Knowing how to calculate Account Receivable(AR) days is an important tool in increasing billing productivity, AR days is the most crucial parameter for a successful billing process.
What are AR Days or “Days in A/R”?
It is the average duration for a charge / service to be paid by the appropriate responsibility (Insurance or Patient). The efficiency of a medical billing operation can be analyzed using this single parameter.
How to calculate AR Days?
The following parameters are needed to calculate the AR Days:
Total Charge: Calculate the total charges for the last 6 months (We will use 6 months as example)
Total Days: No. of days in the last 6 months
Pending Charge: Total charge yet to be collected
AR Days = Pending Charge / ( Total Charge / Total Days)
For example, if the total charge billed for 180 days is $500,000 and $100,000 is pending bill to be collected.
AR Days = 100,000 / ( 500,000 / 180 ) = 36 Days
We use the following numbers as an indication of the billing team performance
- AR Days Less than 35 is Good
- AR Days 35 to 50 is Average
- AR Days Greater than 50 is Poor
More insight to AR Days
Using Date Of Service as base for calculation
Using this for calculating the days will give more accurate statistics than using the submission date or created date. This will play a significant factor when the percentage of AR Days is between 90 and 120
Segregate AR Days by Payor
After receiving a claim, Medicare normally pays within 14 days. Several HMOs pay claims 45 days after they are received, which is the maximum amount of time allowed by law in some jurisdictions. If AR Days is more for a Payor special attention can be given to the charges submitted to that Payor.