Most healthcare organizations can recite their month-end cash and net margin. Far fewer can clearly explain what drives their Days in Accounts Receivable (A/R) or how to fix it when it trends in the wrong direction.
That gap is costly. High days in A/R tie up capital, create uncertainty in payroll and vendor payments, and force executives to manage the business based on cash timing instead of strategy. At the same time, payer behavior is getting tougher, denial patterns are more complex, and patients are responsible for a larger share of revenue.
This article is designed for independent practices, group practices, hospitals, and billing company leaders who already know that Days in A/R is important, but need an operational roadmap: what to measure, where to look first, and which changes will actually move the number.
We will walk through a concise, operationally focused framework so you can:
- Calculate and interpret Days in A/R with more nuance than a single headline number
- Connect A/R performance to specific front-end, mid-cycle, and back-end workflows
- Design a disciplined A/R follow up process that prioritizes recoverable dollars
- Use KPI dashboards to manage payers, staff, and cash flow proactively
- Decide when and how to augment internal teams with external expertise
Reading Days in A/R Correctly: Metrics, Benchmarks, and Segmenting Your Receivables
Many teams treat Days in Accounts Receivable as a single dashboard number. That is a useful starting point, but on its own it can be misleading. To manage A/R at an executive level, you need both a solid calculation method and a way to segment results.
How to calculate Days in A/R
A commonly used formula is:
Days in A/R = Total A/R balance ÷ (Average daily gross charges)
Where:
- Total A/R balance is your unpaid receivables, usually excluding credits and very old, non-collectible accounts.
- Average daily gross charges is typically the last 3 to 12 months of gross charges divided by the number of days in that period.
For example, if you have 2.5 million dollars in A/R and average 100,000 dollars in gross charges per day, your Days in A/R are roughly 25. That is significantly better than the often cited Medical Group Management Association benchmark of around 40 days for many specialties, but the absolute number is only the beginning.
Why segmentation matters more than the headline number
Two organizations can both report 35 days in A/R and have completely different risk profiles. Executive teams should insist on A/R views that are segmented at minimum by:
- Payer type: Medicare, Medicaid, commercial, workers’ comp, self pay
- Aging bucket: 0–30, 31–60, 61–90, 91–120, 120+ days
- Service line or specialty: especially when procedural mix or documentation requirements differ
As a simple diagnostic, review the percentage of A/R over 90 days old by payer category. A common target in many ambulatory and hospital settings is to keep total A/R over 90 days less than 15 to 20 percent of total receivables, with an even tighter target for Medicare. When the over‑90 percentage creeps up, it often precedes visible cash problems by 60 to 90 days.
Executive takeaway: insist on a standard A/R reporting package that always includes Days in A/R, A/R aging by payer, and over‑90 percentages. Without those, you are managing blind, no matter how good the topline number looks.
Finding the Root Causes: Mapping High Days in A/R to Specific Workflow Breakdowns
Days in A/R is a lagging indicator. By the time the number deteriorates, the underlying operational issues have usually been festering for months. To correct it, you need a disciplined way to map symptoms in the receivables to concrete process failures.
A simple A/R diagnostic framework
Use the following 4‑step lens when you see rising Days in A/R or a growing over‑90 bucket:
- Is there a volume or timing shock? Check for EHR changes, new payer contracts, staffing turnover, or large changes in case mix that may have temporarily disrupted throughput.
- Is the problem payer specific? Run Days in A/R and aging by payer. Problems concentrated in one or two payers suggest contract issues, edits, or payer‑specific rule changes.
- Is the issue denial driven or follow up driven? Compare denial rate, clean claim rate, and A/R aging. A high first pass denial rate points to front‑end or coding problems. Normal denial rates with growing over‑90 buckets point to weak follow up.
- Is patient responsibility a major contributor? Rising high‑deductible plan participation often creates spikes in patient A/R, even when payer A/R is stable.
Common operational patterns behind high Days in A/R
Once you have the above view, the same themes tend to emerge:
- Front‑end gaps: Late or inaccurate eligibility checks, missing referrals or prior authorizations, and incomplete demographics feed denials and underpayments.
- Coding and documentation friction: Providers not documenting to payer policies, frequent use of unspecified codes, and slow charge capture all extend the revenue cycle.
- Back‑end capacity issues: Small follow up teams managing large inventories, no clear worklists, and manual tracking of status updates often result in claims sitting untouched until they are nearly uncollectible.
Executive takeaway: tie every A/R symptom back to a point in the revenue cycle. You are not fixing Days in A/R by telling staff to “work harder”. You are fixing specific defects in scheduling, registration, coding, claim submission, or follow up that show up later as A/R bloat.
