Once a medical office renders care, the work doesn’t stop in the patient exam room. The office then needs to bill for it, receive money from the payer, post the payment and figure out the patient’s balance. It’s also critical that those amounts are paid properly and that accounts receivable are cleared.
If accounts are carried for too long, they put stress on the practice’s cash flow, generate extra work for billing departments.
It can also be a warning that there’s a problem with claims, denials, posting, checking insurance or follow-up. That’s why numerous organizations in the health care world are in pursuit of actionable solutions for days in AR and ways to make that number much smaller. The number for Days in Accounts Receivable-often called AR Days-is a key revenue cycle metric helping practices to see how long it takes to collect those outstanding accounts. IfARdays go up, it could be an indicator of how long it’s taking to get payments.
A lower AR day rate means that money is moving along in the revenue cycle efficiently; the right AR day rate can varies.A look at how to improve the areas that will contribute to a more effective AR management plan will be discussed here – from the front end of the patient registration all the way through claim submission, payments received and patient collections.
We will break down exactly what AR days signify, and we’ll share exactly how medical offices should endeavor to work up both patient balances and payer balances through a combination of smarter claim submission processes, better denial management, and a systematic approach to getting follow-up paid by payers.
Days in Accounts Receivable Defined
The calculation for AR Days approximates the amount of revenue tied up on a monthly or weekly billing. In layman’s terms, it answers the following: Roughly how long does it take for all those services that’ve been “ billed” out to turn into cash sitting in a practice’s account?
This is one of the simpler ways AR Days are calculated:Total ARBalance(Average Daily Net Patient ServiceRevenue)Different methods can be used for calculating each component of this. If you consider that this fraction represents how money stays out of a practice, then this is where we’ll look. Many providers will also look atARby payer, by aging category, or by provider.
AR Days: Why they’re important
For the practice owner or practice manager, understanding AR Days can offer numerous benefits:Visibility into how and where a practice’s revenue sitsImproved collectionsworkflow and performanceReduction in old balancesProactive identification of billing process deficienciesMore time spent addressing high dollar value and collections.
The Office of Medicare/CMS wants all its submitted claims to fall under the specific timely filing window it set out. Most of the time, Medicare expects submitted claims by the date of service plus 1 year or unless otherwise stipulated for that line of billing. For this and many other reasons, having effective processes to handle each encounter that result in efficient AR may be critically important. But simply receiving more in less time isn’t the entire game either: it’s more about efficiently moving an account from beginning stages through payment of a claim.
Causes for high AR Days
Most the problems contributing to slow payment collections are based on one thing: either claim submission is delayed, or aclaim is rejected or denied altogether.
Let’s see where and why a claim could stall in the Revenue Cycle:1. Delayed claim submission is probably not surprising, but, if delays are consistent, they directly impact AR. If claims linger for weeks before they’re submitted, there’s no hope of them being approved quickly.
Medical billers should review encounter data closely and ensure billing follows procedures in a timely manner. 2. Claim Rejections: a claim will be rejected for numerous reasons- all of which add processing delays and typically necessitate an account to be corrected. “ dirty” medical billing occurs typically by error when patient, provider, or insurance data has missing bits or contains errors (i.e., wrong member ID), leading to a rejection.3. Claim denails A claim that is denied may cause additional challenges for the organization .
Claim Denials are usually the main reason AR goes through the ceiling.
This should be the main area of emphasis for any organization wishing to tighten up their AR. It may be that there needs to be an addition of information, or a denial appealed. Whatever the correction may involve, most require that further communication with payers and a possible appeal. Many times denial notices are missed or poorly handled , pushing old balance to collections.4.
Poor ar follow-up it’s not enough to have gotten through claim denial process, there still’s the step to collection the claim.
This can result in months that accounts aged. A goodARFOLLOWup protocol would be implemented.5. Front-end denials “ dirty” insurance verification or registration could delay cash by going to thewrong payer.
Insurance providers should also be verify, that they exist or not. If it comes to that, use insurance verification services or similar methods.6. Payment posting errors The practice received payments but never actually did put into the patient accounting “ system” .
Some practitioners simply don’t see money “ collected,” because the actual transaction record has yet to be completed.
A correct payment post is essential to track the money your organization gets. 7. Denials: Patient Responsibility not a payer issue if claim processed at payers office, But many providers see patients balances just as receivables, they may be not aware of collection plan. A separate collections process must take on a billing department’s duties to pursue their accounts.
Strategies to Reduce Days in AR
1. Submit your claims as soon as you can
claim submission is by far an important issue.
You’re probably wondering why a claims submission is not one of these strategies for reducing your Days in AR. The reason is simple – the sooner you get a claim in, the faster you could potentially receive a payment. “ The goal for submitting claims” ,said by a healthcare biller, “ should always be to catch the initial submission cycle or the first run of payments.” the process can be accelerated by making sure everything is “ clean”; in other words, that the claims have all accurate patient and insurance information in them .2.
