is where most of the eventual write-off sits.
A receivable nobody has chased in ninety days is not a receivable. It is an unrecorded loss waiting for year end.
Disallowances have patterns
Disallowances are usually absorbed at settlement as the cost of doing business. Analysed by payer and by reason, they stop being random and start being addressable.
- Documentation missing or submitted late.
- A procedure coded in a way the payer does not accept.
- Pre-authorisation not obtained, or obtained for less than was delivered.
- Tariff differences between what was billed and what the agreement specifies.
- Items excluded under that particular policy.
The first three are process problems inside the hospital and are largely fixable. The last two are commercial, and are worth knowing before the next agreement is negotiated. Neither insight exists if disallowances are only ever a net figure.
Department contribution
Departments share almost everything — theatre time, nursing, equipment, premises, administration. Department profitability is therefore a question of allocation discipline rather than arithmetic, and a basis agreed in advance and applied consistently is worth more than a precise basis applied differently each time.
Without it, cross-subsidy between departments is invisible, and investment decisions get made on revenue rather than contribution.
Doctor payouts should reconcile before release
Revenue-share payouts are frequently computed from a working file that does not tie back to billing. Reconciling the computation to the billing record before payment is a small discipline that prevents a category of dispute which is unusually difficult to unwind afterwards.
Where the boundary sits
Our work here is the finance function: billing reconciliation, receivables, disallowance analysis, payouts, inventory, costing and controls. Clinical, regulatory and licensing matters sit with the appropriate professionals and authorities.