What is a healthy days in AR?
Healthy days in AR is under 40 days for most outpatient practices. HFMA puts the ideal range at 30 to 40 days in its 7 KPIs guidance. Above that, the question is not whether something is wrong but which payer or workflow is causing it.
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Definition
Days in AR is the average number of days it takes to collect a dollar of revenue from date of service, calculated as (Net AR / Average Daily Net Charges).
The detail
HFMA writes that “ideally, days in A/R should range between 30 to 40,” and names net days in AR (FM-1) as one of its standard MAP Keys revenue cycle metrics — though MAP Keys itself publishes the definition and equation, not the target. AR over 90 days is the companion measure, and HFMA is stricter on it than most practices expect: it should sit below 10 percent of total AR, with self-pay AR over 90 days below 30 percent. Specialty matters: dermatology and dental practices with high cash-pay mix often run under 30 days; behavioral health and orthopedics with heavy commercial insurance often run 45 to 55 days. The biggest drivers of high AR days are slow eligibility verification, claim submission delays beyond 48 hours from date of service, denial backlog, and patient AR collection breakdown. Reducing AR days from 50 to 40 on a $5M practice releases roughly $137,000 of working capital one time and improves cash flow predictability permanently. Check your own days in AR to see where you sit against these bands.
| Performance Tier | Net Days in AR | AR Over 90 Days |
|---|---|---|
| High performer | Under 30 days | Under 10% of total AR |
| Healthy | 30 – 40 days | Under 15% of total AR |
| Median across specialties | 40 – 50 days | 13% – 15% |
| Concerning | Above 60 days | Above 25% |
Specialty drift: cash-pay heavy (dermatology, dental) often under 30 days. Commercial-insurance heavy (behavioral health, orthopedics) often 45-55 days. Reducing AR days from 50 to 40 on a $5M practice releases ~$137K of working capital one-time.
“Ideally, days in A/R should range between 30 to 40.” Beyond it, the cause is usually a specific payer or workflow rather than general slowness.
AR over 90 days should be less than 10 percent of total AR, and self-pay AR over 90 days less than 30 percent.
What this means for clinic owners
From Sorso
Days in AR is the single best leading indicator of revenue cycle health. Track it monthly. If it drifts up by more than 5 days quarter over quarter, something specific broke and you can usually find it within a week. The four-minute assessment will show you where yours stands.
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What is a good clean claim rate?
The widely cited target is a 98 percent clean claim rate on first submission — HFMA repeats it in its 7 KPIs guidance, attributing the figure to Becker's ASC Review. Most outpatient practices run below that, and every point of the gap is revenue sitting in rework rather than in the bank.
What is a healthy denial rate?
A healthy initial denial rate is under 5 percent of submitted claims, and denial write-offs are worth tracking as a share of net patient revenue, the metric HFMA lists as AR-6. Industry averages have climbed above 11 percent.
What is the average net collection rate?
HFMA writes that “at a minimum, a provider's net collection rate should be 95%, although 97% to 99% is optimal.” Below 95 percent, revenue is leaking somewhere specific and it is usually findable.
What financial KPIs should I track for my clinic?
The core 8 financial KPIs every clinic should track monthly are revenue, EBITDA, net collection rate, days in AR, denial rate, revenue per provider, overhead ratio, and rolling 13-week cash forecast.
How do I improve my net collection rate?
Improve net collection rate by working denials promptly (60 to 75 percent recovery achievable), reconciling contractual underpayments, collecting patient AR at point of service, and tightening write-off authorization workflows. Most practices can recover 1 to 3 percentage points within 6 months.
Why does my medical practice have cash flow problems even when we are profitable?
Profitable medical practices run out of cash because revenue and cash collection are separated by 30 to 90 days. Insurance reimbursement cycles, denials, patient responsibility growth, and timing mismatches between expenses (paid weekly or monthly) and collections (paid 30-90 days after service) create cash gaps even when the P&L looks healthy. The fix is a 13-week rolling cash flow forecast that maps expected collections against scheduled disbursements week by week.
How do I build a 13-week cash flow forecast for my medical practice?
A 13-week cash flow forecast is a weekly rolling projection of expected cash receipts and cash disbursements over the next 13 weeks (one quarter), updated weekly with actuals. For medical practices, it is the single most useful financial tool for managing the 30-90 day gap between service and collection. Build it from your billing system's expected reimbursement schedule and your fixed disbursement calendar (payroll, rent, taxes, debt service).
How long should medical practices hold operating cash reserves?
Most outpatient medical practices should hold roughly 60 to 90 days of operating expenses in unrestricted cash reserves, with single-location practices on the higher end of that range and multi-location groups with diversified payer mix able to operate on the lower end. The reserve covers payer lag, denial rework, seasonality, and unplanned events without forcing emergency borrowing.
Founder of Sorso and a CFA charterholder. Before Sorso, Stan spent 19 years in corporate finance at institutions including UniCredit and Société Générale — managing a $450M loan portfolio and making senior partner at a major mezzanine lender by 29 — then built a fractional CFO firm exclusively for outpatient healthcare clinics.
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