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Understanding Accounts Receivable (AR) in Medical Billing: A Complete Guide for Healthcare Professionals

Efficient revenue cycle management is vital for the financial stability of any medical practice or healthcare facility. At the heart of this process is Accounts Receivable (AR), a key metric that tracks payments owed to providers for services already rendered.

Managing AR effectively whether from insurance payers or patients is essential for maintaining steady cash flow, reducing delays, and ensuring timely reimbursement. This guide will explain what AR is in medical billing, why it’s important, how it’s measured, and the strategies healthcare organizations can use to optimize collections.

What is AR in Medical Billing?

Accounts Receivable (AR) refers to the money owed to a healthcare provider for services rendered but not yet paid. These outstanding balances can come from either insurance payers or patients. Simply put, AR is the money that is “in transit”  billed but not yet collected.

In Revenue Cycle Management (RCM), AR is a vital KPI (Key Performance Indicator) that reflects how effectively a practice converts billed services into revenue. A high AR balance often signals delays or inefficiencies in billing, whereas a lower AR indicates timely reimbursement and effective processes.

Why AR is Critical in Medical Billing?

Proper AR management is foundational to a practice’s financial stability. Here’s why it matters:

• Cash Flow Management: AR represents pending income. Delayed collections can strain operations and restrict investment in staff, technology, or patient care.

• Financial Forecasting: AR trends provide insight for budgeting, staffing, and service expansion.

• Claims Accuracy: A growing AR can signal coding errors, claim rejections, or lack of timely follow-up.

• Compliance & Efficiency: Accurate AR reporting supports regulatory compliance and streamlines operations.

In short, effective AR management reduces revenue leakage, accelerates collections, and ensures long-term sustainability.

Types of AR in Medical Billing

AR in medical billing generally falls into two categories, each requiring specific strategies:

1. Insurance AR:

   • Money owed by insurance companies after claims are submitted.

   • Delays may occur due to pending reviews, claim denials, coordination of benefits (COB) issues, or incorrect patient/policy details.

2. Patient AR:

   • Balances owed directly by patients after insurance processing.

   • Includes co-pays, deductibles, non-covered services, and payment plans.

Modern billing software often allows categorization of AR by payer type to streamline follow-ups and collections.

What are AR Days in Medical Billing?

AR Days (Days in Accounts Receivable) measures the average number of days it takes a provider to collect payment after services are rendered.

Formula:

AR Days=Total ARAverage Daily Charges\text{AR Days} = \frac{\text{Total AR}}{\text{Average Daily Charges}}AR Days=Average Daily ChargesTotal AR​

Example:

• Total AR: $120,000

• Average Daily Charges: $4,000

AR Days=120,0004,000=30 days\text{AR Days} = \frac{120,000}{4,000} = 30 \text{ days}AR Days=4,000120,000​=30 days

Benchmark for AR Days:

• Excellent: < 30 days

• Acceptable: 30–40 days

• Needs Improvement: 40+ days

Regular monitoring helps identify inefficiencies and opportunities to accelerate collections.

Understanding AR Aging

AR Aging categorizes unpaid balances by how long they’ve been outstanding, helping billing teams prioritize follow-ups and flag long-standing issues.

Common AR Aging Buckets:

• 0–30 Days: Recently billed; usually no action needed.

• 31–60 Days: Begin first follow-up.

• 61–90 Days: Higher risk; increased follow-up required.

• 91–120 Days: Critical follow-up needed.

• 120+ Days: Often “at risk” or potential write-offs.

Sample Aging Report:

A high percentage in the 120+ days bucket signals an urgent need to improve billing processes.

Common Reasons for High AR

High AR balances often point to inefficiencies in the billing cycle:

1. Claim Denials or Rejections: Coding errors, missing documentation, or incorrect patient data.

2. Inadequate Follow-Up: Delays in communicating with payers or patients.

3. Eligibility Verification Issues: Unverified insurance coverage leading to denied claims.

4. Patient Non-Responsiveness: Patients unaware of balances or unable to pay.

5. Incomplete Documentation: Missing clinical information slowing claim approvals.

Tip: If over 25% of AR is in the 90+ day range, your practice may be losing significant revenue.

Strategies to Reduce AR

Reducing AR is about working smarter, not just faster.

• Submit Claims Promptly: Within 24–48 hours of service delivery.

• Automate Eligibility Checks: Verify insurance coverage before appointments.

• Use Claim Scrubbers: Detect errors before submission.

• Prioritize Follow-Ups: Focus on 31–90 day balances.

• Enhance Patient Communication: Timely statements, digital payment options, and clear billing explanations.

• Invest in Staff Training: Minimize errors at the source through regular training.

Key AR Metrics to Track

Monitoring KPIs ensures AR strategies are effective:

Regular review helps identify gaps and improve collection efficiency.

Who Manages AR?

AR management is a team effort:

• AR Specialists: Handle claim follow-ups, denials, and collections.

• Billing Managers: Oversee revenue cycle performance.

• Coders: Ensure accurate coding for maximum reimbursement.

• Patient Services Team: Manage statements, payment plans, and inquiries.

Large practices may outsource AR management to third-party billing companies for efficiency.

Tools for Managing AR

Modern technology can simplify AR tracking and collections:

Features to Look For:

• Real-time AR dashboards

• Automated claim status updates

• Denial management workflows

• Aging reports by payer/service

• Patient payment portals

Popular Tools:

• AdvancedMD

• Kareo

• Athenahealth

• eClinicalWorks

• DrChrono

Choose software that integrates with your EHR and offers detailed AR reporting.

Outsource AR with Staffingly

Managing AR in-house can be time-consuming and resource-heavy. By outsourcing AR to Staffingly, healthcare providers can reduce their administrative workload while cutting costs by up to 70%. With expert teams and advanced technology, Staffingly ensures faster collections, fewer denials, and a smoother revenue cycle  so your staff can focus more on patient care.

What Did We Learn?

Accounts Receivable is more than just a number  it reflects your practice’s financial health and operational efficiency. By understanding AR, identifying its causes, and implementing smart strategies, healthcare providers can accelerate reimbursements, reduce revenue leakage, and improve profitability. Effective AR management is key to sustaining a thriving, financially healthy medical practice.

What People Are Asking?

 What is AR in medical billing?
AR (Accounts Receivable) is the money a healthcare provider is owed for services already delivered but not yet paid.

 What are AR days?
AR days measure how many days, on average, it takes to collect payments after billing.

 Why is AR important in healthcare?
It ensures steady cash flow, reduces revenue loss, and improves financial planning.

 What causes high AR balances?
Common causes include claim denials, coding errors, delayed follow-ups, and patient non-payment.

 How can providers reduce AR?
Submit claims quickly, verify eligibility, use claim scrubbers, follow up regularly, and improve patient billing communication.

Disclaimer

For informational purposes only; not applicable to specific situations.

For tailored support and professional services

Please contact Staffingly, Inc. at (800) 489 5877

Email: support@staffingly.com

About This Blog: This Blog is brought to you by Staffingly, Inc., a trusted name in healthcare outsourcing. The team of skilled healthcare specialists and content creators is dedicated to improving the quality and efficiency of healthcare services. The team passionate about sharing knowledge through insightful articles, blogs, and other educational resources.