Strengthening the Front End: Eligibility, Authorization, and Patient Financial Communication
The fastest money you will ever collect is the money that never has to be reworked. That starts before the patient is seen. High performing organizations treat front‑end revenue cycle as a clinical prerequisite instead of an administrative afterthought.
Key front‑end practices that reduce Days in A/R
Use this checklist to evaluate your current state:
- Eligibility verification window: Are eligibility and benefits checked automatically 48–72 hours before scheduled visits, with same‑day checks for add‑ons and walk‑ins?
- Prior authorization controls: Do staff have payer‑specific rules embedded in workflows so that high‑risk procedures are not scheduled without authorization in progress?
- Demographic and insurance accuracy: Are front desk teams measured on error rates in registration, not just throughput? Do you use digital intake to reduce manual keying?
- Upfront patient financial counseling: Are estimated patient portions presented before service, with easy options for prepayment or payment plans?
Financial and operational impact
Minor improvements at the front end can generate outsized results. For example, an orthopedic group that tightened eligibility and prior authorization saw:
- First pass denial rate fall from 18 percent to 8 percent
- Average Days in A/R improve by 6 days over three quarters
- Staff time previously spent on rework reallocated to complex case management
These gains translate directly into more predictable cash flow and reduced staffing pressure downstream. Instead of growing follow up teams to chase preventable denials, you prevent them in the first place.
Executive takeaway: treat front‑end quality as a strategic lever. Adding one FTE to pre‑registration and eligibility can often free multiple FTEs in A/R follow up and reduce Days in A/R more effectively than any back‑end intervention alone.
Mid‑Cycle Control: Documentation, Coding, and Charge Capture That Payers Will Pay For
Even if front‑end processes work well, you will not collect quickly if the documentation and coding do not support the services billed. Payers are using increasingly sophisticated edits to challenge medical necessity, level of service, and bundling logic. Mid‑cycle control is what keeps those edits from becoming cash flow problems.
Core mid‑cycle capabilities that influence Days in A/R
Focus on three capabilities that have the most measurable impact on payment velocity:
- Provider documentation education: Short, specialty specific education on how documentation translates into codes, medical necessity, and modifiers. For example, ED providers that consistently document all required elements for high‑acuity visits see fewer level‑of‑service downgrades and faster payment.
- Certified, specialty‑aligned coding: Use coders with relevant certification and experience for complex service lines like cardiology, neurosurgery, oncology, and behavioral health. Generalist coding support often leads to avoidable payer friction.
- Charge capture discipline: Establish clear SLAs from date of service to charge entry and claim release. For many ambulatory practices, a 48‑hour standard is achievable and has a material effect on Days in A/R.
Risk and opportunity
Weak mid‑cycle control not only slows payment, it exposes the organization to compliance risk. For example, systemic undercoding to “be safe” harms revenue and also distorts quality metrics. Overcoding drives short term cash but carries audit risk. Both scenarios can trigger payer scrutiny that lengthens the path to payment.
On the other hand, organizations that routinely audit 5 to 10 percent of high value encounters and feed the results back to providers and coders tend to see a dual benefit: net revenue improvement and a more stable A/R pattern with fewer medical necessity denials.
Executive takeaway: mid‑cycle is not a black box. Require clear metrics around coding turnaround, audit accuracy, and time from service to claim. Where those metrics are weak, expect Days in A/R to lag, particularly for complex service lines.
Building a Disciplined A/R Follow Up Engine: Inventory, Worklists, and Escalation Paths
Eventually, every organization must confront the fact that no matter how strong the front and mid‑cycle are, some percentage of receivables will require active follow up. How you manage that inventory separates organizations that stabilize Days in A/R from those that fall perpetually behind.
Designing an effective A/R work model
A mature A/R operation treats outstanding receivables like a portfolio, not an undifferentiated backlog. At minimum you should:
- Segment A/R by payer, aging, and balance: High dollar, high probability accounts deserve different attention than small balances near timely filing limits.
- Assign clear ownership: Use payer‑based team assignments so staff build expertise in payer rules and contacts. Avoid rotating worklists randomly.
- Define work standards: For example, every claim over a specific dollar threshold receives initial follow up by day 30 if unpaid, with defined recontact intervals until resolution.
- Track resolution codes: Require staff to code final outcomes (paid in full, partial pay, denied no appeal, appealed, adjusted to patient, write off with reason) so leadership can see which issues are structural versus one‑off.
