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Monitoring Financial Health: Days in A/R, Collections and Payer Mix

Just like you sit down every month to pay bills and take care of personal finances, your practice should also sit down and do the same. A recent Physicians Practice article provides resources for helping you do this, along with offering ways to plan, calculate and keep track of your practice’s finances.

The article discusses three main ways to monitor the money coming into your practice to help you understand your organization’s financial health, including:

  1. Measuring your average days in A/R: This is a simple calculation—all you have to do is divide your current receivables, which are determined by subtracting the current credit balance from the total receivables, by your practice’s average daily charge amount (calculated by dividing total gross charges for the last 12 months by 365 days). You can create a simple spreadsheet to help keep track of these numbers and quickly calculate the metric.
  2. Knowing your percent collections to predict inflow: Your days in A/R can help you determine how quickly the cash is going to come back to your practice. If you bill $800,000 one month and only get $300,000 back, you can anticipate that it will be close to three months before you see the return.
  3. Understanding your payer mix: This will help you understand how much you’ll be paid. A stable, balanced mix of payers, your contracted rates and a few quick calculations can help you estimate your monthly income.

Of course, these numbers will change month-to-month, so it is important to monitor each one carefully in case there is a major change. You should also have a checks-and-balances system in place to make sure everyone is on the same page.

To learn more about the nuances of measuring days in A/R and other key metrics, download this free resource guide, Key Metrics in Revenue Cycle Management: Measurements that Ensure Peak Financial Performance.

How do you track and benchmark your practice’s finances? Are there any tools you use to help?