Improve Your Front-End Processes
front-end billing processes “ play a keyrole.” Many of those early challenges that end up dragging your collections can be minimized by checking every bit of the registration/intake of insurance and financial and demographic details from the new or existing patient – including:Patient demographicsinsurance coverage eligibility Member identification number and subscriber informationprovider details and information
3. Monitor your clean-claim process
An effective clean-claim process can reduce preventable issues before submission. Claims should be reviewed for the following:
- Missing information
- Incorrect coding
- Inaccurate modifiers
- Incorrect payer information
- Provider information
- Authorization details
- Duplicate claims
- Other payer-specific requirements
The aim here isn’t to overcomplicate the billing process. Instead, practice staff should identify their most common errors and implement appropriate checks around them.
4. Create a structured AR follow-up process
AR follow-up shouldn’t be haphazard; it should be a systematic process. You can divide accounts by:
- Age
- Balance
- Payer
- Claim status
- Denial reason
- Financial priority
For instance, an older high-value account requires immediate action compared with a newly filed claim still within the standard payers’ expected reimbursement timeframe. Each interaction should be logged, including:
- Date of contact
- Who was contacted ( payer)
- Claim status
- Claim number (if available)
- Payer response
- Necessary action to be taken
- Next planned contact date
This generates accountability and prevents accounts from being lost in the shuffle.
5. Prioritize your aging AR
Not all AR accounts are equal. Practices can prioritize accounts by age categories, such as 0–30, 31–60, 61–90, 91–120 days, and 120+ days (these categories can be adjusted as needed to suit your organization). Older accounts require attention as there’s a diminishing probability of collecting them. Medicare timely filing rules are particularly important for Medicare claims because most claims must be submitted to the Medicare Administrative Contractor (MAC) or other Medicare payer within one calendar year of the date of service, with exceptions for certain claims.
6. Analyze denial by root cause
Simply tallying your denials isn’t enough. Your practice needs to answer the question: “Why are these claims being denied?” Categorize claims to better understand denial patterns:
- Eligibility
- Authorization
- Coding
- Medical necessity
- Duplicate claim
- Timely filing
- Incorrect payer
- Documentation
- Modifier
- Patient responsibility
Look for reoccurring themes. Repeated denial in one category, for instance, may signal systemic issues that require improving your registration and verification processes (eligibility denial) or your coding practices and staff training (coding denial), thereby addressing the root cause to prevent future claim denials, not just working existing AR.
7. Work high-value accounts strategically
It’s not necessary for the same follow-up effort to be expended on a $20 unpaid claim and a $5,000 unpaid claim. Utilize appropriate prioritization based on the following:
- Balance
- Age
- Payer
- Likelihood of collection
- Status
- Filing deadlines
- Denial reason
Although, practices still need to address smaller accounts with a consistent workflow.
8. Post payments promptly
When you receive ERA or payment, post it to the practice’s ledger, making sure to make it as promptly and accurately as possible. CMS describes ERA (Electronic Remittance Advice) as detailing an adjudication and payment information and showing adjustments that help providers understand how a claim was processed. Accurate posting of payments:
- Updates account balances
- Identify underpayments and adjustments
- Moves patient responsibility appropriately
- Lists remaining balances to the payer
- Indicates any necessary follow-up with the payer or patient
If payments aren’t posted in a timely manner, the AR report won’t accurately reflect where your accounts stand.
9. Review payer performance
Payer behavior can vary. By tracking AR by each individual payer, practices can often spot recurring trends, such as slow payment, high rejections or denials, frequent authorization problems, insurance and eligibility issues, and underpayments. Individual payer AR reports can be far more helpful than simply looking at aggregate outstanding AR for the practice, for example, if a specific payer is contributing disproportionately to your 90+ day AR, you know this is an area that requires specific attention.
10. Make decisions based on AR reports
Your AR report should be a tool that you use to make strategic decisions, not just show dollar amounts. Consider questions such as:
- Which claims are the oldest?
- What is the most outstanding AR by payer?
- How much of your AR is older than 90 days?
- What are the most common denial reasons?
- What is the outstanding balance by claims pending at the payer?
- How much of the AR is patient responsibility?
- Which of the aged claims are in immediate need of follow-up?
- Which issues occur most often?
Reporting isn’t meant to display data, but rather to drive action based on what that data indicates.
What is the best way to track AR performance?
To continuously decrease your days in AR, organizations should use more than one metric. A practice should look for a combination of useful metrics such as:
* Days in AR (amount of revenue that AR represents in terms of days)
* Aging AR (dollar amount outstanding within different time frames)
* Denial rate (percentage of claims denied)
* Clean claim rate (measure of claim quality based on practice’s own methodology)
* Net collection rate (measure of effectiveness of collection of collectable revenue)
* AR over 90 days (dollar amount outstanding which is over 90 days old)
* First-pass resolution (measure that indicates whether any claim issues are resolved during the first AR collection attempt, dependent on practice’s own definition)
One AR metric will not tell the full story; tracking numerous metrics will allow practices to evaluate whether implemented changes are truly being effective.
