How Healthcare Providers Can Reduce AR Days

Want fewer AR days, not just prettier reports?

Medical and dental practices today are squeezed from both sides:

More patients carry high-deductible plans and higher out-of-pocket costs.
Around 36–41% of U.S. adults report having medical or dental debt.
Median net days in A/R has drifted into the high 40s in many organizations, while best-practice targets are under 30 days (up to ~45 often considered the upper “acceptable” limit).

In other words: even if your revenue cycle looks “okay” on paper, AR days may already be eroding your margins.

Below is a modernized, practical guide to measuring, understanding, and reducing AR days for healthcare providers.

What “good” AR actually looks like

Before you try to fix AR, you need a realistic target.

Typical current benchmarks:

Net days in A/R (DAR / DSO)
- Best performers: under 30 days
- Generally acceptable: up to 40–45 days
- Red zone: consistently 50+ days
A/R over 90 days
- Many RCM experts recommend keeping less than 15% of A/R in the 90+ day bucket.

If your reports show net A/R days in the high 40s and a large slice of receivables over 90 days, you don’t just have “slow payers”—you have a process problem.

Step 1: Get brutally clear on your current AR performance

You can’t reduce AR days if you don’t know exactly where you stand.

1. Calculate your DAR (Days in Accounts Receivable)

Add up total charges for the last 6 months.
Divide by the number of days in that period → this gives you average daily charges.
Now take your current total A/R and divide it by your average daily charges.

That number is your DAR.

If you’re under 30–40 days, you’re in strong shape.
If you’re 40–50 days, you’re average to strained.
If you’re 50+, AR is likely draining cash and staff time.

2. Look beyond the single number

Pull an aging report and review:

A/R by bucket: 0–30, 31–60, 61–90, 91–120, 120+ days
Insurance vs patient responsibility
Top 5 payers by volume and their average payment lag
High-dollar accounts stuck in 90+ days

You’ll quickly see patterns: certain payers, certain service lines, or certain locations where claims and patient balances stall.

Step 2: Fix front-end issues that create avoidable AR

A surprising amount of AR bloat starts before the patient ever sees a bill.

Focus on:

Accurate registration and eligibility

Verify demographics, coverage, and plan details at each visit, not just the first one.
Use electronic eligibility tools where possible to reduce “not covered” or “terminated plan” denials.

Prior authorizations and medical necessity

Track which procedures and payers trigger the most authorization-related denials and design standard workflows or checklists for them.

Up-front financial conversations

With high-deductible plans and average deductibles well over $1,700 for single coverage, patients are often shocked by their share.
Provide pre-service estimates and basic counseling so patients know what to expect.

No Surprises Act & Good Faith Estimates

For uninsured or self-pay patients, the No Surprises Act generally requires giving a Good Faith Estimate (GFE) of expected charges in advance. If the final bill is significantly higher than the estimate, patients can dispute it.

Doing GFEs properly:

Reduces disputes and delays
Builds trust
Protects you from regulatory risk

Good front-end work doesn’t just avoid compliance fines; it keeps more balances from turning into surprised, angry, and delinquent AR.

Step 3: Tighten claims and denial management

Claim denials are a hidden AR factory. Every denial adds days, rework, and the risk that the claim will never be paid.

Standardize clean-claim practices

Use edits and rules in your practice management or clearinghouse system to catch errors before submission.
Focus on top denial reasons (missing info, coding, authorization, medical necessity) and build specific fixes.

Track denial KPIs

Initial denial rate
First-pass resolution rate
Average days to correct and resubmit

Even a modest improvement in denial rate can shave several days off AR and prevent claims from sliding into 90+ territory.

Close the loop with coding and clinical teams

Share patterns: “This payer is denying X procedure for Y diagnosis; here’s how we can document differently or pre-authorize in advance.”
A certified coder or seasoned billing specialist is often worth every penny in reduced denials and faster reimbursement.

