Accounts receivable in medical billing is every dollar your practice has earned but has not collected yet. It is the gap between submitting a claim and receiving payment. That gap determines your cash flow.
The MGMA Cost and Revenue Survey (2024) puts median days in AR at 36 for better-performing physician practices and 47 for the broader median. HFMA MAP Keys set the target at under 40 days. Practices above 50 days are dealing with a structural problem, not a slow month.
What does AR mean in medical billing?
AR stands for accounts receivable. In medical billing, it's the total value of services that have been billed to payers or patients but not yet paid. Every claim sitting with a payer, every patient balance on a statement, and every appeal waiting for a decision falls under AR.
AR isn't one number. It's a collection of individual claims, each with its own payer, status, and age. A practice with $500,000 in total AR might have $400,000 under 30 days and $100,000 over 90. Those two practices look identical on a balance sheet. They aren't.
The AR process in medical billing
AR doesn't start when a claim gets denied. It starts when the claim is submitted. Every step from submission to final payment is part of the AR process.
Step | What happens | Where it breaks |
Claim submission | Coded claim sent to payer through clearinghouse | Formatting errors cause front-end rejections that never reach the payer |
Payer adjudication | Payer reviews the claim against coverage, medical necessity, and contract terms | Claim pended for additional documentation or prior authorization verification |
Remittance posting | Payment, adjustment, or denial posted against the claim (ERA/835) | Missing ERA enrollment means payments post late or not at all |
Denial identification | Denied claims flagged with CARC and RARC codes | Denials sit in a queue because nobody is assigned to work them |
Follow-up and appeals | Corrected claims resubmitted or formal appeals filed | Appeal deadlines missed because aging reports are not reviewed weekly |
Patient billing | Remaining balance billed to patient after payer processing | Patient statements sent late or without clear payment instructions |
Resolution or write-off | Claim fully collected, adjusted, or written off | Write-offs taken without confirming the denial wasn't correctable |
The process looks linear. It isn't. A single claim can cycle through denial, correction, and resubmission two or three times before it resolves. Each cycle adds 15 to 30 days. ERA (Electronic Remittance Advice) enrollment and CARC (Claim Adjustment Reason Code) tracking are two control points where the loop most often breaks.
AR aging in medical billing: what the buckets tell you
AR aging sorts your unpaid claims into time-based buckets: 0 to 30, 31 to 60, 61 to 90, and 90-plus days. The further a claim ages, the less likely you are to collect it. RARC (Remittance Advice Remark Code) codes on denied remittances often point to which bucket a claim is headed for next.
Aging bucket | Collection outlook | Action required |
0 to 30 days | High. Most claims in this window pay on first pass. | Monitor for payer acknowledgment. Check status by day 21 if no response. |
31 to 60 days | Good, but declining. This is the most important intervention window. | Active follow-up. Prioritize high-dollar claims. |
61 to 90 days | Deteriorating. Filing windows closing for some players. | Escalate immediately. Check timely filing deadlines. |
91 to 120 days | Low and falling fast. Appeals may be the last option. | File appeals with full clinical documentation. |
120-plus days | Very low. Most claims at this age become write-offs. | Recovery is expensive and unlikely. Evaluate write-off vs. appeal cost. |
The MGMA benchmarks hold that no more than 15% to 20% of total AR should sit past 90 days for physician practices. If yours exceeds that, the problem isn't one bad payer. Something upstream is feeding claims into the aging pipeline.
How to calculate days in AR medical billing
The formula:
Days in AR = Total accounts receivable / Average daily charges
Average daily charges = Total charges over a trailing period / Number of days in that period
Use a trailing 90-day window for the denominator to smooth out monthly volume swings.
Worked example:
A practice billed $900,000 in net charges over the last 90 days. Total AR is $350,000.
Average daily charges = $900,000 / 90 = $10,000
Days in AR = $350,000 / $10,000 = 35 days
That 35-day result sits right at the MGMA better-performer benchmark. A result above 50 days signals a collection problem that isn't going to fix itself.
Run this calculation monthly. Break it out by payer, provider, and specialty. The aggregate number can mask a payer-specific problem that's dragging the average up.
AR follow-up in medical billing: building a workflow that collects
Follow-up is where most practices lose revenue from accounts receivable in medical billing. Not because they can't do it, but because nobody owns it. The denial queue grows. The aging report goes unread. Revenue that was earned stops moving.
Assign AR follow-up to a specific person or team. If the same staff who answer phones and check in patients are also supposed to work aging claims, the aging claims lose. Every time.
Work the 31 to 60 day bucket first. Claims in this window still have a high collection probability. Catching them here prevents the slide into the 90-day zone where recovery drops sharply.
Sort by dollar value, not just age. A $5,000 claim at 45 days deserves attention before a $50 claim at 95 days. Prioritize by the combination of age and dollar impact.
