Effective revenue cycle management is crucial for the financial health of any medical practice. One key metric in this process is Accounts Receivable (A/R) days, which represents the average amount of time it takes to collect payments from all payers, including insurance companies and patients. Calculating and understanding A/R days helps you identify and address inefficiencies in your billing system, ultimately improving cash flow and financial stability.

What are Accounts Receivable (A/R) Days?

Accounts Receivable (A/R) days tell you how long, on average, it takes to convert outstanding balance (due receivables) into collected revenue. This number is usually calculated for specific periods like 30, 60, 90, or 120 days, allowing you to monitor trends and optimize collection efforts. High A/R days indicate cash flow delays, impacting your practice’s ability to operate and invest in needed resources. Conversely, low A/R days signify efficient billing and faster revenue collection, leading to financial stability and growth.

Calculating Accounts Receivable (A/R) Days

There are two main methods for calculating A/R days:

Method 1:

Total Accounts Receivable (AR): Outstanding balance owed by all payers at the end of the chosen period (e.g., $70,000 for 30 days). Number of days in the period: 30, 60, 90, or 120 days.

A/R Days = (Total AR) / (Number of days in the period)

For example, with $70,000 AR and 30 days, A/R days = $70,000 / 30 = 23.33 days.

Method 2:

Gross Charges: Total charges posted for the chosen period (e.g., $600,000 for 3 months). Number of days in the period: 365 for a year, or adjust for shorter periods.

A/R Days = (Total AR) / (Average Daily Gross Charges)

For example, with $70,000 AR and $600,000/365 = $1,643.84 average daily charges, A/R days = $70,000 / $1,643.84 = 42.62 days.

Interpreting A/R Days

Industry benchmarks are helpful but consider your practice’s specific context. Generally:

• 35 days or less: Excellent performance, efficient billing system.
• 36-45 days: Average performance, room for improvement.
• 46 days or more: Below average, potential revenue leaks, consider optimizing billing processes.

Additional Tips

• Calculate A/R days for all payers:* Identify payers with longer collection times for targeted focus.
• Monitor aged receivables: Track the percentage of AR older than 90 and 120 days to assess potential write-offs or collection needs.
• Account for collections: Consider both A/R with and without collections for a more accurate picture.
• Seek professional help: Outsourcing A/R management to a medical billing company can streamline processes and improve collection efficiency.

Remember, consistent monitoring and proactive management of Accounts Receivable (A/R) days are essential for financial health and long-term success. Implement effective billing practices, optimize workflows, and consider professional assistance to optimize your revenue cycle and improve cash flow.

Do you have concerns about your A/R days? Contact PrimeCare MBS today to discuss how our medical billing and collection services can help you improve cash flow and achieve financial stability.

References:

• MGMA: Foundational benchmarks and KPIs for medical practice operations in 2023
• The Fox Group: Medical Accounts Receivable: Monitoring and Measuring Performance

The post Calculating Accounts Receivable (A/R) Days in Medical Billing appeared first on PrimeCare Medical Billing Services.

Excessive accounts receivable (AR) exceeding 90 days pose a significant financial challenge for healthcare providers. Minimizing AR over 90 days is crucial to ensure healthy cash flow and long-term financial sustainability. This article explores technical and evidence-based strategies to reduce AR over 90 days, optimizing revenue cycle management (RCM) within your practice.

Strategies for Minimizing AR over 90 Days

On average, AR exceeding 90 days falls within the 15-20% range across the healthcare industry. Exceeding this benchmark indicates a potential medical billing issue requiring immediate attention.

Front-End Efficiency

• Dedicated Staff: Assign dedicated staff to verify insurance eligibility, obtain pre-authorization (when required), and estimate patient responsibility before scheduling appointments. This proactive approach reduces claim rejections and expedites the billing process.
• Card-on-File Policy: Implement a policy where patients keep an active credit card on file. This facilitates automatic payments, minimizing late or unpaid bills.

Claim Denial Management

• Denial Analysis: Regularly analyze denial trends to identify root causes and implement corrective actions. This may involve staff training, revising claim submission procedures, or contracting with a denial management vendor.
• Centralized Denials Processing: Establish a central location for receiving and managing denials. This ensures consistent data collection, facilitating root cause analysis and preventing future rejections. An efficient denial management system reduces AR over 90 days.
• Timely Claim Submission: Implement protocols to ensure claims are submitted within the designated timeframe to avoid denials due to late submission.

Financial Reporting

• Aged Receivables Reports: Generate monthly AR reports with detailed breakdowns of outstanding balances categorized by age. This data allows for proactive identification of aging accounts and prioritization of collection efforts.
• Enhanced Billing Frequency: Consider sending patient invoices weekly and insurance invoices twice weekly rather than monthly to accelerate the payment process.
• Multi-Channel Communication: Employ a multi-channel approach for patient communication, including mailed statements, email reminders, and phone calls. This increases the likelihood of prompt payment and facilitates early identification of potential issues.

Additional Considerations

• Technology Integration: Utilize technology solutions such as electronic health records (EHRs) and practice management software to automate administrative tasks, streamline workflows, and improve data accuracy.
• Patient Engagement: Foster open communication channels with patients to educate them about financial responsibility and provide flexible payment options.
• Outsourcing RCM: Consider outsourcing RCM functions to a specialized vendor with expertise in medical billing and collections. This can free up valuable staff time and resources, enabling providers to focus on patient care.

To summarize,

Implementing a comprehensive and data-driven approach to RCM is essential for minimizing AR over 90 days. By combining proactive front-end operations, efficient claim denial management, meticulous financial reporting, and effective patient communication, healthcare providers can optimize their revenue cycle and achieve long-term financial stability.

Struggling with AR over 90 Days?

Partner with PrimeCare, a reliable medical billing company with a proven track record of reducing accounts receivable for healthcare providers. Our team of experts will analyze your billing processes, identify areas for improvement, and implement effective strategies to optimize your revenue cycle. We’ll help you obtain pre-authorizations, manage denials, and collect outstanding balances, improving your cash flow and financial stability. Contact PrimeCare today to learn more and experience the peace of mind that comes with efficient AR management.

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