Improving Days in A/R: A Best Practices Guide to Optimize Your Revenue Cycle
In today's healthcare landscape, where margins are tighter and administrative burdens are rising, optimizing your revenue cycle is non-negotiable. A key metric in assessing revenue cycle performance is Days in Accounts Receivable (A/R), which measures the average number of days it takes for a practice to collect payments owed. The Medical Group Management Association (MGMA) recommends keeping A/R days below 40.
High A/R days can choke your cash flow, delay reinvestment, and compromise operational efficiency. In contrast, reducing A/R days helps ensure financial stability, timely payroll, and long-term growth.
Table of Contents
1. Understanding the Calculation
Understanding how Days in A/R is calculated is essential for evaluating the health of your revenue cycle. This metric reveals how quickly your practice converts rendered services into actual revenue, and it helps identify cash flow inefficiencies that may need urgent attention.
The formula is simple:
Days in A/R = Total Accounts Receivable / (Total Gross Charges / 365)
Where:
Total Accounts Receivable is the amount still owed to your practice for services provided.
Total Gross Charges represent your billed charges over the past 12 months.
For example, let’s say your total A/R is $300,000, and your annual gross charges are $3.65 million:
Days in A/R = $300,000 / ($3,650,000 / 365) = 30 days
This result indicates that your practice collects payments in 30 days on average—an impressive outcome well within the MGMA-recommended benchmark.
It is important to calculate this figure regularly and compare it across payer types, provider groups, and specialties to identify performance disparities and areas for improvement.
2. Common Causes of High Days in A/R
A variety of operational, administrative, and technical issues can contribute to inflated Days in A/R. Understanding and addressing these root causes is essential for improving collections and reducing revenue leakage:
Delayed Claim Submissions: When claims are not submitted promptly after the date of service, it increases the time it takes to receive payment. Delays can stem from bottlenecks in documentation, coding, or claim review.
Incomplete or Inaccurate Eligibility Verification: Failing to verify insurance coverage before appointments can lead to claim denials, rework, and ultimately delayed reimbursement. Errors often originate from rushed patient intake or manual processes.
High Volume of Denials or Rejections: Submitting claims with missing or incorrect information—such as coding errors, mismatched patient details, or incomplete documentation—results in denied or rejected claims that require time-consuming appeals.
Incorrect Coding: Coding inaccuracies not only trigger denials but may also result in underpayment or compliance risks. Coding errors are frequently due to inadequate documentation or lack of certified coders.
Credentialing Issues: Providers who are not correctly credentialed or enrolled with payers cannot bill for services. This causes payment delays until the issue is resolved, sometimes retroactively.
Errors in Data Entry or Payment Posting: Mistakes in entering charge information or posting payments can lead to account discrepancies, missed balances, or duplicate efforts in follow-up.
Inadequate Follow-Up on Aged A/R: Without timely and systematic follow-up on unpaid claims, older balances accumulate, increasing the likelihood of write-offs or bad debt.
Patient Non-Payment Due to Unclear Financial Responsibility: When patients are not informed upfront about their co-pays, deductibles, or outstanding balances, the probability of delayed or missed payments rises significantly.
Most of these issues are preventable through standardized workflows, staff training, technology adoption, and performance monitoring. Addressing these causes head-on can dramatically improve cash flow and reduce operational friction.
3. Best Practices to Reduce Days in A/R
3.1 Front-End Optimization
Front-end operations play a critical role in determining how smoothly the revenue cycle begins. Errors or omissions at this stage lead to downstream delays and denials.
Ensure complete and accurate demographic data capture: Front-desk staff must be trained to collect full and validated demographic details, including correct spelling of names, insurance IDs, and contact information. Using digital check-in systems can reduce manual errors.
Verify insurance eligibility 2–3 days before appointments: Automating this process using EDI clearinghouse tools allows staff to identify inactive policies, plan changes, or coverage gaps in advance, preventing unnecessary denials.
Obtain prior authorization when needed: Build a payer-specific pre-authorization checklist for common procedures and assign accountability for tracking authorization status to avoid last-minute surprises.
Clearly communicate co-payments and deductibles to patients: Use patient portals, phone reminders, or printed estimates to inform patients about their financial responsibility before their visit. This encourages upfront collection and reduces back-end chasing.