Should you outsource medical billing AR?
The management of medical billing AR requires sustained attention from practice staff. Certain practices are successful in managing this internally, but for others, AR follow-up is a task that becomes burdensome when the staff must also manage scheduling, patient communications, registration, payments, and other administrative processes. Hiring an outsourcing solution may be necessary if your practice:
* Experiences an increase in overall AR
* Has high-volume outstanding and aged accounts
* Struggles to implement consistent follow-up procedures
* Deals with frequent claims denials
* Has limited staff devoted to billing
* Is unable to consistently monitor and analyze payer trends
* Has difficulty tracking individual claim statuses
* Needs supplemental support for the revenue cycle
If your organization is having to spend too much time resolving outstanding claims and the practice’s staff are over extended,Noventra RCM can provide professional medical billing AR services to help streamline claim follow-up and other aspects of the revenue cycle.
How Noventra RCM Can Help Reduce AR Days
Reducing AR days effectively requires coordinated effort throughout the entire revenue cycle. Noventra RCM provides outsourced medical billing and RCM services to practices with clients who can use services such as:
- Medical billing
- Claims management
- AR follow-up
- Denial management
- Insurance verification
- Medical coding
- Payment posting
- Revenue cycle management
The selection of services a practice uses will need to be customized to its specific needs. By integrating frontend billing, claims management, and AR follow-up, your practice can implement effective steps to minimize days in AR. If your staff find themselves burdened by the number of days AR has reached and are unable to consistently follow up on outstanding claims,Noventra RCM can support your practice through revenue cycle management and professional billing services. The focus is not simply on improving the reporting metric but on ensuring claims are accurately filed, that unpaid accounts are discovered and responded to swiftly.
How Long Will it Take to Decrease Days in AR?
There is no exact timeframe, but rather a process that takes varied amounts of time depending on factors such as your practice’s current AR level, its payer mix, specialty and claim volume, denial patterns, patient balances, staff support, and established workflows. Practices whose AR includes large balances in the 120-day plus category may need a longer timeframe compared to those whose AR is mostly less than 60 days. A good methodology to use will be establish a baseline and track progress accurately.
It’s ideal for a practice to review its current AR days, and compare the figures against previous trends (30-day, 60-day, and 90-day) while noting the underlying causes that are leading to the current numbers.
While a low AR number is a good indication, sustainable growth must be achieved, not simply collected claims, but with the use of improved processes.
Frequently Asked Questions
What does it mean to reduce days in AR?
To reduce days in AR means to decrease the amount of average time any outstanding account stays in accounts receivable. Billing professionals typically look for ways to improve claim submission, denial management, payment posting, patient collections, and AR follow-up to achieve this.
What are common reasons for high AR days?
Common reasons for high AR days can include slow claim submission, initial rejected claims, denials after submission, incorrect insurance information, lagging payment posting, ineffective AR follow-up, patient balances that aren’t resolved, and systematic billing or coding errors.
How does AR follow-up reduce outstanding accounts?
By diligently following up on submitted claims, billing personnel can identify unpaid claims, monitor the status of all accounts, fix payer issues and correct problems, or identify subsequent actions that need to be taken rather than letting accounts age.
Does a low number of AR days guarantee we are doing a good job?
Not necessarily. Days in AR should always be put in context considering specialty, payer mix, overall revenue, patient responsibility balance, and specific billing cycles. Practices should assess their ongoing collection rates and overall AR quality rather than focusing solely on the days in AR.
Can Denial Management Reduce Days in AR?
Active management of denied claims works to determine why a claim was denied, correct applicable claims, follow the appropriate payers process and analyze trends. It also reduces the number of denied accounts that go into the AR.
Can Outsourcing Help Reduce AR Days?
Working with a trusted partner that offers billing and RCM services can increase practice resources available for claim follow-up, denials, payment posting, and AR work depending on how a practice is currently processing claims and on payers.
Conclusion
The way to reduce days in AR is not just to pay attention to one revenue cycle performance metric. It is about pinpointing why the revenue cycle has not moved from creation to payment or resolution. Review the claim entry process timeline and look at when insurance verification occurs.
Work on all areas of your revenue cycle including coding accuracy, denials, payment posting and your team’s AR work.
Break down your outstanding AR by payer, age, balance and claim status to make sure your team is managing them effectively. By using reporting and analysis, you may discover consistent issues across one specific payer, in one type of denial or with one common billing challenge. Focus on the problem that leads to high AR for your group rather than fixing the same problem repeatedly. When support is needed in these areas Noventra RCM has qualified team of medical billing, claims, denial and AR management experts to help.
It begins with accurate billing and ends with dedicated follow up to address any outstanding AR balance you have.