Before being able to make improvements in your revenue cycle, you must first gain an appreciation of how your revenue cycle performs. Two essential metrics for assessing performance are days in accounts receivable (A/R) and days in A/R greater than 120 (A/R>120). These statistics can paint a picture of the financial health of your practice by demonstrating how long it takes for a service to be completely paid and the number of days that money owed to your practice is outstanding.
When days in A/R are less than 35, your practice’s revenue cycle is in good shape. For the most part, your claims are clean, your processes for claims submission are timely, and your clinical documentation is appropriate. If days in A/R are between 35 and 50, you are doing alright, but you may want take a focused look at why some claims are taking longer to get paid to determine steps needed to improve this number. If your days in A/R are greater than 50, your practice has some work to do to improve claim efficiency, accuracy and timeliness. A detailed review of payments, rejections and denials can reveal addressable problems, such as lack of regular eligibility verification, inadvertent use of improper codes and consistent delays in claims submission.
A/R>120 is another valuable measure to study. This metric describes a practice’s ability to get services paid in a timely manner. While this is not the only metric that measures aging—the length of time a claim is unpaid—it is one of the best ones to monitor. In order to determine A/R>120, add the sum of receivables over 120 days (net of credits). Then, divide that number by the total amount of receivables (net of credits) for your entire practice.
Practices that maintain their days in A/R>120 at less than 12 percent are considered good performers while those that keep the metric between 12 percent and 25 percent are average performers. Practices with days in A/R>120 at 25 percent or more should examine their processes to see if they can enhance timely payment. An important thing to remember is that all calculations should be based on the actual age of the claim (e.g., date of service) to keep accurate benchmarks.
It’s important to note that there are additional outside factors that influence your practice’s days in A/R and A/R>120, as well as other aspects of your practice’s revenue cycle. Things like payer mix, specialty and level of automation can all impact the metrics positively or negatively. Keep these in mind when reviewing the statistics and focus on those things you can control. For additional information on improving your practice’s days in A/R you can download this free resource guide: Key Metrics in Revenue Cycle Management.