3.2 Mid-Cycle Improvements
This phase centers on the accuracy and completeness of documentation, coding, and credentialing—each of which directly affects claim acceptance and reimbursement speed.
Conduct timely and accurate medical coding: Employ certified coders and use computer-assisted coding (CAC) tools where possible. Conduct audits to catch habitual undercoding or upcoding issues.
Review documentation for completeness and compliance: Implement a structured documentation review process that checks for missing modifiers, incomplete notes, or vague medical necessity indications.
Maintain an up-to-date credentialing process for all providers: Credentialing delays are a silent killer of revenue. Use centralized credentialing software to track re-attestation timelines, expirations, and payer-specific requirements.
3.3 Back-End Enhancements
Strong follow-through on claims and patient balances helps convert receivables into cash. This stage often reveals the impact of process breakdowns earlier in the cycle.
File claims within payer-specific timelines: Late filings often result in irreversible denials. Set up automated claim submission workflows that ensure daily or real-time transmissions to payers.
Track denials and rejections; initiate appeals promptly: Use denial management tools to categorize and analyze rejections, enabling fast correction and resubmission. Prioritize high-value claims.
Segment A/R by aging buckets and assign clear follow-up responsibility: Break down receivables by 0–30, 31–60, 61–90, and 90+ days. Assign team members or vendors to focus on each bucket and measure performance.
Establish write-off and collections policies for aged claims: Define when to escalate to collections, when to issue final statements, and when to write off balances to avoid bloated A/R that distorts financial metrics.
4. Leveraging Technology and Outsourcing
Technology and strategic outsourcing have become critical enablers of efficient A/R management. Leveraging these solutions can streamline repetitive tasks, ensure accuracy, and accelerate collections across the revenue cycle.
Automate Eligibility Verification with RCM Tools: Real-time eligibility verification tools reduce manual work and prevent denials by validating patient coverage before the appointment. These systems can be integrated with scheduling platforms and EHRs to flag inactive policies or high-deductible plans early.
Use Clearinghouses for Claims Management and Edits: Clearinghouses act as intermediaries between providers and payers, checking claims for errors before submission. This reduces rejection rates and shortens the claims cycle. Most clearinghouses also offer built-in analytics, remittance tracking, and status alerts to ensure timely resolution.
Outsource A/R Follow-Up to Trained Teams: Managing aging claims in-house can strain internal resources. Outsourcing to specialized A/R follow-up teams ensures dedicated focus on unpaid claims, especially in aging buckets >60 or >90 days. These teams bring payer expertise, appeal strategies, and scalable capacity to improve recovery rates.
Leverage Analytics Platforms to Track Trends and Payer Performance: Advanced analytics solutions enable real-time visibility into A/R metrics, denial trends, and payer-specific delays. Dashboards and predictive models can help prioritize follow-up, identify bottlenecks, and forecast cash flow more accurately.
When implemented strategically, these tools and partnerships free up internal staff to focus on patient care and high-value tasks while ensuring timely, accurate collections. The result is a smarter, more responsive revenue cycle operation.
5. KPI-Driven A/R Management
Using Key Performance Indicators (KPIs) allows organizations to gain real-time insights into their A/R performance and take informed, proactive steps to improve revenue flow. By monitoring these metrics consistently, practices can identify inefficiencies, celebrate improvements, and hold teams accountable.
Monitor A/R by payer, provider, and specialty: Break down A/R data to pinpoint high-performing areas and problem segments. For example, if one payer consistently shows longer payment cycles, this could indicate contract issues or claim denial patterns that require targeted intervention.
Regularly review performance against internal and industry benchmarks: Comparing your current A/R days and other financial metrics to both internal historical data and MGMA or HFMA benchmarks helps you determine if you're improving or falling behind. Use this insight to adjust staffing, workflows, or payer strategies.
Use dashboards to highlight bottlenecks and success stories: Real-time dashboards bring visibility into trends, such as increasing denials, delayed follow-ups, or claims stuck in the system. They also help identify teams or individuals excelling in collections, enabling knowledge-sharing and morale boosts.
