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Accounts Receivable – Why is it Important to Your Practice?

March 2021

The days in accounts receivable measures the amount of time between a patient visit and when payment is made.  This directly impacts cash flow in the practice. Calculating the days in accounts receivable is a measure to quantify the efficiency in your billing operation. This measure will help you understand the percentage of accounts receivable that are over 90 and 120 days which delays payment and impacts the bottom-line. Closely monitoring the number of outstanding receivables will help identify collection issues so adjustments to processes can be made. 

To improve upon the average days in accounts receivable you can:

  1. From receipt of charges to submission of the claim, go for a 48-hour turnaround time.
  2. Set clean claim goal of a minimum of 97%.
  3. Work your EDI rejections on a same day basis and fine tune your claims scrubber/ rules engine.
  4. Use certified coders.
  5. Do not use non-specific diagnosis codes, ICD 10 needs a lot more detail.
  6. Use appropriate modifiers.
  7. Factor in payer guidelines while coding to say clear of rejections and denials.
  8. Monitor adjustments and zero paid claims for abnormal spikes that could cause reduction of days in accounts receivable. 

Another important factor is to establish reports that monitor key performance indicators of the revenue cycle in the practice and practice management system.  According to the Practice Management for Urology Groups LUGPA’s Guidebook Second Edition, the basic components of the key performance indicator report are:

  • Total charges for the month.
  • Total payment for the month.
  • Total write-offs/adjustments for the month.
  • Total accounts receivable (AR).
  • Days in AR - the calculation for monthly days in AR will differ from an annual calculation.  Tracking monthly is preferred. 
  • Daily charges based on work days in the month.
  • Daily payments, based on work days in the month.

Enhancements to the basic data include:

  • Physicians vacation days in the month.
  • Physicians work days in the month.
  • Charges per physician work day.
  • Payment per physician work day.

To learn more, Practice Management for Urology Groups Second Edition of LUGPA’s Guidebook, is available to LUGPA members. 

LUGPA member groups participating in the benchmarking program using the InfoDive® tool have access to information that can guide you to make improvements with these metrics and provide you with comparative data that may help you improve the financial performance and change specific practice patterns.

If you are not currently taking advantage of LUGPA’s Benchmarking program you can read more here or contact Katherine Stack at [email protected] or 312.794.7784.

If your practice needs further assistance with performance improvement, please see how LUGPAOnsite can help you. 

Next month’s installment will discuss credit balances.