Did you know that reviewing metrics beyond cash flow, like the percentage of A/R greater than 120 days (A/R>120), can uncover financial opportunities that could help improve your practice’s financial standing? While most practices recognize the importance of measuring cash flow to ensure their practice is financially healthy, not as many measure other key benchmarks such as A/R>120. Understanding these benchmarks and how to calculate them can help you better understand where your practice’s revenue cycle stands.
The first step to understanding percentage of A/R>120 is to define it: It is a measure of a practice’s ability to get services paid in a timely manner, and represents the number of receivables older than 120 days, expressed as a percentage of your practice’s total current receivables.
Second, you must learn how to calculate the percentage of A/R>120. To do this, first, take the dollar amount of your receivables greater than 120 days (net of credits) and divide that number by the total of receivables (net of credits). For example:
Practices can use this calculation to gauge how claims are being processed, but need to keep in mind that A/R>120 is also influenced by payer mix and specialty, as well as the level of automation for claims processing. The best performers have A/R>120 less than 12 percent; average performers are between 12-25 percent; and the poorest performers have A/R>120 greater than 25 percent.
Observing your practice’s percentage of A/R>120 days will be helpful in measuring practice performance, but it is also important to recognize that sometimes a positive figure can hide areas of underperformance. To avoid misinterpretation, make sure to base your calculations on the actual age of the claim (date of service) rather than the date the claim is entered into the system to ensure the most accurate picture of your practice’s financial health.
The percentage of A/R>120 days is an easy benchmark to calculate to measure your practice’s overall revenue cycle performance. Now that you have a basic understanding of how to leverage your percentage of A/R>120, you can work with your practice management system and clearinghouse to help streamline and automate the monitoring process in order to achieve even greater revenue cycle success.
To learn more about this and other key revenue cycle benchmarks, download this free resource guide , Key Metrics in Revenue Cycle Management: Measurements that Ensure Peak Financial Performance.