Living beyond 90 is great when it comes to patient age, but on the balance sheet, bills older than 90 days can mean financial stress for your practice.
Over the past year, NCG Medical has conducted financial check-ups for hundreds of practices. Some passed with ease, while others discovered a dangerous clog in cash flow. A common culprit - not understanding the importance of monitoring billing and accounts receivable (AR).
Can you answer these questions for your practice?
• Do you know how to measure your AR?
• Do you know what percentage of AR is over 90 days old?
Here are two bottom-line saving tips to analyze the health of your practice:
Calculate your days in AR ratio
To calculate days in AR, divide your total current receivables, net of credits, by your practice's average daily charge amount. For the average daily charge amount, divide total gross charges for the last 12 months by 365 days, representing the previous 12-month period. Depending on the specialty or certain circumstances (for example, a new physician), you may find it beneficial to calculate their average daily charge on a three-month basis instead of 12. In this case, the previous three
(TOTAL RECEIVABLES NET OF CREDITS) + (GROSS CHARGES ÷ 365 DAYS) = DAYS IN AR
[$67,901-($4,521)] + ($587,857 ÷ 365 DAYS) = 44.95 DAYS
($72,422) + ($1,611) = 44.95 DAYS
Calculate the percentage of AR over 90 days
Divide your total accounts receivable by your total accounts receivable over 90 days.
(RECEIVABLES 90+) ÷ (TOTAL RECEIVABLES NET OF CREDITS) = % of AR OVER 90
($18,105.50) ÷ [$67,901-($4,521)] = 25%
Are you ready for your free AR stress test?
We are your Complete Practice Management experts. Call our team, and we’ll be happy give you a complimentary review.