Glossary

Healthcare finance terms explained

Plain-language definitions for clinic owners. No jargon, no textbook answers.

Accounts receivable days (AR days)

The average number of days it takes to collect payment after a service is billed.

AR aging buckets

AR aging buckets — also called days in AR aging — categorize outstanding claims by how long they have been unpaid since the date of service or billing: 0–30 days, 31–60 days, 61–90 days, and 90+ days.

Capitation

A payment model where a payer pays a fixed amount per member per month (PMPM) for each attributed patient, regardless of how many services that patient actually uses.

Claim denial rate

The percentage of submitted claims that are rejected or denied by payers on first submission.

Clean claim rate

The percentage of claims submitted without errors that require no additional information to be processed by the payer.

Collections rate

The percentage of billed charges that you actually collect as revenue.

Contractual adjustment

The difference between what you bill (your fee schedule) and what the payer has contracted to pay you.

EBITDA for medical practices

Earnings Before Interest, Taxes, Depreciation, and Amortization.

Fee-for-service vs value-based care

Two fundamentally different payment models.

Fractional CFO

A fractional CFO is a part-time Chief Financial Officer who provides executive-level financial strategy to companies that do not need — or cannot justify — a full-time CFO hire.

Location-level P&L

A profit and loss statement broken down by individual clinic location, rather than consolidated across the whole practice.

Overhead ratio

The percentage of revenue consumed by operating expenses, everything except owner or provider compensation.

Payer mix

The percentage breakdown of your revenue by insurance type: commercial PPO, HMO, Medicare, Medicaid, self-pay, workers compensation, and any other payer category.

Relative Value Unit (RVU)

A standardized measure of the value of physician services used by the CMS Medicare Physician Fee Schedule (and many commercial payers) to determine payment amounts.

Revenue cycle management (RCM)

The entire financial process of a patient encounter, from scheduling and insurance verification through coding, claim submission, and final payment collection.

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