Accounts Receivable in Medical Billing: How to Shrink Your AR Days
Accounts receivable (AR) in medical billing is the total amount of money your practice is owed for services it has already delivered but has not yet been paid for, whether that money is due from insurance payers or from patients. The longer those balances sit uncollected, the more strain they put on your cash flow and your ability to run the practice.
This guide explains what AR is, how to measure it with days in AR, what an aging report tells you, why AR days climb, and the practical steps that bring them back down.
What Is Accounts Receivable (AR) in Medical Billing?
Accounts receivable in medical billing is the outstanding balance owed to a practice for billed services that have not yet been paid. It covers two kinds of balances: insurance AR, which is money owed by payers on submitted claims, and patient AR, which is money owed directly by patients through copays, deductibles, coinsurance, and self-pay charges. Until that money is collected, it sits on your books as a receivable and is tracked inside your practice management or billing system.
In plain terms, AR is revenue you have earned but do not yet have in the bank. A claim you submitted last week, a patient statement that went out yesterday, and a denied claim you are appealing are all part of your accounts receivable. Managing AR well means turning those earned-but-unpaid balances into collected payments as quickly and as completely as possible.
Why Accounts Receivable Matters to Your Cash Flow
Accounts receivable directly determines how much of the money you have earned is actually available to operate your practice. Revenue only becomes usable once it is collected, so a large or slow-moving AR balance ties up cash you need for payroll, rent, supplies, and growth, even when your practice is busy and billing steadily.
Aging AR also tends to become uncollected AR. The older a balance gets, the lower the odds of ever collecting it, and balances that pass certain thresholds are often written off as bad debt. That makes AR one of the clearest signals of revenue cycle health. A rising AR balance usually means claims are going out late, getting denied, or simply not being followed up on, and each of those problems quietly reduces what your practice keeps.
How to Measure Accounts Receivable: Days in AR
Days in AR is the average number of days it takes your practice to collect payment after a service is billed, and it is one of the most useful numbers for tracking AR health. You calculate it in two steps:
- Average daily charges = (total gross charges for a period minus credits) divided by the number of days in that period
- Days in AR = total accounts receivable divided by average daily charges
For example, if your total AR is 90,000 dollars and your average daily charges are 3,000 dollars, your days in AR is 30, which means you collect in about 30 days on average.
Industry benchmarks give you a target to measure against. Days in AR under 40 is the most widely cited healthy benchmark, reflected in Medical Group Management Association (MGMA) Better Performer data, and most revenue cycle teams aim for a 30-to-40-day range. The metric itself is standardized by the Healthcare Financial Management Association (HFMA) as a MAP Key (Net Days in A/R, FM-1), which defines exactly how it is calculated. If your days in AR climbs well above the 30-to-40-day range, it usually points to slow claim submission, denials, or weak follow-up rather than a billing volume problem. Calculate the metric regularly, and break it down by payer and by provider to see where the delays are coming from.
What Is an AR Aging Report?
An AR aging report is a breakdown of your outstanding receivables grouped by how long each balance has gone unpaid, and it shows you exactly where collection is stalling. Balances are sorted into time buckets, typically 0 to 30 days, 31 to 60 days, 61 to 90 days, 91 to 120 days, and over 120 days.
A common benchmark is to keep more than half of your total AR in the 0 to 30 day bucket, with each older bucket holding progressively less. The share of AR older than 90 days is a key warning sign. A widely used rule of thumb is to keep AR over 90 days under roughly 10 to 15 percent of total AR, and a higher share usually points to a follow-up or denial problem. HFMA's MAP Keys define this aging-percentage metric itself (Aged A/R as a Percentage of Total A/R, AR-3). Once a balance passes 120 days, the chance of collecting drops sharply, which is why the oldest buckets deserve the most urgent attention.
Common Reasons Why AR Days Climb
AR days climb when money gets stuck somewhere between the patient visit and the final payment, and a handful of breakdowns cause most of it. The most common are:
- Claim denials and rejections that stall payment and require rework
- Inconsistent follow-up on unpaid claims, so balances simply age in place
- Eligibility and insurance verification errors caught only after the claim is denied
- Coding errors that trigger denials or underpayment
- Uncollected patient balances, especially copays and deductibles
- No set cadence for working the aging report
Many of these problems start at the front of the revenue cycle. Skipping insurance verification before a visit, or sending claims that are not clean through your claims submission process, creates denials that surface days or weeks later as aging AR. Even patient intake errors, such as an outdated insurance ID or a wrong date of birth, can hold up payment long enough to push a balance into an older bucket.
