February 5, 2020

The aged accounts receivable (A/R) report is one of the best diagnostic tools for identifying collections issues and reimbursement system breakdowns. It should be reviewed by physicians and managers every month.

Here are 6 questions to ask about this essential report.

1. Is the report generated by date of service or date of posting?

The most accurate way to generate the report is by date of service. That’s because the true age of a receivable begins on the day you see and/or treat the patient.

Ideally, the date seen/treated and the date the service was posted and charged should be the same. But a realistic metric is to post and charge services within two business days of the service being rendered.

2. Are prepayments (such as pre-surgical deposits) traced discreetly from receivables – not as a “credit adjustment” against receivables?

They should be. If not, A/R report data will show as less than the receivables actually owed you by patients and payors. That’s because the receivable amount on the report will be net of the prepayments.

3. Have you analyzed the fee schedule within the last year, to make sure fees are in-line with reimbursements in your market?

If dollar amounts in multiple aging categories are “oversized,” it may be a sign that your fees are significantly higher than market norms. To avoid this, conduct an annual fee schedule analysis.

4. Do you review patient and insurance balances separately?

Reviewing them in total mixes apples and oranges. Patient A/R is real money that can be collected from patients after insurance pays. Insurance A/R are inflated amounts that you should never expect to collect in full. Always review these amounts separately.

5. Are you watching and setting improvement goals for “Days in A/R?”

“Days in A/R” is a metric that measures the average number of days it takes for an account to be paid. Turnaround expectations vary by payor but we advise a best practice target of 20-35 days, depending on payor mix and specialty. Surgical specialties typically have higher days in A/R than office-based specialties.

The formula for calculating Days in A/R is: [Total Accounts Receivable / Average Daily Charges]. Average Daily Charges = 3 Months of Charges/90 Days.

6. How does the distribution of A/R dollars look?

In other words, what’s the percent of total A/R that’s in each aging category? In a healthy practice, 50% or more of the total A/R will be in the 0 – 60-day category, and 15% or less of the total A/R will be greater than 90 days old.

More than 15% over 90 days old can indicate system breakdowns such as poor patient collections, ballooning denials that aren’t being managed, or bad debt that needs to be written off. Once you’ve identified that there’s more A/R in the 90 day+ buckets than there should be, dig into the details of what’s in there and why. Then make a plan to address the issues that emerge.

Example of a Good Accounts Receivable Summary Report
Generated by: Date of Service
Pre-Payments 0-30 31-60 61-90 91-120 121+ Total
Patient Responsibility A/R $12,456 $16,000 $18,000 $9,000 $9,000 $40,000 $92,000
Patient Responsibility % N/A 17.4% 19.6% 9.8% 9.8% 43.5% 100%
Insurance A/R N/A $346,000 $74,000 $11,000 $13,500 $27,500 $472,000
Insurance % N/A 73.3% 15.7% 2.3% 2.9% 5.8% 100%
Total A/R $12,456 $362,000 $92,000 $20,000 $22,500 $67,500 $564,000
Total A/R % N/A 64.2% 16.3% 3.5% 4% 12% 100%

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