How to reduce AR days in medical billing (monitoring days in accounts receivable)
Accounts receivable (AR) is one of the key performance indicators for a medical practice. But when monitoring your days in AR make sure you know what impacts that metric.
What factors contribute to calculating the days in AR?
First, does your billing service reset the days when resubmitting rejected claims? If so, this will certainly make the days and aging look better but won’t necessarily present an accurate picture of your account.
Are you leaving patients bad debt in your AR? This will result in an increase in your days in AR and will also result in the >120 aging increasing. Some practices don’t care and that is certainly a choice but remember the total AR does not reflect actual collections nor the performance of your billing team.
Are you submitting your charges within 1-2 days of service? If so, that is great but if you are submitting a week or more after the date of service then the charges are already 7-14 days old before your billing team receives them.
Managing AR requires timely claims submission, ongoing collection efforts, regular monitoring, addressing patient bad debt, and reporting all claims from the date of service without resetting the dates. If all of the above is being done, then you can use your days in AR to monitor your practice’s performance.
According to the American Medical Billing Association (AMBA), the industry standard for a medical practice’s days in AR is 52. If you have chosen to leave patient bad debt or liens in your accounts receivable, then the days in AR are not a true measure of performance. However, you can and should still monitor your AR aging excluding, of course, the patient's bad debt and liens. The more profitable medical practices have more than 75% of their AR collected within 90 days.
There are always extenuating circumstances why claims are not paid but practices facing high AR days need to investigate their processes to understand the problem areas and then develop corrective action plans.
Three areas to consider when calculating days in AR
Start with how the days in AR are calculated and what is negatively impacting that calculation. Then proceed to patient registration.
Are benefits verified every time and pre-certifications obtained before the patient visit?
Are charges submitted daily?
Do you have an error-free workflow that reduces denials/rejections substantially?
Keep the lines of communication open and timely between the front office and the billing team. Pointing fingers doesn’t get the claims corrected or paid faster. It takes everyone working in the same direction to keep the days in AR low and claims paid in a timely manner.
If you’d like to talk further about reducing your days in AR, we’d love to talk with you about how we can help.