Days in AR: what it means, how to calculate it, and how to lower it

Days in accounts receivable (days in AR) is the average number of days it takes your practice to get paid after a service is provided. It is one of the most useful single numbers in medical billing, because almost every problem in the revenue cycle shows up in it eventually.

The formula

Days in AR = total accounts receivable ÷ average daily charges.

Average daily charges is usually your gross charges over the last three months divided by the number of days in those months.

A worked example

Suppose a practice has:

• Total AR today: $150,000
• Gross charges over the last 3 months: $270,000
• Days in those months: 90

Average daily charges = $270,000 ÷ 90 = $3,000. Days in AR = $150,000 ÷ $3,000 = 50 days.

(These figures are made up to show the arithmetic.)

What is a good number?

There is no single right answer. It depends on your specialty, payer mix and how much patients owe after insurance. The more useful comparison is your own trend: if days in AR is rising month over month, something in your process is slowing down. Look at AR by aging bucket too. A practice with a low average can still have a dangerous pile of claims over 90 or 120 days old.

What pushes days in AR up

• Claims submitted days or weeks after the visit.
• Rejections from the clearinghouse that sit unfixed.
• Denials that are not worked promptly.
• No follow-up on claims the payer has not answered.
• Payments posted late, so problems are found late.
• Patient balances billed slowly or unclearly.

How to bring it down

1. Submit claims daily, within a day or two of the visit.
2. Fix clearinghouse rejections the day they come back.
3. Post payments daily and route denials immediately.
4. Follow up any claim with no response after a set number of days.
5. Work the oldest, largest balances first.
6. Bill patients promptly and let them pay online.

Track it with the right tools

GetMax calculates days in AR, AR by aging bucket and AR by payer from your live claims, so you can see the trend without a spreadsheet. If your AR has a backlog, our AR follow-up service runs cleanup projects. More metric definitions are in the RCM glossary.