Accounts Receivable (AR) days are crucial to keep your revenue in check. They are basically the number of days until you receive payment for medical services offered by healthcare providers or practices. It is a critical aspect of the administrative process and financial soundness of the practice.
AR management is nothing but calculating AR days and keeping a check on issues that are responsible for increasing the number of AR days. The best way to ensure you receive proper reimbursement for rendered services is understanding and learning accounts receivable.
In this blog, we will understand what AR is, how to calculate it, and what the role of medical billing services is in depth.
Understanding What Are AR Days in Medical Billing
As discussed above, AR days are the time between rendering medical services and receiving payment for them. However, the more the AR days the closer you are to your revenue becoming a bad debt.
That is why staying in touch with accounts receivable is important for the financial growth of your healthcare practice. To know about them in detail, you must first know how AR days are calculated.
This is How AR days are Calculated -
The time insurance companies take to reimburse your medical claims after the submission of claims is equal to AR days.
If you receive your revenue after 30 days of submitting claims, then 30 days are your accounts receivable days.
In the same way, if a patient is supposed to pay out-of-pocket for the medical services, the number of days they take to make the payment are your AR days. Suppose they take 15 days, then that’s the number.
What are Total AR Days?
The total time taken by insurance company and the patient (out-of-pocket) revenue refers to total AR days.
However, if that is not the case for your healthcare practice, insurance companies usually take more time to reimburse than any patient.
If you review your AR days, you will find the average time in which you receive most for your revenue.
A Step-by-Step Guide to Calculate Your AR Days
There’s a formula that you can use to calculate your AR days. The standard formula used is:
Total Accounts Receivable ÷ Average Daily Charges = AR Days
Total Accounts Receivables: Days taken to make payment by both insurance company and patient. (Insurance + patient balance)
Average Daily Charges: Monthly charges of services rendered divided by the number of days in that month. (Monthly charges ÷ number of days in the month)
What is AR Aging – Decoding AR Aging Categories
While there is a standard duration of AR days, increasing AR days is certainly not beneficial for your healthcare practice.
- The ideal range of AR days is 30-40 days.
- Up to 45 Days, the AR is considered under the acceptable range.
But these ranges also differ based on medical specialty and payer mix (insurance provider, Medicare or Medicaid)
Following are AR aging categories:
- 0-30 Days
- 31-60 Days
- 61-90 Days
- 91-120 Days
- 120+ Days
AR between 0 to 60 are generally considered safe, but AR over 60 or 90 days are considered high risk. As the AR gets older, you need to follow up with your due revenue more diligently.
Healthcare providers and practices need to maintain a proper follow-up process to make sure their revenue doesn’t result in bad debts.
What Causes High AR Days in Healthcare Practice?
Before you jump to reducing your accounts receivable, you first need to understand the reason behind them.
Here’s a list of common causes:
- Errors during submission of claims or delays
- Inaccuracies in medical coding
- Missing information and mistakes in documentation
- Inadequate insurance coverage eligibility and authorization issues
- Claim denials caused by errors
- Poor patient collections in case of out-of-pocket costs
- Inefficient internal workflows and disrupted revenue cycle management
Impact of AR Aging on Revenue Cycle Management
- Increasing AR days affects the profitability of your healthcare practice
- High AR days are the biggest reason behind delayed reimbursements
- You have to spend more time in initiating claim follow-up and identifying issues
- They lead to higher operational costs and reduce RCM growth
- They disrupt the provider and payer relationships, making the process mentally challenging
How Medical Billing Services Reduce AR Days
Medical billing services always come to the rescue of healthcare practices and providers. They ensure that healthcare providers are not losing revenue due to increasing AR days.
Let’s go through how they manage to do this:
They focus on improving the medical billing process to achieve a higher clean claims rate and fast-tracking claim submission.
Medical billing companies work on steps like insurance eligibility verification and prior authorization so that the practice doesn’t experience unnecessary claim denials.
Another thing that medical billing partners optimize is denial management. They do root-cause analysis and work on all-around improvement of your administrative process.
They keep up with the claim management process and take regular AR follow-ups with insurance payers. Moreover, they categorize AR days by payers and age to locate the exact issues and find solutions.
In case AR is caused by patients not paying, your medical billing partner follows up with them and the payment plans.
Partnering with a Medical Billing Company Makes a Difference
Medical billing companies showcase the expertise that has the power to take your medical billing process to a successful level. They follow all rules and regulations, so that you never have to face legal action or revenue loss. They have a dedicated team just to work with AR; it follows up process and more. Their comprehensive approach and continuous monitoring results in improvement and allows you to devote your time to patient care stress free.
Conclusion
There is no one-time solution to AR management. Your healthcare practice requires a consistent approach to monitor AR and implementing ways to prevent them from affecting revenue cycle management. Additionally, you must benefit from AR days to analyze your operational process and spot areas of improvement.
Medical billing services can help you do all this with precision. They offer the expert support needed to handle increasing AR days. Their services solve billing challenges and help you maximize your revenue.
Eminence RCM helps you build a long-term beneficial workflow strategy that reduces the scope of rising accounts receivable. Our services target overall medical billing efficiency, ensuring a smooth operational flow. Our team proficiently handles all billing steps, ensures compliance with all regulatory standards, utilizes technological tools to remove manual errors, formulate a denial management strategy, and maintain proper data analytics and reporting.
Choose Eminence RCM as you medical billing partner and experience shrinking AR days in real-time.
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