Days in Accounts Receivable (AR) is a critical metric that directly impacts your practice's cash flow and financial health. This guide provides actionable strategies to reduce your AR days and accelerate revenue collection.
Understanding Days in AR
Days in AR measures the average time it takes to collect payment after services are rendered. The industry benchmark is 30-40 days, but many practices struggle with AR exceeding 50-60 days or more.
Formula: Total AR Balance ÷ (Average Daily Charges) = Days in AR
Step 1: Establish Baseline Metrics
Before implementing improvements, measure your current performance:
- Calculate overall days in AR
- Break down AR by payer (commercial, Medicare, Medicaid, patient responsibility)
- Identify AR aging buckets (0-30, 31-60, 61-90, 91-120, 120+ days)
- Calculate your clean claim rate
- Track denial rates by payer and reason
Step 2: Optimize Front-End Processes
Verify Insurance Eligibility
Verify coverage before every appointment, not just new patients. Real-time eligibility verification prevents claims from being denied due to inactive coverage or incorrect information.
Collect Patient Responsibility Upfront
Collect copays, deductibles, and estimated patient responsibility at the time of service. Patient collections become significantly more difficult after the visit.
Ensure Accurate Patient Demographics
Scan insurance cards and verify all information at check-in. Simple errors in patient information are a leading cause of claim denials.
Step 3: Improve Charge Capture and Coding
Submit Claims Promptly
Establish a goal to submit all claims within 24-48 hours of service. Delays in charge entry and claim submission directly extend your AR days.
Ensure Coding Accuracy
Invest in coder training and use coding software with built-in compliance checks. Coding errors lead to denials that require rework and resubmission, significantly extending collection time.
Match Diagnosis and Procedure Codes
Ensure diagnosis codes support medical necessity for the procedures billed. Mismatches are a common denial reason that can be prevented with proper documentation and coding practices.
Step 4: Implement Aggressive Follow-Up
Work Claims Systematically
Prioritize follow-up efforts:
- Claims approaching timely filing limits
- High-dollar claims
- Claims in the 31-60 day bucket
- Denied claims that can be appealed
Establish Follow-Up Schedules
Don't wait for payers to respond. Follow up on unpaid claims:
- First follow-up: 14 days after submission
- Second follow-up: 30 days after submission
- Escalate: Any claim unpaid after 45 days
Use Technology for Efficiency
Leverage your practice management system's reporting tools to identify claims requiring follow-up. Use automated claim status checking where available to reduce manual phone calls.
Step 5: Master Denial Management
Track and Analyze Denials
Maintain a denial log that captures denial reasons, payers, and resolution outcomes. Identify patterns and implement preventive measures for recurring issues.
Appeal Denials Promptly
Don't accept denials without review. Many denials can be overturned with proper documentation and timely appeals. Establish clear appeal procedures and deadlines.
Prevent Future Denials
Use denial data to improve front-end processes. If you're seeing repeated denials for authorization issues, strengthen your authorization verification process.
Step 6: Optimize Patient Collections
Send Statements Promptly
Mail patient statements within 7 days of insurance payment or denial. The longer you wait, the less likely you are to collect.
Offer Multiple Payment Options
Make it easy for patients to pay:
- Online payment portal
- Credit card on file programs
- Payment plans for large balances
- Text-to-pay options
Implement a Collections Policy
Establish clear policies for patient collections, including when accounts are sent to collections. Be consistent in applying these policies.
Step 7: Monitor and Adjust
Track Key Performance Indicators
Monitor these metrics monthly:
- Days in AR (overall and by payer)
- Clean claim rate
- Denial rate
- Collection rate
- Percentage of AR over 90 days
Conduct Regular AR Reviews
Hold weekly or bi-weekly AR meetings to review aging reports, discuss problem accounts, and adjust strategies as needed.
Celebrate Improvements
Recognize staff efforts when AR metrics improve. Consider incentive programs tied to AR performance to maintain momentum.
When to Seek Professional Help
If your practice consistently struggles with high AR days despite implementing these strategies, consider partnering with a professional revenue cycle management company. Expert billing services can often identify issues that internal staff miss and implement proven processes to accelerate collections.
Reducing days in AR requires consistent effort across all revenue cycle functions, from scheduling to final payment. By implementing these strategies systematically and monitoring results, most practices can achieve significant improvements in cash flow and financial performance.