The Importance of Tracking (and Lowering) Days in Accounts Receivable

May 29, 2018 by Antonio Arias, MBA, CHBME

Topics: Practice Management, Medical Billing Company

How well do you know your cash flow when it comes to accounts receivable? Many practices allow A/R to be a black box of misunderstanding.

Accounts receivable (the money owed to your practice for services rendered and billed) is a high-touch area of every medical practice. So if you have a large number of administrative staffers managing different patient accounts or specialties, it can be hard to gain a holistic understanding of how long it’s taking you to get paid.

That’s why many practices *think* their A/R is a-ok, even when incomes fluctuate from month to month. But if patient visits are stable, incoming cash should be too – which is why it’s vital for medical practices to understand how many days pass between the bills going out, and the payments coming in.

To get a sense of your starting point, calculate your current “Days A/R” by looking at back at your billings:

  • Compute the average daily charges for a set number of months by adding up the charges posted for that period, and dividing by the total number of days in those months.
  • Divide the total accounts receivable by the average daily charges.

The result is the average Days in Accounts Receivable. If you look back at the last, say, three months, you can consider that a starting point for ongoing measurement on a quarterly basis. (If you compare those three months to the three or six months that precede them, you can understand if that baseline is consistent with your performance over time.)

A/R within 30 days is the gold standard. How close are you? If you’re averaging over 60 days in accounts receivable, investigate immediately. Is there a payer stalling on payments? Are denials spiking around particular procedures or patient populations? Have there been errors in your claims requiring resubmissions?

If you’re in the zone of ~45 days (or ideally, less) you can start monitoring and understanding your billings better by bucketing and aging your receivables.

Since every payer operates on their own schedule, you can correlate payments coming out with bills coming in to gain an understand of whether an insurer reimburses you within a 30 or 60 day window – providing your team with more knowledge on when a given bill has reached its “late payment” threshold and it’s time to contact the payer.

And if your big team isn’t keeping A/R running smoothly enough, working with a trusted medical billing service can help you streamline. Contact NCG Medical Billing to see if we can help you keep ‘Days A/R’ as low as possible.



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