Step 4: Shorten your billing cycle and make statements smarter

The original weekly or monthly cycles many practices used are now too slow.

Bill as close to the date of service as possible

Submit insurance claims daily, not in big weekly batches.
Generate patient statements once the primary payer posts and the patient share is known.

Use clear, patient-friendly statements

Show service dates, payer payments, adjustments, and the exact reason the patient owes a balance.
Avoid cryptic codes and jargon that drive dispute calls and delays.

Set expectations on timing

Spell out your payment window (e.g., “payment expected within 20 days of statement date”).
Include what happens if no payment or arrangement is made (second notice, internal collections, potential referral to a third-party agency).

Step 5: Make it ridiculously easy to pay

If paying you is hard, AR days will rise—no matter how well you code and bill.

Offer as many secure payment options as practical:

Online portal with card and ACH
Mobile-optimized statements with click-to-pay
IVR or live phone payments
In-office card terminals and contactless options
Mailed checks for patients who still prefer paper

Combine this with:

Email/SMS reminders with direct payment links
Payment plans for larger balances, with automated recurring drafts
Optional third-party patient financing for high-ticket procedures, if appropriate for your setting

Older patients and those with limited tech comfort still exist, so don’t kill paper entirely—but make sure digital is front and center.

Step 6: Set hard rules for aged AR and stick to them

Here’s where many organizations fall short. They do all the right things early, then let aged AR linger.

Design clear rules such as:

Internal follow-up window

0–30 days: standard statement / reminder flow
31–60 days: targeted phone outreach or text reminders
61–90 days: last internal attempt plus final notice

Escalation to third-party collections

For example:

Any patient balance ≥ $200
No payment or arrangement by 90 days
At least two statements and one successful contact attempt

→ Eligible for placement with a medical collection agency under your instructions and compliance expectations.

For very old A/R (120+ days), focus on cleanup:

Decide which accounts to batch to collections
Which to close/write off
How to prevent similar accounts from aging that far in the future

Remember benchmark guidance: try to keep less than 15% of A/R in the 90+ bucket.

Step 7: Use analytics and automation, not just effort

Manual AR work doesn’t scale. Modern revenue cycles lean on:

RCM dashboards and BI tools to see payer lag, denial trends, and responsible departments in real time.
Automation / AI for:
- Worklist prioritization (highest-value or highest-risk accounts first)
- Automated reminders and statements
- Predicting which accounts are most likely to go bad without intervention

Even basic automation—like automatically creating work queues for 60–90 day accounts or auto-triggering patient reminders—can chip away at AR days without adding headcount.

Step 8: Recognize when professional collections are the right tool

Given that a large share of households carry medical debt, it’s unrealistic to think internal staff can resolve every delinquent balance.

A healthcare-focused collection agency:

Understands HIPAA and privacy constraints
Operates under FDCPA and state collection laws
Uses skip-tracing, call strategies, and negotiation skills your team doesn’t have time for
Can sometimes leverage credit reporting or legal channels (where allowed and appropriate)

Your job is to:

Define which accounts go to collections, and when
Set tone and boundaries (e.g., no aggressive tactics, focus on payment plans)
Monitor performance and patient complaints

Done right, third-party collections is not about being harsh—it’s about ensuring that earned revenue doesn’t quietly die in the 120-day column.

Bringing it all together

Reducing AR days is not one project; it’s an ongoing discipline across the entire revenue cycle:

Front end: clean data, eligibility, authorizations, estimates
Mid cycle: claim quality, denial management, smart billing and communication
Back end: easy payments, firm aging rules, and the right collections partner

You don’t have to overhaul everything at once. Start by:

Measuring your current DAR and % of A/R over 90 days.
Fixing the one or two biggest bottlenecks you see in that data.
Putting written rules in place for when aged accounts escalate to collections.

Over time, those changes translate into fewer AR days, better cash flow, and less staff burnout—without compromising patient relationships or care.