Home Page > Business Intelligence > Key Performance Indicators (KPIs) > Refresher: Calculating and Benchmarking Days in A/R

Refresher: Calculating and Benchmarking Days in A/R

Fan Favorites

5-Helpful-tipsIn addition to tracking A/R numbers regularly, practices should try to understand the outside influences driving those numbers. Knowing what impacts your patient volumes, collections and more allows you to more proactively manage the revenue cycle and prepare for major industry shifts, such as ICD-10.

In preparation for ICD-10, take a look at what your A/R looks like historically during the September through November timeframe. Once you’ve done that, you’ll have a much better idea of what you’ll need to do to make sure your A/R stays the course once next October rolls around.

For instance, we all know that ICD-10 is likely to disrupt A/R once it takes effect Oct. 1, 2014. So, know what’s going on with your patient base during a typical October. Does your pediatric practice volume usually ramp up in the fall with school physicals and sick kids? Does your geriatric practice volume normally plummet because your patients head to warmer climates for the winter months

There are a couple of A/R benchmarks worth monitoring, most notably:

  • Days in A/R: This figure represents the number of days of A/R outstanding, based on your average daily charge volume. To calculate it, take your total current receivables (net of credits) divided by your practice’s average daily charge amount. (For the average daily charge, it’s best to divide total charges for the last 365 days, representing the last year; or some practices might benefit from dividing this by 90.3 days, representing the last three months). An average-performing practice will typically carry 35–50 days in A/R, while top-performing practices are likely to have less than 35 days in A/R.
  • A/R greater than 120 days (A/R>120): Measuring A/R>120 is a good way to tell whether your claims are being paid in a timely manner. As the name implies, it shows the amount of A/R older than 120 days as a percentage of total A/R. To calculate this benchmark, take the dollar amount of receivables (net of credits) that is greater than 120 days from the date of service, and divide that number by the your total receivables (net of credits). An average-performing practice will likely see A/R>120 run 12%-25%, while top-performing practices may be able to keep A/R>120 at less than 12%.

Measuring accounts receivable (A/R) benchmarks consistently month to month, and sometimes year to year, is an essential part of a well-managed revenue cycle for everyday practice management and preparations for new regulations. After all, you can’t fix something unless you know it’s broken or prepare for upcoming obstacles unless you know what you are facing.

For more information, download this free resource guide Key Metrics in Revenue Cycle Management.