What is accounts receivable in medical billing, and how do you fix high A/R?
Accounts receivable (A/R) in medical billing is the money payers and patients still owe you for services you have already billed. High A/R means claims are sitting unpaid, underpaid or denied with nobody moving them, and you bring it down by working the claims closest to a deadline first.
Written by Salman Saeed, CEO and Co-Founder · Reviewed by a Certified Medical Coder · 
In short: A/R is billed money that has not been collected yet. Read it by age bucket and by payer, measure days in A/R on one stated basis, and give every open claim an owner, a next action and a date. Deadline comes first, then dollars, then effort.
What does accounts receivable mean in medical billing?
Accounts receivable is the total of billed charges you expect to collect and have not collected yet. Two kinds of debtor sit inside it: insurers, for claims they have not finished paying, and patients, for the deductible, copay and coinsurance left after the insurer pays.
A claim leaves A/R in only three ways. It is paid in full, it moves to another payer or to the patient, or it is written off with an approval. Everything else is still A/R, including a claim that was denied last quarter and never touched.
That is why A/R is a better picture of unfinished work than a list of denials. It holds claims the payer never answered, claims paid below the contract and claims denied and forgotten. Denials that have a payer answer are covered in the denial management playbook, and this post covers the whole balance, ranked by age.
How do you read an A/R aging report?
An aging report groups open claims by how long they have been open, so you can see where money is stuck. Set the buckets once, for example 0 to 30, 31 to 60, 61 to 90, 91 to 120 and over 120 days, and count from the same date every time. Date of service and claim submission date give different pictures, so pick one.
Read the report three ways: by bucket, by payer and by claim. The bucket view shows how much of the balance is old. The payer view shows whether one payer holds most of the old money. The claim view is the list your team picks up on Monday.
| Look at | What it shows | What to do |
|---|---|---|
| Share of the balance over 90 days | How much is old, compared with your own earlier months | Keep the bucket edges fixed so months compare |
| Largest payer in the over-90 bucket | A payer-specific delay or a pattern of lost claims | Check status in batch and raise it with the provider representative |
| Claims with no note or last-action date | Claims nobody owns | Assign an owner and a next date |
| Claims near a filing or appeal limit | Deadline risk | Work these first |
| Credit balances | A possible overpayment | Review it as a possible refund before treating it as income |
A practice has $1,500,000 in open A/R. The over-90 buckets hold $330,000, which is 22.0% of the balance. The $170,000 over 120 days is read claim by claim, because that is where filing and appeal limits close.
A practice such as internal medicine usually carries many payers and a steady flow of patient balances. Split the report by insurer balance and patient balance before you read the buckets, so patient follow-up does not hide payer problems.
How do you calculate days in A/R?
Days in A/R is the A/R balance divided by average daily revenue, where the daily figure is the period's revenue divided by the number of days in the period. Say whether you used net revenue or gross charges, because the two answers cannot be compared.
HFMA's MAP Keys define Net Days in Accounts Receivable (FM-1) as net A/R divided by the average daily net patient service revenue of the most recent three months. A quarter that ends June 30 uses 91 days. The A/R days and denial rate calculator runs your own figures with the period set by you.
The balance on the last day of a 90-day period is $1,500,000. Revenue for those 90 days is $2,700,000, so the daily figure is $30,000.
HFMA's page gives formulas and no target values, so this post states no benchmark either. Compare the figure with your own earlier periods, and read it beside the aging buckets, because a few large old accounts can move it with no change in the quality of the work.
Why is A/R high?
