What is Accounts Receivable in Healthcare?

In any industry, “accounts receivable” is a term referring to the amount of money a customer owes to a company. This refers to goods and services the company has delivered, but the customer has not yet paid for.

In the healthcare industry, accounts receivable refers to treatment a patient has already received. He or she has not yet paid for that treatment. Generally, healthcare-related accounts receivable requires the patient to make a payment within a relatively short time period.

In the healthcare organization’s balance sheets, accounts receivables are always recorded as assets. This is because the patient has a legal obligation to pay for any treatment he or she has received. The organization can designate the amount owed by the patient as a current asset. Therefore, the patient’s account balance becomes due for payment within a year.

In basic terms, healthcare accounts receivable are sales patients make under credit terms. The healthcare organization has not yet collected the money from patients. Therefore, they are, essentially, short-term IOUs a patient issues to the provider of his or her healthcare service.

When the provider produces the invoice for the treatment, it’s a sale that is officially recorded. Yet, the credit period is extended to the patient by the provider of the healthcare services. This allows a grace period in which the patient is able to make his or her payment. Until the patient makes the payment, his or her owed amount is an account receivable. If patients don’t pay by the end of their credit periods, the provider may give the account to a collections team.

Once the patient makes the payment, the cash sheet balance will increase by that amount. Conversely, the healthcare accounts receivable balance will decrease by the same sum.