A/R Management and Collections Optimization: Reduce Days in A/R Below 35 (2026)

The A/R Problem

Accounts receivable is the financial holding pen between service delivery and cash collection. In a perfect revenue cycle, claims would be submitted cleanly, adjudicated quickly, and paid in full within 30 days. In reality, claims get stuck: they are denied, underpaid, lost in payer queues, or simply never followed up on. The result is an A/R balance that grows older and less collectible with each passing week.

The math is unforgiving. Industry data consistently shows that collectability drops as A/R ages:

0-30 days: Greater than 95% collectability. Claims are fresh, within filing limits, and payers are actively processing them.
31-60 days: Approximately 85-90% collectability. Claims that have not been adjudicated in this window likely have an issue that needs follow-up.
61-90 days: Approximately 70-80% collectability. Something is wrong. The claim may be denied, pending additional information, or lost.
91-120 days: Approximately 50-60% collectability. Recovery requires active intervention -- calls, appeals, or resubmission.
120+ days: Less than 30% collectability. At this point, you are spending significant resources to recover a fraction of the billed amount.

The Hidden Cost of Aged A/R

A practice with $1 million in total A/R and 20% of that over 120 days is carrying $200,000 in receivables that have less than a 30% chance of collection. The expected recovery on that $200,000 is less than $60,000. The remaining $140,000 will eventually be written off -- representing services that were delivered, documented, coded, and billed but never paid for. The loss is not just financial; it represents wasted clinical and administrative effort at every stage of the revenue cycle.

The organizations that manage A/R effectively share common characteristics: they have clear aging targets, structured follow-up workflows, defined escalation paths, disciplined write-off governance, and a weekly operating rhythm that keeps everyone accountable. A/R management is not heroic recovery work -- it is systematic prevention of aging.

A/R Aging Analysis

The A/R aging report is the primary diagnostic tool for accounts receivable health. It segments total outstanding receivables into aging buckets, showing how much money is owed and how long it has been outstanding. Reading the aging report correctly is the first step to managing it effectively.

Aging Buckets: Healthy vs. Warning Thresholds

Aging Bucket	Healthy %	Warning %	Action Required
0-30 days	>55%	<45%	Routine follow-up. Monitor for claims approaching 30-day mark without adjudication.
31-60 days	20-25%	>30%	Escalated follow-up. Check claim status with payer. Identify and resolve pending issues.
61-90 days	10-15%	>20%	Appeal or resubmit. Something is wrong with every claim in this bucket. Investigate root cause.
91-120 days	5-8%	>12%	Supervisor review. Escalate to management. Determine if claims are recoverable or need write-off evaluation.
120+ days	<10%	>15%	Write-off evaluation. Formal review to determine if claims should be appealed (if within deadline), sent to collections, or written off.

How to Read the Aging Report

Look at distribution, not just totals: A total A/R number is meaningless without the aging distribution. $500,000 in A/R with 70% in the 0-30 bucket is healthy. $500,000 with 40% over 90 days is a crisis.
Segment by payer: One payer with slow adjudication can skew the entire aging report. Identify which payers are driving aged A/R so you can target follow-up efforts.
Trend month over month: A single snapshot tells you where you are. Monthly trending tells you whether you are getting better or worse. A slowly growing 120+ bucket is a leading indicator of a systemic problem.
Exclude credit balances: Credit balances (overpayments) sitting in A/R inflate the total and distort the aging distribution. Report them separately and process refunds promptly.

Follow-Up Prioritization

Not every unpaid claim deserves the same level of attention. Effective A/R follow-up requires a prioritization framework that directs staff effort toward the claims most likely to yield the highest return. Working A/R without prioritization is like triaging an emergency room by arrival order instead of severity.

The Priority Matrix

Prioritize follow-up using two dimensions: dollar value and age. The combination determines the action:

High dollar + recent (0-60 days): Work first. These claims have the highest recovery potential and the largest financial impact. A single $2,000 claim resolved today is worth more than twenty $50 claims worked next week.
High dollar + aged (60-120 days): Escalate immediately. These are the claims most at risk of becoming uncollectible. Assign to experienced staff or supervisors.
Low dollar + recent (0-60 days): Batch process. Use electronic status inquiries (276/277) rather than phone calls. Many of these will resolve on their own through normal adjudication.
Low dollar + aged (90+ days): Evaluate for write-off. If the cost to follow up exceeds the expected recovery, write off and invest the time in higher-value work.

