How to reduce accounts receivable in a medical practice

The fastest way to reduce accounts receivable is to sort every open claim by payer and age, work the highest dollar and most time-sensitive claims first, and give each one a clear next action: corrected claim, appeal, status check, records submission, transfer to patient or write-off. That clears the backlog. Keeping A/R low after that depends on fixing the reasons claims age: slow charge entry, rejections nobody works, the same denials repeating, and patient balances that should have been collected at the visit.

This guide walks through how to measure A/R, how to work it down, and the process changes that stop it from building again.

Start by measuring the right numbers

Total A/R in dollars does not tell you much on its own, because it grows as the practice grows. Use these instead:

• Days in A/R. Total A/R divided by average daily charges. A common method is to take gross charges for the last three months, divide by the number of days in that period to get average daily charges, then divide total A/R by that figure.
• Percentage of A/R over 90 days. Insurance balances older than 90 days are much harder to collect, and many are close to a filing or appeal deadline.
• A/R by payer. One payer often accounts for a large share of old balances, which points to a specific issue like a credentialing gap or a recurring denial.
• Insurance A/R vs. patient A/R. They need different work and should be tracked separately.

Many practices aim for days in A/R under roughly 40 and keep insurance A/R over 90 days to a small share of the total, but the right target depends on your specialty and payer mix. A practice with heavy Medicaid managed care or workers' compensation volume will run longer than a primary care office with mostly commercial and Medicare patients. Trend matters more than a single benchmark. If days in A/R rises three months in a row, something changed.

How to work A/R by aging bucket

Step 1: Clean up the 0 to 30 day bucket first

It sounds backwards, but new A/R becomes old A/R if nobody watches it. Confirm that each claim submitted in the last month was accepted by the clearinghouse and the payer. A rejected claim never entered the payer's system, so it will sit with no activity until someone finds it. Reviewing the rejection report every working day is one of the cheapest fixes available.

Step 2: Sort older A/R by payer, dollar amount and deadline

Pull an aging report by payer and sort claims over 60 days by balance. Work the larger balances first, but flag any claim close to a filing or appeal deadline so it moves to the top regardless of size. For Medicare, the initial claim must be filed within 12 months of the date of service, and a redetermination request is due within 120 days of receiving the initial determination. Commercial and Medicaid deadlines vary by contract and state, so keep a list of each payer's limits. Our guide to timely filing limits by payer explains how to track them.

Step 3: Give every claim a next action and a date

An A/R worklist where claims are only "noted" does not move. Each claim should leave the review with one specific action and a follow-up date:

• Corrected claim when the original had a coding, modifier or demographic error, using the payer's replacement claim process (frequency code 7 for most electronic claims)
• Appeal when the claim was correct and the denial was wrong
• Records submission when the payer requested notes
• Bill another payer when coverage was primary elsewhere or a secondary was never billed
• Transfer to patient when the payer applied the balance to deductible or coinsurance
• Write-off only with a reason code that shows why, so the pattern can be tracked

Step 4: Find the root cause by payer

When one payer holds a large share of old claims, look for a single cause. Common ones include a provider who was never linked to the group contract, an incorrect billing address on file with the payer, a missing ERA enrollment that makes payments hard to match, or a policy change for a frequently billed code. Fixing one setup issue can release dozens of claims at once. If the cause is enrollment, our credentialing and payer enrollment page explains how that work is handled.

Step 5: Stop denials from repeating

Most A/R over 60 days started as a denial or a rejection. Track denials by claim adjustment reason code (CARC) and remark code each month. If CO-16 for missing information, CO-197 for missing authorization or CO-109 for the wrong payer show up again and again, the fix is upstream at the front desk or in charge review. See our list of common claim denial reasons for what each code usually means and how to prevent it.

Step 6: Submit claims faster

A/R starts aging on the date of service, so each day between the visit and claim submission adds to days in A/R. Set a rule that notes are signed within 24 to 48 hours, reconcile charges against the schedule daily, and submit claims as soon as charge review is done. Practices that batch claims weekly carry several extra days of A/R all the time.

Step 7: Collect patient balances at the visit

Patient A/R grows quickly with high deductible plans. Verify eligibility and benefits before the visit, collect copays and known prior balances at check-in, give a cost estimate when the deductible has not been met, and offer online payment. Statements should go out on a fixed schedule with a clear amount due and a simple way to pay. Follow your written financial policy for payment plans and collection referrals so patients are treated consistently.

Step 8: Review the work every week

A weekly A/R meeting, even 20 minutes, keeps things moving. Review:

• Days in A/R and the over 90 day percentage, compared with last month
• The five payers with the most dollars over 60 days
• Top denial reasons and what was changed to prevent them
• Claims approaching a filing or appeal deadline
• Write-offs by reason

When old A/R needs a dedicated project

If a large share of A/R is past 120 days, daily staff usually cannot catch up while also handling new claims. That is when practices bring in a separate team for an A/R cleanup project. The team works the old claims while your regular staff keeps current claims moving, and the project should end with a list of the root causes found so they do not create a new backlog.

Mistakes that keep A/R high

• Rebilling the same claim without checking status, which leads to duplicate claim denials (CO-18)
• Writing off small balances without looking for a pattern
• Waiting for the 90 day report before following up
• Letting secondary claims sit after the primary pays
• Working claims in date order with no attention to payer deadlines

How SFA can help

SFA's A/R recovery and denial management teams work aging claims by payer and deadline and report the root causes back to your practice. Our published results include up to 40% A/R reduction in selected client results, and results depend on your starting point, payer mix and specialty. A free practice audit is a good first step: we review your billing and walk you through where revenue may be slipping.

Frequently asked questions

What is a good days in A/R for a medical practice?

Many practices aim for under roughly 40 days, with a small share of insurance A/R older than 90 days. The right target depends on specialty and payer mix, so track your own trend month to month.

How do you calculate days in A/R?

Divide gross charges for a recent period, often three months, by the number of days in that period to get average daily charges. Then divide your current total A/R by that average daily charge figure.

Should old A/R be written off?

Only after the claim has been worked and no further action is possible, such as a missed deadline with no proof of timely filing. Record a write-off reason on each one so you can see patterns and prevent them.