Healthcare financial teams face mounting pressure to accelerate cash flow and optimize their revenue cycles. When days in accounts receivable (AR) stretch longer than necessary, it impacts everything from operational costs to growth opportunities. The good news? Accounts receivable solutions for healthcare and life sciences can help reduce these delays.
For medical device, bio-tech, pharmaceutical, and medical supply companies, de efficient AR processes directly affect their ability to invest in customer support, maintain staffing levels, and upgrade essential equipment. We'll help you discover the most effective strategies to optimize collection processes and implement efficient payment systems that benefit both your company and customers.
Understanding days in AR in healthcare and life sciences invoicing
Days in AR serves as a vital performance indicator for healthcare organizations, measuring the average time between service delivery and payment receipt. Let's explore the key aspects of this necessary metric:
What are days in AR?
Days in AR represents the average time it takes for a Healthcare and Life Sciences company to receive payment after invoicing. This crucial metric indicates how efficiently a practice converts services rendered into actual revenue. Think of it as a measure of how quickly your business turns their product into working capital.
Why it matters for healthcare and life sciences companies
Healthcare and life sciences companies with optimized days in AR maintain healthier cash flows, enabling them to:
- Handle unexpected expenses.
- Fund expansion opportunities.
- Maintain headcount.
- Reduce DSO.
- Decrease overdue AR.
Industry standards and expectations
While optimal AR days vary by specialty and practice size, most high-performing healthcare and life sciences organizations aim to keep their days in AR under 30-40 days. Numbers climbing above this range often signal inefficiencies in the billing process that need attention.
The relationship between AR performance and revenue cycle health extends beyond timing—it reflects your organization's overall financial efficiency. Providers who maintain lower days in AR typically experience more predictable cash flows and stronger financial positions.
Common causes of extended AR days in healthcare
Extended days in AR often stem from several key challenges that healthcare organizations face. Understanding these obstacles is the first step toward implementing effective solutions:
Manual payment processing burdens
Manual processes create bottlenecks in payment workflows, from data entry errors to time-consuming reconciliation tasks. Staff members spend valuable hours processing paper checks, matching payments to claims, and managing disparate payment systems—time that could be better spent on strategic initiatives.
Multiple payment channel challenges
Healthcare and life sciences companies must juggle various payment methods and sources: insurance companies, government payers, and customers, all paying through different channels. This fragmented approach often leads to payment delays and increased processing time as staff switch between systems and reconciliation methods.
Payment posting and reconciliation issues
When payments arrive through multiple channels without standardized posting procedures, matching payments to specific claims becomes a complex task. This complexity increases the likelihood of errors and delays in updating patient accounts.
Key strategies to reduce AR days
Implementing the right strategies can dramatically improve your AR performance. Here are proven approaches that deliver measurable results:
Digital payment solutions
Moving toward electronic payment processing streamlines the entire revenue cycle. By accepting digital payments through multiple channels, healthcare and life sciences companies can:
- Process payments faster.
- Reduce manual entry errors.
- Automate payment posting.
- Improve accuracy in reconciliation.
Payment acceptance policies
Creating clear, standardized payment policies helps both staff and customers understand expectations. Your policies should:
- Define acceptable payment methods.
- Establish clear payment timelines.
- Set up automated payment plans.
- Create procedures for handling delayed payments.
While these strategies require an initial investment in technology and processes, the long-term benefits far outweigh the costs. Consider partnering with Billtrust, whose Payments solution—part of their unified AR platform—helps healthcare providers implement these strategies efficiently while reducing DSO by up to 76%.
Transforming healthcare and life sciences invoicing through intelligent AR automation
Since 2001, Billtrust has pioneered innovations in accounts receivable automation. We serve 2,400+ customers across manufacturing, transportation, construction, healthcare and life sciences, and other key industries, helping them optimize billing operations and reduce AR days. Our AI-powered Payments solution, part of our comprehensive Unified AR Platform, transforms payment processing with proven technology that helps healthcare and life sciences organizations accelerate their revenue cycle.
Our AR solutions deliver measurable results through:
- Payment channel optimization: Process payments through a single, integrated platform that streamlines acceptance across all payment methods and significantly reduces processing time.
- Strategic payment acceptance: Implement configurable payment rules and automated posting capabilities that optimize efficiency while maintaining seamless payer experiences.
- Digital acceleration: Drive faster payments through digital channels with proven strategies and user-friendly payment interfaces for customers.
- AI-powered efficiency: Leverage machine learning for intelligent payment matching, automated reconciliation, and analytics that identify payment patterns and opportunities.
- Unified visibility: Access real-time insights into payment status and cash flow trends through comprehensive dashboards and reporting.
With demonstrated success in reducing days in AR by up to 76% when deploying digital payments, our platform combines innovative technology with deep healthcare and life sciences industry expertise. Our implementation experts ensure seamless integration with existing ERP systems and a rapid return on investment.
Schedule a consultation today to learn how Billtrust's payment solutions can help improve your healthcare and life sciences invoicing AR performance.
Frequently Asked Questions
Check out the FAQs for general questions. Find helpful answers quickly to get the information you need.
While benchmarks vary by specialty and practice size, high-performing healthcare organizations typically maintain days in AR between 30 and 40 days. Anything above 50 days often indicates opportunities for process improvement.
Days in AR is calculated by dividing your total accounts receivable by your average daily charges (total gross charges divided by number of days in the period). For example, if you have $100,000 in AR and average daily charges of $2,500, your days in AR would be 40 days.
Gross days in AR include all outstanding receivables, while net days in AR exclude accounts that are unlikely to be collected or have aged beyond a certain point (typically 120 days). Net days in AR often provide a more accurate picture of collection efficiency.