Workflow Design for A/R Specialists

Assign by payer: Each A/R specialist should own a set of payers. This builds payer-specific expertise: the specialist learns that payer's portal, knows their follow-up requirements, and develops relationships with payer representatives.
Set daily touch targets: Define how many claims each specialist should touch per day based on complexity. A reasonable target is 40-60 claims per day for phone-based follow-up or 80-120 for portal-based status checks.
Document every touch: Every follow-up action should be logged with the date, method (phone, portal, fax), result, and next action date. This prevents duplicate work and creates an audit trail for escalation.
Use electronic status inquiries first: Before making a phone call, check claim status electronically via the payer portal or a 276/277 transaction. Many claims can be resolved or their status determined without a phone call.

Payer Follow-Up Strategies

Each payer type has different follow-up requirements, communication channels, and resolution timelines. A one-size-fits-all approach wastes time on unnecessary calls and misses payer-specific escalation options.

Medicare

Check claim status via the Medicare Administrative Contractor (MAC) portal first. Phone hold times for Medicare can exceed 30 minutes.
Medicare claims typically adjudicate within 14-30 days. If a claim is unpaid after 30 days, check for rejections in your clearinghouse reports before calling.
Use the Medicare Redetermination process for denied claims. First-level redeterminations have a 120-day filing window from the date on the Medicare Remittance Notice.
For Medicare Advantage plans, follow up with the MA plan directly, not the MAC. MA plans operate under different rules and timelines than original Medicare.

Medicaid

Medicaid adjudication timelines vary significantly by state, ranging from 15 to 45 days.
Check for retroactive eligibility changes that may have occurred after the original claim was submitted. Medicaid eligibility can be backdated, creating both coverage gaps and retroactive coverage situations.
Managed Medicaid plans operate independently from state fee-for-service Medicaid. Follow up through the managed care organization, not the state Medicaid office.

Commercial Payers

Use payer provider portals for electronic status inquiries. Most major commercial payers (UnitedHealthcare, Anthem, Aetna, Cigna, Humana) offer real-time claim status through their portals.
When calling, have the claim number, patient subscriber ID, date of service, and billed amount ready. Representatives will not engage without this information.
Document the representative's name and reference number for every call. If the issue is not resolved, this documentation supports escalation.
Know each payer's appeal filing deadlines. Commercial payer appeal windows range from 60 to 180 days from the date of the initial determination.

Electronic Status Inquiry (276/277)

The HIPAA 276/277 transaction set allows you to electronically inquire about claim status and receive a standardized response. This is faster than portal checks and far more efficient than phone calls. Configure your PM system or clearinghouse to support batch 276 submissions for all claims over 30 days without adjudication.

Appeal Workflows

When a claim is denied, the appeal process is your mechanism for challenging the payer's decision. Effective appeals require understanding the multi-level appeal structure, meeting filing deadlines, providing the right documentation, and tracking outcomes systematically.

Appeal Levels and Requirements

Appeal Level	Timeline	Documentation Required	Success Rate
First-Level (Internal)	60-180 days from denial date (payer-specific)	Appeal letter citing specific contract terms or policy, original claim, clinical documentation supporting medical necessity, any missing information referenced in denial	40-60% for well-documented appeals
Second-Level (Internal)	60-120 days from first-level decision	All first-level documentation plus additional clinical evidence, peer-reviewed literature if medical necessity is at issue, letter from treating physician	30-45% (lower because easy wins are resolved at first level)
External Review	Varies by state; typically 60-120 days from second-level decision	Complete case file from prior appeals, independent medical review request form, any state-specific documentation requirements	40-50% (independent reviewers often favor clinical documentation)

What Makes a Winning Appeal Letter

Reference the specific denial reason: Cite the CARC/RARC codes and the payer's stated reason for denial. Address that specific reason directly.
Cite contract terms: If the payer is violating their own contract, reference the specific contract provision. This is particularly effective for underpayment appeals.
Include supporting clinical documentation: For medical necessity denials, include the relevant clinical notes, test results, and any clinical guidelines (such as ASAM criteria for behavioral health) that support the service.
Be specific and factual: Avoid emotional language or broad claims. State what was billed, what was denied, why the denial is incorrect, and what action you are requesting.
Reference prior appeal outcomes: If the same denial reason has been overturned for other patients, reference that precedent.

Common Appeal Scenarios

Medical necessity denial: The payer determined the service was not medically necessary. Appeal with clinical documentation demonstrating medical necessity, citing relevant clinical guidelines or criteria.
Authorization denial: The claim was denied for missing authorization. If the authorization was obtained but not linked to the claim, provide the authorization number and approval documentation.
Timely filing denial: The payer claims the claim was submitted late. Provide proof of timely submission (clearinghouse acceptance report with date stamp).
Bundling denial: A procedure was bundled and paid at $0. If the services were truly distinct and separately reportable, appeal with operative notes and modifier documentation.

