Submitting a claim and getting paid are two completely different events — and a lot of therapy practices and home care agencies run their books as if they're the same thing. The gap between the two is where cash flow problems quietly take root.
If you run a therapy practice, home care agency, or allied healthcare business anywhere in Frederick County or central Maryland, the time between delivering care and actually being paid for it can stretch for weeks, sometimes months, across Medicare, Medicaid, and private insurance. How your books account for that gap matters as much as the care itself.
A claim that's been submitted to Medicare, Medicaid, or a private payer hasn't actually generated revenue yet — it's generated a receivable, which may or may not turn into cash. Some claims get paid in full, some get partially adjusted, some get denied and need to be resubmitted, and some simply stall in review. A business that treats "submitted" as equivalent to "paid" ends up with books that look healthier than the actual cash position supports.
The first-pass acceptance rate — the percentage of claims paid without rejection or adjustment on the first try — is one of the most useful numbers a therapy or home care business can track, precisely because it reveals how much of your submitted revenue is actually converting to cash versus getting stuck in the gap between submission and payment.
Many small healthcare practices treat their accounts receivable balance as something that simply happens — it goes up, it goes down, and nobody looks closely until it becomes a real problem. Practices with a tighter handle on cash flow treat AR as something to actively manage: reviewing aging claims on a regular schedule, following up on anything stalled past a certain point, and treating a growing AR balance as an early warning sign rather than background noise.
| Approach | What Happens |
|---|---|
| AR treated as a passive number | Cash flow surprises arrive after the problem has already grown |
| AR reviewed and aged regularly | Stalled claims get caught and followed up while still recoverable |
Cash-basis accounting — recording revenue when payment lands and expenses when bills are paid — works reasonably well for simple, single-payer businesses. A therapy practice or home care agency billing across Medicare, Medicaid, and several private insurers has a fundamentally different revenue pattern: care delivered this month might not generate cash for 30, 60, or even 90 days, depending on the payer.
Accrual accounting, which records revenue when it's earned — generally when the service is delivered and the claim is reasonably expected to be collectible — gives a far more accurate month-to-month picture of how the business is actually performing, separate from the timing quirks of when different payers happen to release payment. This distinction matters enormously when trying to understand whether a given month was genuinely strong or simply benefited from a batch of old claims finally clearing.
Medicare's home health payment rates are adjusted annually, and recent rate changes have meant a net decrease to aggregate home health payments compared to the prior year — a result of permanent and temporary adjustments tied to how CMS's case-mix payment model has performed against its original assumptions. For agencies with significant Medicare-billed revenue, a rate change like this isn't just a compliance footnote — it's a real input into your budget and staffing plans for the year, and it's worth incorporating into financial projections rather than discovering its effect after the fact in your year-end numbers.
Therapists, home care aides, and allied healthcare staff are sometimes brought on as 1099 contractors, particularly in smaller or newer practices. Whether that classification actually holds up depends on the same factors that apply across any industry — how much control the practice exercises over schedule, methods, and exclusivity — and misclassification risk in healthcare staffing is taken just as seriously as anywhere else, with the added complexity of payer credentialing requirements that often assume a more formal employment relationship.
At Mercer Flanagan, we work with therapists, home care agencies, and allied healthcare businesses throughout Frederick County and central Maryland to set up accrual-based accounting that reflects multi-payer billing realities, build AR review processes that catch stalled claims early, and plan around annual Medicare and Medicaid rate changes.
Book a free consultation and we'll walk through your specific situation — no pressure, no obligation.
Book a Free ConsultationMost multi-payer practices benefit from accrual accounting, since it reflects when care was actually delivered rather than when payment happens to arrive, which can lag by weeks or months depending on the payer.
A submitted claim has been sent to a payer but hasn't necessarily been paid — it could be paid in full, adjusted, denied, or stalled in review. Treating submission as equivalent to payment can make your books look healthier than your actual cash position.
Regularly, on a consistent schedule, rather than only when the balance spikes. Catching stalled claims early, while they're still recoverable, is far more effective than discovering a large aged balance months later.
By Roy Cogliandolo, CPA · Mercer Flanagan · May 25, 2026
This article is for general informational purposes and reflects practices current as of 2026. Medicare and Medicaid payment rules are subject to change — confirm current requirements with your CPA before relying on this information.