How to Shrink Your AR Days: A Step-by-Step Approach
Reducing AR days comes down to preventing avoidable delays at the front end and following up on every unpaid claim on a consistent schedule. The steps below address both:
- Verify eligibility before the visit. Confirming coverage, benefits, and authorization requirements up front prevents the denials that age into old AR. Insurance verification at intake is one of the highest-leverage fixes.
- Submit clean claims promptly. File claims within 24 to 72 hours of the visit and check them for coding and documentation errors before they go out, so they are paid on the first pass.
- Work the aging report on a set cadence. Review your AR aging report on a regular schedule, weekly for most practices, and start with the highest-value and oldest balances first.
- Resolve denials quickly. Track every denial, identify the reason, and correct and resubmit or appeal within the payer's deadline, since missed appeal windows turn recoverable revenue into write-offs.
- Make patient payment easy. Collect copays and known balances at the time of service, send clear statements, and offer online and card-on-file payment options to keep patient AR from aging.
- Monitor the right metrics. Track days in AR and the percentage of AR over 90 days continuously, so you catch an upward trend before it becomes a cash flow problem.
Done consistently, these steps tighten the gap between billing and payment, which is exactly what a lower days in AR number reflects.
How a Virtual Assistant Helps Reduce AR Days
An accounts receivable virtual assistant handles the consistent, time-intensive follow-up that keeps AR moving, which is the work most small practices struggle to staff. A trained AR follow-up assistant works your aging report, contacts payers on unpaid and denied claims, corrects and resubmits or appeals them, posts payments, and flags patient balances that need a statement or a call.
The value is in the consistency. Denials and aging claims need someone working on them every day, in order, before appeal windows close, and that is hard to maintain when the same staff are also answering phones and checking patients in. Accounts receivable follow-up support from MyMedicalVA gives you a HIPAA-trained assistant who works inside your existing billing system and keeps that follow-up running on schedule, so fewer balances slip into the older aging buckets. To talk through what that would look like for your practice, contact us.
Lower AR days come from doing the unglamorous work consistently: verify coverage early, file clean claims fast, and follow up on every unpaid balance before it ages. If your team does not have the hours to keep that follow-up going, accounts receivable follow-up support from MyMedicalVA can carry it for you. Contact us to see how it would fit your practice.
Shrink Your AR Days Without Adding Front-Desk Hours
A HIPAA-trained AR follow-up assistant keeps your aging report clean, resolves denials before appeal windows close, and frees your front desk to focus on patients.
Your Guide To Common Questions & Solutions
What is accounts receivable in medical billing?
Accounts receivable in medical billing is the total money a practice is owed for services it has billed but not yet been paid for. It includes both insurance AR, owed by payers on submitted claims, and patient AR, owed by patients for copays, deductibles, and self-pay balances. Those balances remain receivables until they are collected.
How many days in AR is good for a medical practice?
Most practices aim to keep days in AR under 40, the most widely cited healthy benchmark and one reflected in MGMA Better Performer data. Most revenue cycle teams target a 30-to-40-day range, and HFMA defines how the metric is calculated through its MAP Keys (Net Days in A/R). A number consistently above that range usually signals slow claim submission, denials, or weak follow-up. Benchmarks also vary by specialty and payer mix, so compare against your own segment.
What does it mean when AR is over 90 days?
AR over 90 days is money that has gone unpaid for more than three months, and it is one of the strongest warning signs in the revenue cycle. As a widely used rule of thumb, AR over 90 days should stay under roughly 10 to 15 percent of total AR. A higher share points to follow-up or denial problems, and collection odds drop sharply once balances pass 120 days.
How can a practice reduce its accounts receivable?
A practice reduces AR by preventing delays at the front end and following up on unpaid claims consistently. The highest-impact steps are verifying insurance before visits, submitting clean claims within 24 to 72 hours, working the aging report on a weekly cadence, resolving denials before appeal deadlines, and making patient payment easy at the time of service.
What is the difference between insurance AR and patient AR?
Insurance AR is money owed by payers on claims your practice has submitted, while patient AR is money owed directly by patients through copays, deductibles, coinsurance, and self-pay charges. The two often require different follow-up: insurance AR centers on claim status, denials, and appeals, while patient AR centers on statements, reminders, and easy payment options.
