Revenue Cycle Key Performance Indicators Part 1

Track and analyze key performance indicators (KPIs) to assess the financial health of your medical billing revenue cycle. One essential KPI to monitor is average days in accounts receivable.

Average days in accounts receivable (AR) measures the average number of days it takes for a healthcare practice to collect payments from patients or insurance payers after providing services. The higher average days in AR suggests delayed collection, which can impact the practice’s financial stability and liquidity.

How to Calculate Your Practice’s Average Days in Accounts Receivable

Average Days in AR = Total Accounts Receivable / Average Daily Charges or Collections

Total Accounts Receivable =
the outstanding amount of money owed to the practice for services rendered but not yet collected

The Average Daily Charges or Collections =
total charges or collections over a specific period (e.g., a month) divided by the number of days in that period

Here are some strategies to help improve the average days in AR:

  • Timely and Accurate Claims Submission
    Ensure that claims are submitted promptly and accurately to insurance payers. Whenever possible consider utilizing electronic claims submission methods for faster processing.

  • Efficient Billing and Follow-up Processes
    Streamline your billing operations and establish efficient follow-up procedures to address outstanding accounts. Regularly monitor and track unpaid claims or balances to identify and resolve any issues promptly. Implement reminder systems and automated follow-up mechanisms to improve collections.

  • Verify Patient Insurance Coverage and Eligibility
    Before providing services, ensure they are covered by the patient’s insurance, reducing the risk of denied or delayed payments.

  • Clear and Transparent Patient Communication
    Provide detailed explanations of charges, payment expectations and available payment options to patients. Clear and transparent communication helps minimize confusion and encourages timely payment.

  • Implement Payment Acceleration Strategies
    Provide a multiple of payment options, including online portals, electronic fund transfers or payment plans. Having payment flexibility can help encourage patients to settle their bills more quickly.

Regularly monitoring and analyzing the average days in AR allows you to identify trends, measure the effectiveness of your revenue cycle management and implement targeted strategies for improvement.

David Swiercz