Accounts Receivable, abbreviated and called “A.R.” and written as “A/R” is the money due to a healthcare organization for services provided. For most cash-based non-hospital practices, the A/R works as follows:
- When a service is provided to a patient, the charges are added to the A/R.
- For most charges that are added to the A/R, it is assumed that a portion will be paid by an insurance company, a portion will be paid by the patient, and a portion will be written off.
- Very few, if any healthcare organizations will actually collect the entire A/R as most provide whopping amounts of charity care, negotiated payment care, government-subsidized care and care that is never compensated and is written off to bad debt as uncollectable.
- When payments are made, the amount due is reduced and therefore, the A/R is reduced.
- An aged A/R will divide the money owed into aging buckets of Current (less than 30 days old), 30, 60, 90, 120, and 150+ days old.
- The older or more “aged” the charges in the A/R become, the harder it is to collect and the less value it has.
- I think the appropriate way to age charges is from the date of service, but some groups age their A/R from the date the insurance pays and the remaining balance is due from the patient. This is called “re-aging” the account.