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Throwback Thursday: What’s the Right Days A/R Goal for Your Practice?

In this installment on our blog, we are reaching into our archives to bring you some of our best and brightest blogs from over the years. Stay tuned every Thursday for more blast from the past blogs and articles that continue to hold keys to your practice success.

As far as physical therapy billing and physical therapy practice management go, having a high or low Days A/R metric, and determining whether or not it’s good or bad, depends on your practice. While it can be a good indicator for your cash flow over time, there are some important considerations to apply when determining the right A/R range for your practice.

How do you determine your Days A/R?

Technically, Days A/R represents the number of days of revenue that is tied up in accounts receivable – essentially the number of days of uncollected revenue you have. It’s important to know though that the metric by itself doesn’t tell you a whole lot because the payer mix of your practice will greatly influence your expectations of this metric. It is very important to understand your payer mix and collection cycle first. Establish an appropriate A/R goal and then compare your actual results with your goal. 45 days might be a good average goal that meets industry standards, but it may not be the right goal for your practice and it might just be unattainable.

For example, if you service a high mix of workers compensation payers that typically have longer payment cycles, then 45 days might be the right goal or it might even be too low – it’s important not to set yourself up for failure here. On the other hand, if you service a high mix of patients with standard commercial insurance coverage, or even Medicare, you can collect much more quickly if you submit clean claims and 45 days might be too high. Understanding your payer’s payment practices and setting appropriate goals based on these practices is very important.

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As we’ve mentioned in other A/R resources, the most important thing is to measure your Days A/R and compare it to your goal. If your Days A/R metric is climbing and/or higher than your goal, you could very well have a problem. If your Days A/R is lower than your goal, then take a look at your goal. It is always important to set goals that are aggressive and achievable with the right effort. Sometimes the industry standard goal of 45 days might be letting your billing and collection department off too easy!

Of course, you have to have the right system to effectively manage your A/R. Since Clinicient has been managing over $100 million annually in billing and collections for hundreds of physical therapy practices for over a decade, we believe our system is one of the best in the market to help your entire staff manage their revenue cycle. Days A/R is just one key metric we measure to ensure each claim is billed and paid as accurately and quickly as possible.  To learn more about how our system is uniquely set up to manage revenue cycles, contact us and we’ll set you up with a demo.

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