Not long ago I posted some strategies you can use to make sure you’re correctly calculating two of our industry’s most utilized benchmarks: days in accounts receivable (A/R) and net collections percentage. At the time, I briefly noted that it’s also important to check your A/R greater than 90 days old (A/R>90) because it’s possible for a good overall A/R number to mask problems with aging claims.
A/R>90 is a measure of a practice’s ability to get claims paid in a timely manner. This measure represents the amount of A/R older than 90 days as a percentage of the total A/R. Here’s how to calculate it: Take the dollar amount of the A/R that is greater than 90 days from the date of service, and divide that number by the dollar amount of your total A/R.
You would add the total A/R for all aging buckets greater than ninety days (in the illustration above, that equals $429,608.51) and divide by total A/R ($2,124,042.74 in the illustration above). So, for this example, A/R>90 would be calculated: $429,608.51 ÷ $2,127,042.74 = 20.19 percent.
While not necessarily cause for alarm, the practice in our illustration may want to take a closer look at its aging claims. If your A/R>90 is less than 12 percent, consider yourself a “best performer.” A/R>90 that runs about 15-21 percent is fairly average, but a number approaching 25 percent or above indicates underperformance.
For this benchmark, it is critical to utilize an aging approach based on dates of service. That is the only way to obtain a true starting point from which you can measure each individual claim. I sometimes see practices using a transaction/re-aging approach, which typically ages a claim based on either the first claim submission date or a subsequent submission date. I believe this is problematic, because it holds the potential to dramatically skew the true aging of a claim.
Here’s an example: Let’s take a claim with date of service 01/15/2010 that is submitted to the carrier on 01/22/2010. On 03/01/10, if we were to use the transaction/re-aging approach, we would age this claim at 37 days vs. 44 days using the date of service approach. If this claim were to be re-filed/resubmitted on 03/10/2010 and still not resolved on 4/10/2010, the recalculated aging of the claim at that point would be 31 days. Using the date of service approach, the aging of this claim would have been 84 days. You can see that these two approaches provide vastly different numbers. With the date of transaction/re-aging approach you may not realize that you have a problem with your aging that needs to be addressed.
That said, there is some benefit in utilizing the transaction/re-aging A/R approach. It provides a practice with an understanding of whether its A/R is being worked appropriately. Ideally, in this approach a practice would see its aging buckets greater than 90 days at levels of $0 (or some minute amount that might typically represent appeals, worker’s comp, and no-fault claims where no re-filing/resubmission is necessary).
For more information, download Navicure’s resource guide, Key Metrics in Revenue Cycle Management, which identifies the four critical KPIs and gives detailed instructions for calculating them.