Check claim status before calling the payer. Use the X12 276/277 claim status transaction to check electronically. A five-minute electronic check replaces a 20-minute phone hold.
Document every follow-up action. If a payer says the claim is in review, log the date, the reference number, and the promised timeline. That log becomes evidence for appeals and payer contract negotiations.
6 reasons AR gets stuck
Eligibility wasn't verified. A claim submitted to the wrong payer or for a patient with lapsed coverage gets denied immediately. The fix takes 30 seconds at registration. The rework takes 30 minutes after the denial.
Prior authorization was missing or expired. CARC 197 denials (precertification absent) are among the most common and most preventable denial codes. Each one adds 15 to 30 days to the claim's AR life.
Coding errors triggered a denial. A diagnosis-procedure mismatch, a missing modifier, or an unspecified ICD-10 (International Classification of Diseases, 10th Revision) code produces a denial that surfaces weeks after submission. Practices with a dedicated medical coding team catch these before claims go out.
Denials aren't being worked. Every unworked denial is permanent revenue loss disguised as an aging balance. The longer denials sit unworked, the smaller the recovery window becomes.
Patient balances go uncollected. High-deductible health plans have shifted more cost to patients. Without clear statements and easy payment options, patient AR ages just as fast as payer AR.
Credentialing lapsed. A provider whose credentialing has expired with a payer will generate denials on every claim under that NPI (National Provider Identifier). The claims pile up in accounts receivable in medical billing until someone notices.
Accounts receivable in medical billing: benchmarks to track
Track these five metrics monthly. Compare against the benchmarks below.
Metric | Benchmark | Source |
Days in AR | Under 40 days (better performers: 35 to 36 days) | MGMA Cost and Revenue Survey 2024 (MGMA data) |
AR over 90 days (% of total) | Under 15% to 20% | MGMA; HFMA MAP Keys |
Net collection rate | 96% or higher | MGMA Cost and Revenue Survey 2024 (MGMA data) |
Clean claim rate | 98% or higher | HFMA Claim Integrity Task Force (HFMA MAP Keys) |
Cost to collect | 3% to 5% of net revenue | HFMA MAP Keys methodology |
Days in AR alone doesn't tell the full story. A practice at 38 days can still have 25% of its AR past 90 days if that concentration sits in a few high-dollar aged claims. Always pair days in AR with the aging distribution.
When to get help managing medical billing accounts receivable
Some practices can manage accounts receivable in medical billing internally. Others can't. The difference usually comes down to staff capacity and claim volume.
If your AR over 90 days exceeds 20% of total receivables or your days in AR keeps climbing quarter over quarter, internal capacity is the bottleneck. A low denial rework rate points to the same problem.
A dedicated accounts receivable management partner assigns staff specifically to your aging claims. They work the 31 to 60 day bucket daily, appeal denials within 48 hours, and report results by payer and CARC code.
Practices that also need help with coverage discovery often recover additional revenue from self-pay accounts where active insurance exists but was not reported at registration. That revenue would otherwise be written off or sent to collections.
Questions to ask an AR management partner
Question | Why it matters |
How do you prioritize which claims to work first? | A partner without a clear priority method (age + dollar value) will waste time on low-impact claims. |
What denial rate do your clients typically achieve? | Compare against the HFMA benchmark. A credible partner can show payer-level results. |
How quickly do you rework denied claims? | Reworking denials within 48 hours keeps appeal options open before payer deadlines close. Delays past 30 days risk missing those windows entirely. |
Do you report by CARC code? | CARC-level reporting shows exactly why claims are denied, not just that they were denied. |
How do you handle timely filing limits? | If a partner doesn't track filing deadlines by payer, aged claims will expire before an appeal is filed. |
Can you provide references from practices in our specialty? | Billing complexity varies by specialty. A partner with relevant experience reduces onboarding risk. |
FAQs
If your days in AR keeps rising or your AR over 90 days exceeds 20%, the current process isn't keeping up. Outsourcing the AR function to a billing partner is usually more cost-effective than hiring additional staff.
What is AR in medical billing?
What is a good day in AR for a medical practice?
How do you calculate days in AR?
What does AR aging mean?
What percentage of AR should be over 90 days?
Why do claims get stuck in AR?
What is AR follow-up in medical billing?
Without a structured follow-up workflow, claims age past filing deadlines and become uncollectible.
Where to start
Run your AR aging report right now. Break it out by payer. Calculate your days in AR using the formula above. Check what percentage of your total AR sits past 90 days.
If the numbers don't match the MGMA benchmarks in this guide, the next step is figuring out where claims are getting stuck. Is it eligibility? Coding? Denials that nobody's working? Managing accounts receivable in medical billing starts with knowing which bucket is growing fastest.
Medbilling RCM tracks AR by payer, provider, and aging bucket. We work the denial queue daily, not monthly, and report results with CARC-level detail so you can see exactly where the gains are coming from.