Analyzing Accounts Receivable Greater than 120 Days: Implications for Healthcare Revenue Cycle Efficiency

Accounts receivable greater than 120 days means patient bills or insurance claims not paid within 120 days after the service was given. This number shows how well a healthcare group is doing with money and billing. Experts say the amount of A/R older than 120 days should be less than 12 to 25 percent of all receivables, and best if under 12 percent. If the number is higher, it may mean problems with collecting payments, billing, or claims.

A survey by the Medical Group Management Association (MGMA) shows the average A/R over 120 days is about 13.54 percent. This means payments are late, which can make it hard for medical groups to pay bills. When a lot of money is tied up in old receivables, cash flow gets stretched, making it tough to pay things like worker salaries or buy medical supplies. People who run medical offices, own practices, or manage IT need to understand this number to keep the business running.

How Aged Receivables Affect Revenue Cycle Efficiency

Having many accounts receivable over 120 days often shows problems from earlier steps in the payment process. These can include claims being denied, wrong billing, late claim submissions, not enough patient payment communication, or delays from payers. If a healthcare group has too many old accounts, it might lose 5 to 15 percent of its yearly income because they don’t manage these receivables well.

The problems with poor management don’t just hurt money. They can also affect how happy patients are and the reputation of the providers. For example, high amounts of unpaid bills might leave less money to improve patient care or update technology. Also, if billing is slow or confusing, patients may get upset. One study found that about 69 percent of patients might change doctors because of money problems.

It is important to have good workflows. This means checking insurance on time, sending claims correctly, and handling denials quickly. Studies say that checking insurance before service can lower unpaid care, which in the U.S. reached $41.6 billion according to the American Hospital Association.

Key Performance Indicators Related to Aged Accounts Receivable

Managing accounts receivable needs watching several related metrics to know how money flows and billing works. Important indicators linked to A/R over 120 days include:

• Days in Accounts Receivable (A/R Days): This measures how many days it usually takes to collect payments. The goal is 30-40 days, and no more than 50 days. Skilled nursing centers should aim for 40-45 days.
• Denial Rate: This shows the percent of claims that get denied. Usually between 5 and 10 percent. Keeping denials under 5 percent is better. Each denied claim can add to the payment delay and increase old receivables.
• Adjusted Collection Rate: This shows what percent of total possible money was collected. A good rate is 95 to 99 percent.
• Percentage of Accounts Receivable Over 90 or 120 Days: Claims older than these times mean there are problems that need fixing.
• Cost to Collect: This measures how much it costs to collect payments. The goal is to keep this under 10 percent of collections to avoid losing profits.

By watching these metrics all the time, healthcare managers can find bottlenecks, pick important claims to appeal, and get better collections. This can lower the amount and age of unpaid bills.

Causes of Aged Accounts Receivable Over 120 Days

Many things cause old receivables to build up:

• Insurance Verification Errors: Without checking insurance first, claims are more likely to be denied or take longer.
• Claims Submission Errors: Wrong codes, missing documents, or incomplete info can cause claims to be rejected.
• Delayed Claims Submission: Sending claims too late increases payment time and may cause arguments with payers.
• Inadequate Denial Management: Not tracking or appealing denied claims makes payments take longer and lowers revenue.
• Patient Payment Challenges: Not clearly telling patients about their payment responsibilities can delay receiving money.
• Manual Processes: Handling claims and payments by hand can cause errors, slow work, and late collections.

Each cause can make the number of unpaid days go up and push more claims into the old receivable category.

Strategies to Reduce Aged Accounts Receivable

To lower A/R over 120 days, healthcare groups need to use several methods:

• Streamline Billing and Coding: Make sure coding and claim checks are correct before sending claims to avoid denials.
• Perform Timely Follow-Ups: Regularly check with payers and patients to fix unpaid balances faster.
• Denial Analysis and Appeals Management: Focus on the biggest denials and main payers. About 20 percent of payers cause 80 percent of denials, so work on these cases first to get money back.
• Insurance Eligibility Verification: Check insurance before services to lower unpaid claims and reduce free care.
• Use Aging Reports Regularly: Automatically making A/R aging reports helps find claims overdue by 90 or 120 days and focus collection efforts.
• Staff Training and Process Optimization: Train billing teams often on rules, best ways to send claims, and denial handling.
• External Partnerships: Using outside companies for tasks like denial work, claim processing, and payment posting can make work faster and better. Some companies show they can lower denials and reduce A/R days with automation and expertise.

Applying these steps can speed up cash flow and lower risks connected with old unpaid bills.

Leveraging AI and Workflow Automations in Revenue Cycle Management

Technology helps fix problems that cause old accounts receivable. Artificial intelligence (AI) and workflow automation tools are now important in healthcare money management.

AI in Denial Management: AI systems look at denied claims to find common mistakes like wrong codes or missing info. They suggest fixes and automate resubmission. This speeds up claim handling and lowers denial rates to under 5 percent.

Automated Claims Processing: Automation software makes claims faster by creating, sending, and matching claims. This cuts down errors and speeds up billing. It helps reach the goal of 30-40 days in A/R.

Accounts Receivable Aging Reports: Automated A/R reports let billing teams follow unpaid claims, prioritize actions, and catch overdue accounts. This is very helpful for busy practices where manual tracking is hard.

Patient Financial Communications: AI chatbots and automated messages improve communication by clearly explaining bills and offering payment plans. This helps collect more patient balances, which usually is about 57 percent.

Workflow Automation for Follow-Ups: Automated processes send unpaid claims to the right staff for review or next steps. This keeps accounts under control with timely actions. Using a “Triple Check” review with automated alerts helps avoid errors before claim submission.

Risk Analysis by Payer: AI tools study payer behaviors to find those causing delays or denials often. This helps managers focus on the most important problems.

These tools not only improve accuracy and speed but also reduce the work for staff. This lets skilled workers focus on tougher problems and strategy.

Implications for Healthcare Providers in the United States

The U.S. healthcare system has many payers like Medicare, Medicaid, private insurers, and self-paying patients. Each one pays differently and has its own rules. This makes money management harder and needs careful KPI tracking.

For places caring for long-term patients or skilled nursing, a Days Sales Outstanding (DSO) of 40-45 days is okay, but 30-40 days is better. Sometimes Medicare and Medicaid take longer, making receivables older.

Hospitals and clinics have strong pressure to lower unpaid care and old accounts. The American Hospital Association says unpaid care costs $41.6 billion each year. Good accounts receivable management can cut these losses by finding problems early and making collections easier.

Also, the U.S. medical billing outsourcing market was worth $5.7 billion in 2023 and is growing fast at almost 12% per year. Many healthcare groups now use outside companies with automation to improve their money operations.

Final Thoughts for Medical Practice Administrators, Owners, and IT Managers

Watching and managing accounts receivable over 120 days is an important part of running healthcare money systems well. Practices should track this number along with denial rates, collection rates, and A/R days to see how they are doing financially.

Improving these numbers needs correct billing, good denial handling, quick follow-ups, clear patient money talks, and most important, using technology like AI and automation to streamline work.

With hard work and good technology, medical managers, owners, and IT staff in the U.S. can improve cash flow, lower lost money, and keep operations steady in a complex healthcare system.

Keeping a strong focus on aged accounts receivable and adding automated tools helps healthcare groups of all sizes manage their money better and lower risks from slow payments.