Use accounts receivable days as a measuring stick

There’s no greater asset to a business than accounts receivable days. Consider the dense weave of financial sources, from insurance payers to the federal government to individual patients. This is an asset that needs careful management or its value starts escaping, like the leak of a punctured balloon.

For that reason, providers are drilling down on accounts receivable as one measuring stick for their organization’s financial health. By referring often to the accounts receivable days as one key performance indicator, financial managers can get a digestible readout from a complex financial system.

Look to your accounts receivable days and if the indicators fall short, take it as a symptom of an underlying problem and trace it back to the root cause.

The tie-in to timing
One measurement is the average number of days between the visit and payment. Fifty days is the optimal limit for providers, but if it stretches past even 40 days, that’s an early indicator it’s time to examine billing management processes. Is the billing department sending the correct codes and patient data to the insurance companies? Or perhaps there’s another source, such as a lagging payer.

Track down the controllable factors
It’s a given that not all delays can be avoided. There’s the fact that claim denials can take months to resolve, and some patients are simply unable to pay. Another yardstick is the long-term accounts receivables — accounts that are anywhere from 60 to 120 days and older. When these accounts exceed 25 percent of all receivables, that’s an indicator it’s time to look for controllable factors that may have slipped through, such as errors and lack of follow-up on denials.

Third-party solution
Choosing the right third-party collection partner can help close the bad-debt A/R chasm for hospitals and clinics. IC System can help medical providers sort out the underlying causes of bad debt. Our process allows us to identify insurance accounts, manage self-pay balances, as well as screen patients for charity care and financial assistance. Explore your options today to bring those A/R days within a healthier, more profitable range.

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