As a medical professional you can rightfully place emphasis on providing your patients with remarkable care and treatment. However, the physical exercise in owning and managing a practice is not just scientific – it is also business savvy. Hospital accounts receivable days are one of the most important financial signs to measure how financially sound your practice is and how much leverage you have by managing them.
What Does Hospital Accounts Receivable Days Mean?
Hospital accounts receivable days show the average length of time for your practice, to get paid from patient balances and insurance carriers. This functionality is valuable when it comes to healthcare revenue cycle management, offering an understanding of how effective your practice is at billing and collections.
The industry benchmark for accounts receivable days typically ranges between 30 to 70 days. However, if your AR days exceed 50, it could signal underlying financial or operational issues that need to be addressed promptly.
Why Are AR Days Crucial in Healthcare?
While your commitment to delivering outstanding patient care is commendable, financial health is equally essential to sustain your practice. Prolonged accounts receivable days can disrupt cash flow, leading to operational challenges. Managing finances effectively requires accurate reimbursements and streamlined revenue cycles. Keeping accounts receivable days below 50 ensures your practice remains on solid financial footing, allowing you to focus on what you do best—caring for patients.
How to Calculate Accounts Receivable Days
Calculating accounts receivable days provides a clear snapshot of how efficiently your practice collects outstanding payments. The formula is straightforward:
AR Days = (Accounts Receivable ÷ Annual Revenue) × Number of Days in the Year
Before applying this formula, you need to determine your practice's daily charges. Add all posted charges within a specific period, subtract the credits received, and divide the result by the number of days in your chosen timeframe.
Here’s an example:
- Receivables: $80,000
- Gross Charges: $700,000
- Credit Balance: $10,000
Step 1: Calculate Average Daily Gross Charges
Gross Charges ÷ 365 days = $700,000 ÷ 365 = $1,917/day
Step 2: Calculate AR Days
(Total Receivables – Credit Balance) ÷ Average Daily Gross Charges = ($80,000 – $10,000) ÷ $1,917 = 36.91 AR Days
Interpreting Your AR Days
The result of your calculation will fall into one of these categories:
- Less than 35 days: Excellent performance
- 35–50 days: Average performance
- Over 50 days: Poor performance, requiring immediate action
How to Reduce AR Days
Long accounts receivable days often stem from common issues like inefficient billing processes, errors in coding, or poor denial management. Addressing these problems requires strategic interventions, and outsourcing accounts receivable management can be a game-changing solution.
By partnering with specialized billing and revenue cycle management experts, you can leverage their expertise to:
- Streamline claims submission and follow-ups
- Implement proactive denial management strategies
- Improve accuracy in coding and documentation
- Recover aging accounts receivable efficiently
Outsourcing Hospital Accounts Receivable: A Path to Efficiency and Growth
Outsourcing hospital accounts receivable solutions is a great deal for the healthcare practices looking forward to managing their accounts receivable days and improving their financial performance. It offers the ability to interact with groups of highly specialized professionals that work solely for your revenue cycle. Using best practices, these professionals solve these central issues of accounts receivable management to provide an efficient process in such field.
The major advantage of outsourcing entails the identification and management of constraints that lead to extended payment time. Whether you’re dealing with claims tying up their system due to coding issues, missing documentation, or payer-sporting issues, these people are prepared to handle these issues in the beginning. They are aggressively chasing payments, pursuing insurance reimburses and patients for their receivables while dealing with aging AR buckets which are typically outsourced.
Outsourcing not only helps to bring in cash early in the practice and save on labor and administrative expenses. You do not have to spend a lot of money and time training and managing staff to do billing for your practice since this is handled by another party.
In addition, hospital accounts receivable outsourcing allows for compliance, reduced write-offs, and elimination of revenue loss while keeping your team to provide excellent healthcare services. This approach is significant for present practice as it combines the concern for financial solidity with the requirements for organizational effectiveness.
Nothing is impossible when it comes to managing accounts receivable days below 50 and outsourcing can help to bolster any strategy for improving the revenue cycle.
When accounts receivable days are optimized, your practice runs smoothly which allows you to focus on actual work, namely serving your patients.