Drill down into claims >90 days to prioritize recovery: Claims older than 90 days typically represent revenue at risk. Segment these by payer, claim type, or reason for non-payment, then assign ownership and escalation pathways to recover what would otherwise become bad debt.
Establishing a strong KPI framework transforms A/R management from a reactive process into a strategic function, enabling continuous performance improvement and long-term financial health.
6. Role of Policy and Governance
Strong governance frameworks and clear financial policies are critical to achieving sustained improvement in A/R performance. Without defined rules, consistent training, and leadership oversight, even the best-intended A/R processes may falter.
Draft Clear A/R and Collections Policies: Establish comprehensive guidelines that detail how and when follow-ups, appeals, write-offs, and patient collections should be handled. Policies should be authored or reviewed by the CFO or revenue cycle leadership to align with organizational goals and compliance standards.
Standard Operating Procedures (SOPs) and Staff Training: Develop SOPs for all major A/R activities and ensure they are communicated to billing staff, front-office personnel, and clinical teams. Conduct routine training sessions and refreshers to reinforce best practices and onboard new team members effectively.
Monthly Process Audits and Compliance Reviews: Schedule recurring audits to ensure adherence to defined workflows. These audits can reveal systemic issues such as delayed claim submissions or missed follow-ups and allow leaders to take timely corrective action.
Performance Monitoring and Accountability: Use performance dashboards and scorecards to measure individual and team effectiveness. Key metrics might include claim submission turnaround time, denial resolution rates, and average days in A/R by employee or unit. Recognize top performers and address areas of underperformance through coaching and intervention.
Cross-Departmental Alignment: Involve stakeholders from finance, operations, clinical, and IT departments in policy development and performance reviews. This holistic approach ensures that governance isn’t just top-down but operationally embedded.
By institutionalizing policies and empowering teams with training, oversight, and metrics, organizations can foster a culture of accountability that reduces A/R days and drives revenue integrity.
7. Clinician Engagement & Feedback Loops
The clinical team plays a critical role in the success of the revenue cycle, particularly in documentation and coding accuracy. Engagement with physicians and other providers is vital to reducing denials, improving claim quality, and ultimately shortening A/R cycles.
Educate physicians on documentation best practices: Many claim denials are the result of insufficient or unclear documentation. Conduct regular training sessions to help clinicians understand what is needed from a documentation and compliance perspective, including how to capture relevant diagnosis codes, modifiers, and medical necessity.
Review common denial reasons with clinical teams: Share periodic reports outlining top denial reasons tied to clinical documentation, such as missing elements or vague language. Use these insights as teaching moments to promote documentation improvements.
Share feedback on documentation deficiencies: Establish a feedback loop between coding, billing, and clinical teams. When errors or omissions are identified, provide timely, constructive feedback so providers can make corrections and avoid recurrence.
Reward improvement in coding accuracy and documentation: Recognize providers who consistently demonstrate strong documentation practices. This could be through shoutouts during team meetings, performance dashboards, or small incentives. Celebrating improvements reinforces desired behaviors and motivates others.
Foster collaboration between coders and clinicians: Encourage open communication so that coders can clarify uncertainties and clinicians feel supported in documenting care more effectively. Consider appointing documentation champions or liaisons within specialty teams.
By building mutual understanding and collaboration between clinical and revenue cycle teams, organizations can significantly reduce preventable denials, improve coding precision, and ensure faster, cleaner reimbursements.
Educate physicians on documentation best practices
Review common denial reasons with clinical teams
Share feedback on documentation deficiencies
Reward improvement in coding accuracy and documentation
8. Case Study
Example: A multi-specialty practice reduced A/R days from 55 to 33 within 4 months by outsourcing A/R follow-up, deploying automated eligibility tools, and tightening front-end workflows. Collections improved by 22%, and claim rejections dropped by 35%.
9. Conclusion
Improving your Days in A/R is not just about chasing payments—it's about building a robust, agile, and accountable revenue cycle. With the right combination of process discipline, technology, and cross-functional collaboration, reaching or exceeding the MGMA benchmark is entirely achievable.
Partnering with a specialized revenue cycle services firm like MBW RCM can accelerate your journey. Contact us today to find out how we can help you reduce A/R days and improve financial performance.
For more insights, visit www.mbwrcm.com and schedule a consultation with our experts.
