Bill Sample / December 8, 2018 / Daphne Pope
Days in Accounts Receivable (DAR) A growing number of days in accounts receivable are symptomatic of a faulty billing process. One way to determine DAR is to count days from the date of service to the date of payment for every claim and then average across all claims. A simpler way to compute average number of days in accounts receivable by taking a ratio of accounts receivable to average daily charges or Number of days in accounts receivable = (Accounts Receivable / Average Charge) x 365 This metric too depends on medical specialty patient demographics payer mix and CPT sample. Another downside is that this metric is sensitive to provider as it counts the lag time of unsubmitted claims for services already delivered.
If you dont include the responsibilities of each party in the contract how does it protect either of you when the relationship starts to fall apart? And if neither party knows their responsibilities how can you expect that the relationship will work? Here is an example. You specify in the contract that it is the obligation of the providers office representative to supply you with all the payment remittances but you are not getting them which is causing you to do a lot of extra work in contacting the insurance carriers to check status on claims that were already paid. It is upsetting to spend three or four hours calling insurance companies to find that the claims were paid but the doctors office missed sending you the eobs.
This lag time roughly averages across all payers making DAR an effective comparison metric between payers for individual provider but invalidating it across multiple providers. One obvious advantage of DAR metric is its independence of charges. The averaging feature of this metric eliminates sensitivity to specific day or CPT but also hides the behavior shape of the accounts receivable curve. First-Pass Pay (FPP Rate) and Denial Rate FPP is the percentage of claims paid in full the first time upon submission (subject to federal or state timely payment regulations: 15 days for electronic submission and 30 days - for paper). Denial rate is the complementary metric to FPP rate. It counts the percent of claims that require followup and therefore cost more to process.