I once met a brilliant ophthalmologist with a distinguished career. But he had an A/R problem. A big A/R problem.
He remained blissfully ignorant of his problem until one day—one of those days when we all have when feel we are working too hard for the money we’re earning. He decided to dig into how his practice’s billing staff was handling accounts receivable (A/R).
He discovered that his practice had about $1 million dollars of uncollected A/R, most of it so old the chances of collecting it were very, very slim.
Doctors, we know you’re in this profession to focus on helping your patients see, and we totally love that about you. But you owe it to your staff, your practice, and yourself to know just enough about A/R to be confident your staff is managing it optimally, and to help them correct course if there’s room for improvement.
What does ‘days in A/R’ mean?
“When people talk about ‘days in accounts receivable (A/R),’ they’re referring to single number that tells you, on average, how long it takes you to get paid after you provide a service,” explains Torrey Kim of Part B Insider.
To quickly calculate days in A/R, you need to figure out your Average Daily Charge (ADC), says Kim. You get this number by dividing your gross charges by 365. Then you divide your total accounts receivable by your ADC to get the number of days A/R you have outstanding.
What’s a reasonable number of days in A/R to have?
It depends on many factors, including your payer mix, whether you’re working in an ophthalmology practice or an optometry practice, and even what subspecialty you’re in, say experts.
Ophthalmology practices usually have 25-45 days in A/R, according to benchmarks from BSM Consulting. The median for optometry practices is 17 days, according to The Management and Business Academy for Eye Care Professionals.
What about A/R aging analysis?
A/R folks also talk about “aging,” which describes the amount of time elapsed between the point of service and corresponding payment.
For optometry practices, 20% is the median for A/R that’s 60 days or older, according to MBA.
Below are healthy ranges for A/R aging in an ophthalmology practice, according to BSM Consulting’s Maureen Waddle and Derek Preece.
- 0-30 days, 40-60%
- 31-60 days, 15-25%
- 61-90 days, 5-10%
- 90-120 days, 5-10%
- More than 120, 10-20%
Help! My A/R numbers seem whacked!
A/R numbers that are outside the median or “healthy range” for your specialty signal that something is not working correctly in your back office. You could be coding incorrectly, which is triggering denials from insurers. Your front desk collection processes could be sub-par, or your patient billing system may need improvement.
What can I do about really old A/R?
Yes, it’s true that the older the A/R, the harder it is to collect. But don’t throw up your hands and write it off before exploring other options. Some RCM services specialize in collecting old A/R, and it may be worth your while to look into them.
