The first measurement we like to review is Days Receivable Outstanding, or DRO for short. The easiest way to describe DRO is that it measures how many days of business you have in outstanding accounts receivable.
There are several reasons DRO is important. If your timeline to get paid extends too far you risk missed revenue. Extended DRO numbers can result in very messy aging that makes it difficult to track other issues. These accumulated minor issues hiding in a larger aging number could result in timely filing issues and other collection issues that keep you from correctly collecting on these claims.
If your EHR has the capability to do this report, it could be called something other than DRO, for instance, Days in Accounts Receivable (DAR) or Days Sales Outstanding (DSO). If you cannot find this report in your EHR, there is a quick way to calculate it with other reports.
First, take the last 90 days of total gross charges; for this example, let’s say 2,000,000 dollars, then divide that by 90. That brings your average daily charge amount to 22,222.22 dollars.
Average Daily Charge Amount $2,000,000 / 90 = $22,222.22
Next, look at your total accounts receivable outstanding. As an example, that could be $1,600,000. Then you take the $1.6M and divide it by the average daily charge amount, which in this scenario is $22,222.22.
DAR = $1,600,000 / $22,222.22 = 72 Days
Now we can see that this group has 72 days of receivables outstanding waiting to be collected or accounted for. The goal for most groups should be to keep this number as close to 30 days and consistently below 40.
There are several additional ways to slice and review this data to help identify potential issues or find solutions.
One of the best exercises to do is to break this number out by your top payers. Identify the average daily charge amount for your state Medicaid or Blue Cross. Then divide by the total aging for that payer only. You may find out that one of your larger payers takes longer to pay, and there is nothing to worry about; you might also discover that you have a submission or problem, like an incorrect diagnosis or a change in the way claim submissions need to be happening but isn’t (global code changes as an example).
Start reviewing this number every month to ensure your billing is optimized and correctly collecting what you are due so you can continue to care for your communities. Regardless of the EHR you are on today, if you are struggling to control or understand your days in accounts receivable or days sales outstanding for your mental or behavioral health facility we would love to help.
More to come as we work through the top metrics to watch for your facility!
Qualifacts has a dedicated Revenue Cycle Management Services (RCMS) team and can take the billing burden off your shoulders. Our experts manage your entire revenue cycle, speeding up cash flow and freeing up staff time. If you would like to learn more on how our team of experts can transform your billing operations and the many benefits, please contact us today.