Days in accounts receivable is one of the most commonly quoted measures in long-term care finance. It is intended to answer a simple question: on average, how many days of revenue are tied up in unpaid claims? In practice, different people calculate it differently, which makes comparisons unreliable and conversations frustrating.
This post covers how to define and calculate days in A/R consistently, how to read the trend and what to do when it moves. Your finance team may have its own conventions, and the most important point is to pick one and apply it the same way every time.
The basic idea
A common approach divides the total outstanding receivable balance by average daily revenue over a chosen period. If your balance is large relative to the revenue you earn each day, it takes longer for cash to arrive. Be sure to define:
- Which balances are included, such as all payers or specific classes, and whether contractual adjustments are accounted for.
- Which revenue period is used, such as the last 30, 60 or 90 days, or a rolling average.
- How to treat private pay and other categories.
Document the definition and keep it constant. If you must change it, note the date and recalculate prior periods for comparison.
Why payer-level views matter
An overall number can hide very different realities. Medicare, Medicare Advantage, Medicaid, managed care and private pay each have their own typical timing. Calculating days in A/R by payer reveals which classes are lengthening and which are steady. A rise in the overall figure may come from a single plan.
Trend, not snapshot
A single month tells you little. Plot days in A/R over many months and look for:
- Gradual drift upward, which may point to slower billing, payer delays or growing unworked balances.
- Sudden jumps, often linked to a specific event such as a system change, staff turnover in the business office or a new payer process.
- Seasonal patterns, which may reflect predictable payer or calendar effects.
- Improvement after a process change, which tells you what works.
Pair it with supporting measures
Days in A/R is an outcome. To understand it, view alongside the drivers:
- Days from service to billing.
- Denial rate and top reasons.
- Clean claim rate, if your system tracks it.
- Percentage of balances in older buckets.
- Cash collected versus billed.
When days in A/R moves, these measures often explain why.
What to do when it moves up
Resist the urge to demand a quick fix. Instead, investigate:
- Identify the payer or payers responsible.
- Check billing timeliness. Did claims go out later than usual?
- Review denials. Are there new reasons or increased volume?
- Review unworked accounts. Are there balances without recent activity?
- Look for external causes, such as payer system changes or processing delays.
Then assign owners and dates. Follow up weekly until the trend turns.
Interpret improvements carefully
If days in A/R falls, make sure the improvement is real. A decrease might come from collecting older balances, which is good, or from write-offs that reduce the receivable without producing cash, which warrants a different view. Looking at cash collected alongside helps verify.
Communicate clearly
Share the measure with the business office team in a way that emphasizes learning. Business office staff often manage complex work with limited tools. Presenting data as a way to identify obstacles, rather than a scoreboard, builds partnership.
A hypothetical example
Imagine a hypothetical building whose overall days in A/R rises over three months. Breaking it out by payer, the team finds that nearly all of the increase comes from one managed care plan, tied to an authorization documentation issue. After correcting the process and following up on aged claims, the number begins to fall. The overall figure had signaled a problem, but the payer breakdown showed where it was.
Make it part of the monthly package
Include days in A/R, by payer, with trend lines and the supporting measures, in your monthly financial review. Keep definitions on the page so everyone reads the numbers the same way.
CarePulse Analytics calculates days in A/R and its drivers from billing and EHR data, and updates them automatically so definitions stay consistent. If you would like to see what that looks like with your own numbers, we can arrange a demo.