A/R is high when claims stop moving, and each stalled claim has one of a small number of causes. Find the cause on each claim before you pick the fix, because the fix differs.
| Cause | How it shows | First check |
|---|---|---|
| The payer never answered | No remittance and no portal status | Check status by portal or inquiry, and resend only if the payer has no record |
| Rejected and not fixed | A rejection on the clearinghouse report | Read the code and correct the field, as in fixing a CO-16 |
| Denied and not worked | A CO line on the remittance and no note | Classify it and put it in a work queue |
| Paid below the contract | Payment is under the contracted rate | Compare to the contract and batch by payer |
| Authorization or coverage gap | CO-197 or a coverage-ended denial | Ask for a retro review, or bill the correct payer |
| Patient balance sitting with the payer | The payer is finished and a balance remains | Move it to patient billing |
A rejection needs special watching. It is not a payment decision, so no appeal clock starts and the claim just ages. A claim left in a rejection report can become a timely filing denial.
How do you bring high A/R down?
Work the aging report in a fixed order and record every touch. The order below is the one that keeps a deadline from closing on a claim you could have saved.
When the same cause keeps appearing on old claims, send it back to the team that created it. Stopping new A/R from forming is covered in how to reduce claim denials.
Which deadlines can stop you from collecting an old claim?
For Medicare, the claim must be filed by the close of the period ending 1 calendar year after the date of service, under 42 CFR 424.44(a)(1). That limit counts from the service, not from the denial, so an old rejected claim can run out of time while you work it.
After a denial, a Medicare redetermination must be requested within 120 calendar days of receiving the notice under 42 CFR 405.942, with receipt presumed 5 calendar days after the notice date. A reconsideration by the next reviewer must be requested within 180 calendar days under 42 CFR 405.962. Under 42 CFR 405.980(c), a contractor can also be asked to reopen an initial determination within 1 year for any reason.
Commercial limits come from the contract or the payer manual, so read them there. The timely filing limits by payer page, the timely filing calculator and the Medicare appeal levels page hold the detail.
How does Nucleus Align work A/R?
We start from your aging report, rank every open claim by deadline and dollars, and read the remittance code on each one before choosing the fix. Claims we bill go out within 24 hours of charge entry and denials are worked within 48 hours, so new A/R stays young while the old balance is cleared. Our figure is 15 to 20% revenue recovered from denials and old A/R.
The service is described on our A/R recovery page, and the in-house versus outsourced billing cost guide helps you compare the options. To go through your own aging report, book a call.
- HFMA MAP Keys: Net Days in Accounts Receivable (FM-1) and Remittance Denial Rate (AR-5) · HFMA
- 42 CFR 424.44, Time limits for filing claims · eCFR
- 42 CFR 405.942, Time frame for filing a request for a redetermination · eCFR
- 42 CFR 405.962, Timeframe for filing a request for a reconsideration · eCFR
- 42 CFR 405.980, Reopening of initial determinations · eCFR
We check every rule, code and deadline against the official source. See our editorial policy.
Common questions
Straight answers from the team that does the work.
Ask a billing lead directly. A 20-minute call, Monday to Friday, 9am to 5pm Eastern.
01What is accounts receivable in medical billing?
Accounts receivable is the money still owed to a practice or hospital for services already billed. It includes insurer balances on unpaid, underpaid and denied claims and patient balances after insurance. A claim stays in A/R until it is paid, moved to another payer or the patient, or written off with approval.
02How is days in A/R calculated?
Divide the A/R balance by average daily revenue, where the daily figure is the period's revenue divided by its number of days. A $1,500,000 balance and $30,000 a day gives 50.0 days. Use net or gross revenue consistently, and state which one you used.
03How do you reduce accounts receivable?
Work the aging report by deadline first, then dollars, then effort. Find the reason each claim is open from the remittance code or portal status, log every payer contact with a next date, and review weekly. Send repeat causes back to the team that created them.
04How often should you review the A/R aging report?
Review it weekly with fixed bucket edges. A claim in the 61 to 90 day bucket reaches the next bucket within a month, so a monthly review sees problems after the cheap fixes are gone. Keep the same dates and payer split each week so the trend is readable.
Talk to a billing lead.
A 20-minute call about your payers, volume and setup. Monday to Friday, 9am to 5pm Eastern.