What are AR Days in Medical Billing

Definition of A/R Days (or AR Days)

The term A/R days or accounts receivable days may be defined as the number of days that a medical billing office/hospital takes to collect the outstanding amount from an insurance carrier for all the services it provides to insured patients.

A/R days are calculated for the time period of 3 months, 6 months, and 12 months. The formula to calculate AR days is:

A/R Days = (Accounts receivable ÷ Annual revenue) x Number of days in the year

For example, accounts receivable for a pediatric clinic is $100,000 and its (Account receivable/total charges) X 365 days is $600,000. Then the A/R days for this clinic will be:

A/R Days = ($100,000 accounts receivable ÷ $600,000) x 365 days = 60.8 Accounts Receivable Days

Understanding AR Days

In medical billing and collection, there are 7 Key Performance Indicators (KPIs) or Medical Billing Metrics to monitor financial performance.

1. Collections per Visit
2. Contractual Variance
3. A/R Days
4. First Pass Resolution Rate (FPRR)
5. Gross Collection Rate (GCR)
6. Net Collection Rate (NCR)
7. Percentage of A/R Older than 60 Days

Just like the other 6 KPIs, it is vital for any hospital to calculate it’s a/R days to maintain a good revenue cycle. While calculating the A/R days the following metric is used as benchmarks or guideposts:

• 35 or less A/R days = Good or High Performance
• 35-50 A/R days = Average Performance
• 50 or more A/R days = Below Average or Poor Performance

Incorrect calculation of A/R days can be misleading in terms of identifying who has paid the outstanding amount and who is yet to pay the amount. Therefore, the following are three tips to help you calculate A/R days effectively:

• Individual calculation of A/R days for all payers: It is important to calculate the A/R days for app payers separately. While making the calculation of A/R days pay attention to specific payers that are taking more than average time to pay you the outstanding amount. This will help you to keep track of the late payments while obviating the inefficiencies.
• Monitor accounts receivable over 90 and 120 days: If accounts receivable for some specific payers are over 90 or 120 days then you must make sure to get the payment as soon as possible. Practicing minimum A/R days for all your payers should be your goal to achieve high performance. Getting compensation for your services is essential to maintain the supply of medical equipment and other services.
• Accounts forwarded to Collections matter: Sometimes it so happens that the medical billing office may forget to incorporate the accounts sent to collections. However, this should not happen as it will affect your A/R days’ calculation giving you a misleading value. So, whenever you calculate A/R days for any particular payer, make sure to incorporate accounts forwarded to collections.
• Outsource A/R services: A/R follow-up is both a challenging and exhausting task. The process requires a trained professional to follow A/R and make correct calculations of A/R days for all payers. Therefore, it is beneficial to outsource A/R services from a medical billing and collection company and get professional assistance.