Average Days to Collect Payment

Average Days to Collect Payment is a key metric in healthcare revenue cycle management that measures the average number of days it takes for a healthcare provider to receive payment for services rendered. This metric is calculated by dividing the total accounts receivable by the average daily charges. A high Average Days to Collect Payment indicates that the healthcare provider is taking longer to collect payments, which can negatively impact cash flow and profitability. It can also be an indicator of inefficiencies in the revenue cycle process, such as delayed billing or inadequate follow-up on unpaid claims.

By tracking and analyzing this metric, healthcare providers can identify areas for improvement in their revenue cycle management processes and take steps to reduce the time it takes to collect payments. This can lead to improved cash flow, increased revenue, and better financial performance overall.

Average Days to Collect Payment is calculated by dividing the total accounts receivable by the average daily charges.

The formula for calculating this metric is as follows:

Average Days to Collect Payment = (Total Accounts Receivable / Average Daily Charges)

To calculate the total accounts receivable, add up all outstanding balances owed to the healthcare organization by patients, insurance companies, and other payers. This includes both current and past due balances.

To calculate the average daily charges, divide the total charges for a given period (usually a month) by the number of days in that period.

For example, if the total charges for the month of January were $1,000,000 and there were 31 days in January, the average daily charges would be $32,258 ($1,000,000 / 31).

Once you have both the total accounts receivable and the average daily charges, divide the total accounts receivable by the average daily charges to get the average number of days it takes to collect payment. For example, if the total accounts receivable is $5,000,000 and the average daily charges are $32,258, the average days to collect payment would be 155 days ($5,000,000 / $32,258).

Best practices to improve Average Days to Collect Payment are:

1. Implementing a Clear and Concise Billing Process: A clear and concise billing process can help reduce the number of errors and delays in the billing process. This can be achieved by ensuring that all the necessary information is collected upfront, such as patient demographics, insurance information, and medical codes.

2. Automating the Billing Process: Automating the billing process can help reduce the time it takes to generate and submit claims. This can be achieved by using electronic health records (EHRs) and billing software that can automate the billing process, including claim submission and follow-up.

3. Improving Claims Management: Claims management is a critical component of the revenue cycle management process. Improving claims management can help reduce the number of denied claims and appeals, which can help improve the average days to collect payment.

4. Enhancing Patient Communication: Enhancing patient communication can help improve the collection process. This can be achieved by providing patients with clear and concise information about their bills, payment options, and financial assistance programs.

5. Monitoring Key Performance Indicators (KPIs): Monitoring KPIs such as the average days to collect payment can help identify areas for improvement in the revenue cycle management process. This can help healthcare organizations make data-driven decisions to improve their revenue cycle management process.

6. Conducting Regular Staff Training: Regular staff training can help ensure that staff members are up-to-date on the latest billing and coding regulations, as well as best practices for revenue cycle management. This can help reduce errors and delays in the billing process, which can help improve the average days to collect payment.

The industry standard benchmark for Average Days to Collect Payment is typically around 30 days.

This benchmark is important because it helps healthcare providers understand how efficiently they are managing their revenue cycle. If the average days to collect payment is higher than the benchmark, it may indicate that there are issues with the billing process, such as delayed claims submission or denials. On the other hand, if the average days to collect payment is lower than the benchmark, it may indicate that the provider is doing a good job of managing their revenue cycle.

It is important to note that the benchmark for Average Days to Collect Payment can vary depending on the type of healthcare provider and the payer mix. For example, hospitals may have a longer average days to collect payment due to the complexity of their billing processes and the higher volume of claims they process. Additionally, providers who primarily serve Medicaid or Medicare patients may have a longer average days to collect payment due to the slower payment cycles of these payers.

Overall, the benchmark for Average Days to Collect Payment is a key metric for healthcare providers to monitor and improve upon in order to optimize their revenue cycle management.

Revenue cycle software can significantly improve the Average Days to Collect Payment metric by streamlining the entire revenue cycle process. With the help of automation, the software can reduce the time taken to complete tasks such as claim submission, denial management, and payment posting. This, in turn, reduces the time taken to receive payments from insurance companies and patients.

Additionally, revenue cycle software can provide real-time visibility into the revenue cycle process, allowing healthcare providers to identify bottlenecks and inefficiencies. This enables them to take corrective action promptly, which can further reduce the Average Days to Collect Payment metric.

If you're looking to improve your healthcare organization's revenue cycle management, it's time to consider revenue cycle software. MD Clarity's revenue cycle software is designed to help healthcare providers streamline their revenue cycle process, reduce costs, and improve cash flow. Book a demo today to see firsthand how MD Clarity's revenue cycle software can improve your Average Days to Collect Payment metric.