Example of a basic A/R follow up cadence
One practical pattern used by many successful revenue cycle operations:
- Day 0 to 10: Claim submission and electronic acknowledgement monitoring
- Day 15 to 20: Follow up on high‑dollar or high‑risk payers lacking remittance
- Day 30: Initial follow up for remaining unpaid claims over a defined threshold
- Day 45 to 60: Escalated follow up for unresolved claims, including appeals for denials
- Day 90+: Triage to determine collectability, secondary billing, patient billing, or administrative write off
Organizations that implement this level of discipline often see over‑90 A/R as a percentage of total drop by several points within two to three quarters, even if total charge volume is stable or slightly rising.
Executive takeaway: measure A/R team performance on outcomes, not just “touches”. You want higher recovery in early aging buckets, lower over‑90 percentages, and timely identification of systemic denial patterns that can be fixed upstream.
Managing by KPIs: Turning A/R Reporting Into an Executive Control System
Once your processes are aligned, the next step is to convert A/R and related metrics into a simple, reliable management system. Many leadership teams are overwhelmed with data but underpowered when it comes to actionable KPIs.
Essential A/R and revenue cycle KPIs
A focused executive dashboard should include at least:
- Days in Accounts Receivable (overall and by payer)
- A/R over 90 days as a percentage of total A/R
- First pass denial rate (number and value)
- Net collection rate and gross collection rate
- Time from date of service to claim submission by service line
- Patient A/R aging and collection yield
Using KPIs to drive behavior, not just reports
KPIs are only useful if they shape decisions. Some practical governance steps:
- Review the core KPI set monthly in a standing revenue cycle meeting that includes finance, operations, and clinical leadership.
- Assign accountable owners to each metric. For example, front‑end leadership for service‑to‑claim time, coding leadership for denial categories, A/R leadership for over‑90 performance.
- Use simple traffic light thresholds. Green when within target, yellow when deteriorating, red when breaching defined ranges that threaten cash.
- When a metric turns red, require a brief corrective action plan with specific process changes, not just “work the backlog”.
Executive takeaway: treated correctly, Days in A/R and related KPIs become an early warning system for cash and payer risk. They also provide the objective basis you need for staffing decisions and contract negotiations.
When To Add Outside Help: Scaling A/R and Denial Management Without Losing Control
There is a practical limit to how much A/R improvement you can drive with existing staff and technology. At some point, the question becomes when to leverage specialized outside support and how to do it without losing visibility or control.
Signals that it may be time to augment internally
Warning signs include:
- Chronic over‑90 A/R above target despite internal process changes
- Large legacy A/R backlogs from system conversions or acquisitions
- Persistent staffing vacancies in coding or A/R follow up roles
- Difficulty keeping up with payer policy changes across multiple states and lines of business
In these situations, selective use of an experienced revenue cycle partner can accelerate results and free leaders to focus on strategy rather than daily firefighting.
If your organization is looking to improve billing accuracy, reduce denials, and strengthen overall revenue cycle performance, working with experienced RCM professionals can make a measurable difference. One of our trusted partners, Quest National Services, specializes in full‑service medical billing and revenue cycle support for healthcare organizations navigating complex payer environments.
Executive takeaway: external support should be deployed against clearly defined scopes such as aging A/R clean up, denial management, or end‑to‑end billing for specific service lines, with measurable KPI targets and transparent reporting that align with your internal dashboards.
Translating A/R Improvement Into Strategic Advantage
Reducing Days in Accounts Receivable is not just a finance project. It is a practical way to protect margins in a tight reimbursement environment, relieve pressure on staff, and give leadership the confidence to invest in growth.
In concrete terms, organizations that bring Days in A/R and over‑90 performance into target ranges typically see:
- More predictable cash flow for payroll, capital spending, and debt service
- Lower write offs and bad debt, particularly in older aging buckets
- Reduced overtime and burnout in billing and follow up teams
- Better payer relationships rooted in data, not guesswork
The path forward rarely requires a complete reinvention of your revenue cycle. It does require a disciplined approach: accurate measurement, honest diagnosis of where work is breaking down, targeted process changes at front, mid, and back end, and a willingness to supplement internal capabilities where appropriate.
If you are ready to turn A/R from a persistent headache into a controllable performance lever, the next step is conversation. Align your finance, clinical, and operations leaders around a clear A/R improvement plan and define the KPIs that will tell you whether it is working. When you are prepared to evaluate options or pressure test your current strategy, you can contact us to discuss practical approaches that fit your organization’s size, specialty, and payer mix.
References
Medical Group Management Association. (n.d.). MGMA DataDive Cost and Revenue. Retrieved from https://www.mgma.com
Healthcare Financial Management Association. (n.d.). Key performance indicators for revenue cycle. Retrieved from https://www.hfma.org
