A Comprehensive Guide to Benchmarking Accounts Receivable Over 120 Days KPI for Improved Financial Health in Clinics

Accounts Receivable Over 120 Days means the percent of unpaid bills or patient balances that have not been paid for more than 120 days since the service was done. These old bills hold up money that the clinic needs. This can make it hard for the clinic to pay for daily work or grow.

According to the Medical Group Management Association (MGMA), the average number of accounts receivable older than 120 days is about 10 to 15 percent. The best clinics keep this number below 10 percent. This shows that their billing and collections are faster. Clinics with more unpaid bills need to find problems in their billing processes or follow-up steps that make payments slow.

Why Benchmarking Accounts Receivable Over 120 Days Matters

Benchmarking means comparing a clinic’s current numbers to national or regional standards. It helps to see if a clinic is doing well or not.

Key reasons why benchmarking AR over 120 days is important include:

• Cash Flow Management: High old receivables reduce the money available for daily expenses like payroll, supplies, and maintenance.
• Operational Efficiency: High AR over 120 days may show problems in billing like slow claim submissions, coding mistakes, or poor follow-up.
• Revenue Leakage Prevention: When payments take longer than 120 days, they might never be paid, which lowers the clinic’s income.
• Informed Decision-Making: Benchmarking gives data that helps managers plan things like training, upgrading systems, or changing processes.
• Compliance and Reporting: Keeping financial numbers within standards helps meet rules and shows clear finances to others.

Jean Lee, managing editor at The Intake, says that constant KPI benchmarking turns data into helpful information by a cycle of measuring, comparing, acting, and repeating. This helps clinics find problems and use resources better.

Common Causes of Elevated Accounts Receivable Over 120 Days

A high number of old accounts receivable happens because of many reasons that clinics must watch closely. Some common causes include:

• Coding or Documentation Errors: Wrong or missing medical codes can cause claims to be rejected. Around 30% of healthcare claims get denied because of such errors.
• Late Claim Submission: Sending claims to insurance companies late makes payments take longer, causing old bills.
• Insufficient Insurance Verification: Not checking if a patient’s insurance is valid before service can lead to unpaid claims or longer appeals.
• Ineffective Denial Management: If denied claims are not checked and sent again quickly, unpaid amounts pile up.
• Lack of Structured Follow-up: When staff don’t have clear rules or responsibility to follow up, overdue balances grow.
• Patient Payment Issues: Collecting from patients is tough. Only about 57% of patient balances billed after service are collected without payment plans or help.

Balaji Ramani, VP of RCM Research & Analyst at Plutus Health, says “Efficient AR management is necessary to keep cash flow smooth, cut costs, and get the most reimbursement.” Clinics with poor AR processes may lose 5 to 15 percent of their yearly income because of bad management.

Industry Benchmarks and Performance Metrics

In the U.S., clinics try to keep AR over 120 days below 10 to 15 percent to show strong billing systems. Other important benchmarks include:

• Days in Accounts Receivable (A/R Days): This is the average time to collect payments. The American Academy of Family Physicians suggests keeping this under 50 days, ideally between 30 and 40 days.
• Clean Claim Rate: The percent of claims sent without mistakes. About 98% is excellent and helps get payments quicker.
• Denial Rate: The percent of claims rejected by payers. Clinics try to keep this under 5%. Fewer denials means less old AR.
• First Pass Yield: This shows how many claims are paid the first time without extra work. The goal is above 95%.
• Cost to Collect: The cost to collect payments as part of total income. Clinics usually spend around 3% of collections on collecting.

The MGMA reports that better clinics collect much more AR in the first 30 days than average clinics. This helps keep old AR low.

Strategies to Reduce Accounts Receivable Over 120 Days

Reducing old receivables needs teamwork, better processes, staff education, and new technology. Clinics can use these methods to improve their AR:

• Check patient insurance before appointments to avoid claims that can’t be paid or delayed.
• Use software to send claims automatically and check for errors to speed up billing.
• Set up denial management to find why claims are denied and fix the issues quickly.
• Create patient payment plans to make it easier for patients to pay and reduce unpaid bills.
• Look at aging reports often to see which accounts need attention first.
• Train billing staff on payer rules, coding, and how to handle claims that don’t get paid fast.
• Make sure front office staff talk with patients about payment during scheduling.
• Analyze AR data by department or provider to find exact problem areas.

Jean Lee says “Tracking KPIs helps healthcare providers understand how they perform. It allows teams to make important decisions based on data and improve over time.”

Integration of AI and Workflow Automations in Accounts Receivable Management

In recent years, artificial intelligence (AI) and automation have become useful tools in making revenue cycle work better and lowering old AR.

Clinics in the U.S. can use these technologies in many ways:

• Automated patient reminders lower no-show rates by 30 to 50%. This helps keep revenue by preventing missed appointments.
• Digital bills and online payment sites speed up payments and lower patient balances owed.
• AI tools find errors in claims before sending, which helps claims get paid faster.
• Advanced software can predict why claims get denied and suggest fixes, helping speed up corrections.
• AI can manage routine claim follow-ups and payer communication to keep payments moving and reduce old AR.
• Automation can also check insurance coverage before services, saving time and avoiding denial of claims.

Andrew Hajde of MGMA says automation cuts down on manual work and errors. It also helps clinics check their KPIs often which allows faster decisions.

Medical practice leaders and IT managers need to think about adding these tools into their current systems like Electronic Health Records (EHR) and practice management software.

For example, Simbo AI offers tools that automate front office tasks like phone calls, insurance checks, and patient payments. This helps key workflows related to accounts receivable.

Real-World Impact of Effective AR Benchmarking and Management

When clinics carefully watch and benchmark AR data, they often see benefits like:

• More financial stability with fewer old unpaid bills, freeing up cash for daily needs.
• Less lost revenue by managing denials well and sending clean claims.
• Better patient experience with faster billing and clear communication about payments.
• Higher staff productivity because automation and good processes lower manual work.
• Confidence in compliance during audits and reports by keeping industry standards.

Balaji Ramani notes that managing AR well is “a complex process that needs constant review of workflows, data, and staff work to meet financial goals.”

Further Considerations for U.S. Clinics

Clinics in the U.S. face unique challenges like many insurance types, complex coding rules, and different types of patients. Because of this, clinics may need to change benchmarks based on:

• Medical Specialty: Different specialties have varying billing rules and payment rates. Using detailed benchmarking tools helps clinics check their finances more accurately.
• Location: Insurance agreements and patient insurance vary by region, so clinics tailor AR management locally.
• Practice Size and Ownership: Small and large clinics or groups use different metrics to fairly check AR and productivity.

By often using their own data with trusted sources like MGMA and government statistics, clinics keep their benchmarks current and correct.