Accounts Receivable Aging: What Healthcare Practices Need to Know

Accounts receivable aging is one of the clearest indicators of practice health. If yours is above 60 days, you’re leaving money on the table.

What Is A/R Aging?

A/R aging is the average number of days between when a service is provided (and billed) and when payment is received. It’s calculated across all outstanding balances—insurance claims and patient balances combined.

Formula: Total outstanding A/R ÷ Daily revenue = A/R Days

Industry Benchmarks

• Healthy practices: 30-45 days
• Acceptable range: 45-60 days
• Problematic: Over 90 days

If you’re at 90+ days, you have cash flow problems brewing and collection issues that need immediate attention.

Why A/R Aging Matters

Cash Flow Impact

Money tied up in A/R is money you can’t reinvest in your practice. High A/R aging directly reduces your ability to pay staff, invest in equipment, or handle unexpected expenses.

Collection Risk

The older a balance gets, the less likely you are to collect it. A 30-day balance has a 90% collection likelihood. A 120-day balance? Only 50%.

Operational Insight

High A/R aging often signals:

• Broken claim follow-up processes
• Patient communication gaps
• Billing accuracy issues
• Missing insurance authorizations

What Drives High A/R Aging?

1. Slow Insurance Claims Processing

Insurance companies don’t always respond within promised timelines. Some take 45-60 days to process.

Fix: Track claim status by payer. Identify slow payers and implement automatic resubmission protocols.

2. Claim Denials Not Being Addressed

A denied claim sits in a “denied” status until someone appeals it. That’s wasted time.

Fix: Review denials weekly. Appeal within payer’s timeline. Track appeal progress.

3. Patient Balances Going Uncollected

After insurance pays, remaining patient responsibility often goes uncollected because it’s not being followed up.

Fix: Send patient statements monthly. Make patient calls every 30 days for balances over $100.

4. Missing Insurance Information

Claims can’t be submitted without complete insurance details. Incomplete information = processing delays.

Fix: Verify insurance before treatment. Store verification in the patient file.

5. Incomplete or Inaccurate Billing

If claims are submitted with errors, insurance returns them for corrections, delaying everything.

Fix: Implement a pre-claim audit process to catch errors before submission.

Steps to Improve A/R Aging

Step 1: Audit Your Current A/R

Run an aging report and categorize balances by age:

• 0-30 days
• 31-60 days
• 61-90 days
• 90+ days

This shows you exactly where the problems are.

Step 2: Address 90+ Day Balances

These are collection risks. For each:

• Determine if it’s an unpaid insurance claim or patient balance
• If insurance: resubmit or appeal
• If patient: call and negotiate payment plan
• Consider referring to collections if appropriate

Step 3: Implement Daily Claim Status Tracking

Create a system (even a simple spreadsheet) that tracks:

• Claim submission date
• Insurance payer
• Expected payment date
• Actual payment date
• Amount

This shows you which payers are slow and which claims need follow-up.

Step 4: Establish Patient Balance Follow-Up Routine

Set a schedule:

• Day 1-30: Send patient statement
• Day 31-60: Send friendly reminder
• Day 61+: Phone call or collection action

Step 5: Train Staff on Prevention

Make sure everyone understands:

• Verify insurance before treatment
• Submit complete, accurate claims
• Process payments daily
• Track claim status weekly

Benchmarking Your Progress

Track these monthly:

1. A/R Days: Should decrease gradually toward 45 days
2. Denial Rate: Should decrease as accuracy improves
3. Days to Insurance Payment: Track by payer
4. Patient Balance Collection Rate: Should increase as follow-up improves

The Financial Impact of A/R Improvement

A 100-patient-per-month practice with $1,500 average claim value:

Current state: 90 A/R days = $450,000 outstanding Improved state: 45 A/R days = $225,000 outstanding Cash freed up: $225,000 available immediately for operations and reinvestment

That’s significant.

Moving Forward

Improving A/R aging requires three things:

1. Visibility: Know exactly what’s outstanding and why
2. Process: Have clear workflows for claims and patient follow-up
3. Accountability: Assign responsibility and track results

If your A/R aging is above 60 days, the good news is that improvement is usually possible with focused attention. Many practices improve 30+ days within 90 days of implementing these strategies.

Let’s assess your A/R situation and identify the biggest opportunities to free up cash flow.