What Is AR Days in Medical Billing?

In medical billing, keeping track of how quickly payments are collected is vital for maintaining a healthy cash flow. One key measure can reveal the efficiency of this process – directly affecting your practice’s financial health and stability. So, what is AR days in medical billing, and how can you measure it? 

Ahead, you’ll understand the significance of this metric, methods for improving performance, and how outsourcing solutions can assist in flawless management!

What Is AR Days in Medical Billing?

AR days, or accounts receivable days, are a key financial metric used to measure how long it takes a company to collect payments from patients or insurers. They are generally focused on periods of collecting the money within 1 to 4 months.

The main purpose of AR Days is to evaluate how quickly a company is able to convert its receivables into cash. A lower number indicates strong financial health, while higher numbers suggest challenges in collecting on outstanding invoices.

To calculate AR Days, you can use the following formula:

AR Days = (Total accounts receivable ÷ Annual revenue) x Days in the year

For example, let’s say a company has made a revenue of $1 million at the end of a year and has $200,000 in total accounts receivable. Using the formula:

AR Days = (200,000 ÷ 1,000,000) x 365

AR Days = 0.2 x 365 = 73

This means, on average, it takes the company 73 days to collect payments from its patients.

What Is a Good AR Days in Medical Billing?

An AR days value of 35 days or less signifies excellent performance, meaning the practice has better revenue cycle management, maintaining a strong cash flow. A range between 35 AR days to 50 AR days reflects average performance, indicating room for improvement in the revenue cycle but still within acceptable limits.

However, if AR days exceed 50 days, it is considered poor performance, signaling financial trouble, delays in payments and collections, or process inefficiencies. This could negatively affect financial stability.

Strategies for Improving AR Days Performance

Improving Accounts Receivable Days (AR Days) performance is critical for improving cash flow and overall financial health. Here are some effective strategies:

Streamline billing processes 

Ensuring billing is accurate and timely is essential to avoid unnecessary delays caused by incorrect or incomplete invoices. Automating certain aspects of the billing process, such as claims submission and payment tracking, can reduce manual errors and significantly speed up the entire collection cycle, resulting in improved AR Days performance.

Implement clear payment terms 

Setting clear payment terms from the start provides patients and insurers with a transparent understanding of when payments are expected and the consequences of late payments. Reducing the payment terms from 60 or 90 days to 30 days not only speeds up cash flow but also sets a standard for quicker collections, keeping accounts receivable in better shape.

Follow up on outstanding invoices

Establishing a consistent follow-up routine for overdue invoices ensures that unpaid accounts don’t slip through the cracks. Regular, proactive communication with patients or insurers about outstanding balances will result in faster payments, and using reminder systems or dedicated teams can help prevent AR Days from piling up unnecessarily.

Outsource medical billing

Outsourcing medical billing to experts allows healthcare practices to focus on their core operations while ensuring that the billing and collections process is handled professionally. Specialized billing services can offer better accuracy, quicker turnaround times, and standard operating procedures for managing AR, which will drastically improve AR Days.

Outsourcing Solutions By CLICKIVISONBPO

Outsourcing solutions for improving AR days has become a strategic option for healthcare practices aiming to improve cash flow and efficiency. By partnering with specialized third-party billing services, practices can hand over the responsibility of managing claims, payment follow-ups, and denial management, allowing in-house staff to focus on patient care. 

Since we understand that improving AR days’ performance requires both time and resources, our team at CLICKVISION BPO has the expertise to do it. By partnering with us, you get access to streamlined processes and a well-trained team which can be your ticket to reduced errors and better clean claim rates. So, while you focus on what you do best – delivering quality care – let us take care of the back-office operations.

Conclusion

Now that you know what is AR Days in medical billing and how to improve its performance, you can take the necessary action.

This metrics is key for healthcare practices to monitor as they reflect your billing and collections efficiency. Increased AR Days or anything over 50 could be a signal for financial trouble, indicating poor management, while lower AR Days mean that your revenue cycle management strategies are working. However, there’s always space for improvement.

Improving your AR days requires strategies like regular monitoring, addressing delays, and in some cases, outsourcing. At CLICKVISION BPO, we provide the expertise and tools you need to achieve this goal, ensuring timely payments and allowing you to focus on what truly matters – patient care.