Days in Accounts Receivable

As a pediatric practice, it is crucial to keep track of your financial health, and one of the key performance indicators (KPIs) that can help you do that is Days in Accounts Receivable (DAR). DAR measures the average number of days it takes for a practice to receive payment for services rendered. 

Here are some reasons why tracking DAR is essential for a pediatric practice:

1. Cash flow management: DAR helps you understand how long it takes for your practice to receive payment for services rendered. A high DAR means your training is waiting longer to receive payment, impacting your cash flow and ability to pay expenses. By tracking DAR, you can identify areas where you can improve your billing and collections processes to shorten the payment cycle.

2. Revenue cycle management: DAR is a critical component of revenue cycle management. By tracking DAR, you can identify trends and patterns in your billing and collections processes. For example, if your DAR is consistently high for a particular payer, you may need to adjust your billing processes or negotiate better payment terms.

3. Patient satisfaction: A high DAR can also impact patient satisfaction. Patients may become frustrated if they receive bills for services rendered several months ago, affecting their perception of your practice. By tracking DAR and improving your billing and collections processes, you can help ensure patients receive timely and accurate bills.

4. Compliance: DAR is also an essential metric for compliance purposes. Medicare and other payers have specific guidelines for when claims must be submitted. By tracking DAR, you can ensure that your practice meets these guidelines and avoids potential compliance issues.

In summary, Days in Accounts Receivable is a critical KPI for pediatric practices. Tracking DAR can improve your cash flow, revenue cycle management, patient satisfaction, and compliance. If your DAR is consistently high, it may be time to review your billing and collections processes and make adjustments to improve efficiency.

So how do you calculate this critical number, and when? 

• Take the total charges for at least 30 days and divide by 30. That is called the average daily charges. Then divide your entire account receivable by your average customary charges.

• Make a linear graph of the results once a month and follow the trend.

What is my number, 

• Great Companies like Greece Pediatric Medicine and Pediatrust are at or below 20 days in accounts receivable. 

• Anything greater than 35 indicates a severe problem with your finance department, particularly the Revenue Cycle Management. 

Actionable Steps 

• Measure your DAR Monthly 

• If you are at DAR more than 35 take action and call a consultant 

• Make sure your in-house and outsourced billers understand this expectation from the beginning