In medical billing, AR days, or Accounts Receivable days, is a crucial metric used to measure the efficiency of the revenue cycle management process.
“AR days represent the number of days it takes for healthcare providers to receive payments for services rendered to patients. The lower the AR days, the more efficient the billing process, and the faster the cash flow.”
Healthcare providers rely on payments from insurance companies, Medicare, Medicaid, and private payers to maintain their operations, cover overhead costs, and provide quality care to their patients. A delay in the same or complete denial of payments can lead to financial strain, decreased staff morale, and even the closure of medical practices.
Calculation of AR days is important for every healthcare provider. A simple formula for the calculation of AR days, which is mostly being used by the healthcare provider, includes dividing their total accounts receivable by the average daily charges. The result of this calculation represents the number of days it takes for the practice to collect its outstanding payments. For example, if a practice has $10,000 in accounts receivable and its average daily charges are $1000, the AR days would be 10.
A high AR day value indicates that the billing process is inefficient, and payments are delayed. The reasons for high AR days can vary, and healthcare providers need to identify the root cause to improve their revenue cycle management process.