Write-Off Governance

Write-offs are a permanent reduction of revenue. Once a balance is written off, it is gone. This is why write-off decisions should be governed by a defined policy with clear criteria, approval authority levels, and audit trails -- not left to individual staff judgment.

When to Write Off vs. When to Appeal

Write off when: All appeal options are exhausted and the final determination is upheld. The timely filing deadline has genuinely passed (not just claimed by the payer). The patient is confirmed uninsured and does not qualify for financial assistance. The cost to collect exceeds the balance amount.
Appeal when: Documentation supports the service and the denial is based on incomplete information. An authorization was obtained but was not properly linked. The patient had retroactive eligibility. The payer applied incorrect fee schedule, bundling, or modifier rules.

Write-Off Categories

Contractual write-offs: The difference between the billed charge and the allowed amount under the payer contract. These are expected and routine. They should be posted at the time of payment, not accumulated in A/R.
Bad debt write-offs: Patient balances that have gone through the full statement and collection cycle without payment. These represent a genuine inability or unwillingness to pay after reasonable collection effort.
Charity write-offs: Balances waived under the organization's financial assistance policy for patients who qualify based on income. These are policy-driven, documented, and reported separately from bad debt.
Administrative write-offs: Small balances, timely filing losses, and other operational write-offs that do not fit the above categories. These should be tracked and reported because they often reveal process failures that can be prevented.

Write-Off Approval Authority

Establish tiered approval authority to prevent premature or unauthorized write-offs:

Billing staff: up to $50 per claim, with documented justification
Billing supervisor: up to $250 per claim
Billing manager or RCM director: up to $1,000 per claim
CFO or executive leadership: above $1,000 per claim

Compliance Considerations

Routinely waiving patient copays, coinsurance, or deductibles without a documented financial hardship determination can be considered a violation of the Anti-Kickback Statute and the False Claims Act. Write-off policies must distinguish between legitimate financial assistance based on income criteria and blanket balance waivers that could be interpreted as an inducement for referrals. Consult compliance counsel when designing write-off policies.

Patient Collections

Patient responsibility now represents 25-35% of total practice revenue for many organizations. As high-deductible health plans become standard, the ability to collect patient balances is no longer a secondary concern -- it is a core revenue cycle competency.

Statement Cadence

First statement: Send within 5-10 days of insurance adjudication. This is the highest-response-rate communication.
Second statement (30-day reminder): Reiterate the balance, include payment options, and note that the account will be escalated if not resolved.
Third statement (60-day final notice): Inform the patient that the account will be referred for collections if payment or a payment arrangement is not made within 30 days.
Collection referral evaluation (90-120 days): Evaluate whether to refer to an external collection agency, write off as bad debt, or offer financial assistance.

Payment Plans

Offering structured payment plans is essential for balances that patients cannot pay in full. Effective payment plan programs include:

Automated enrollment through the patient portal or at the front desk
Flexible terms based on balance amount (e.g., up to 6 months for balances under $500, up to 12 months for larger balances)
Automatic payment drafting via credit card or bank account on file
Automatic escalation when a payment plan defaults (two consecutive missed payments triggers re-evaluation)

Collection Agency Relationships

When internal collection efforts are exhausted, an external collection agency may be appropriate. Key considerations:

Select an agency that specializes in healthcare collections and understands HIPAA, state collection laws, and the No Surprises Act.
Negotiate contingency rates (typically 15-30% of collected balances). Higher-aged accounts command higher rates because they are harder to collect.
Set clear rules about patient communication tone and frequency. The agency represents your organization, and aggressive tactics damage patient relationships.
Review agency performance quarterly: collection rate, complaint rate, and compliance with your communication guidelines.

Bad Debt Thresholds

Define a clear threshold for when a patient balance transitions from active A/R to bad debt. Common thresholds: 120 days after the last statement with no response and no payment arrangement, or 90 days after the final statement if the balance is under $100. Once classified as bad debt, the balance is either written off or referred to collections based on your policy and the dollar amount.

Small Balance Management

Small patient balances -- typically under $10-25 -- often cost more to collect than they are worth. Sending a statement costs $1-3 in printing and postage. Processing a payment costs $0.50-$2 in staff time and transaction fees. If a patient owes $8 and it takes two statements and a phone call to collect it, the organization has spent $5-10 to collect $8.

Auto-Write-Off Rules

Set a threshold: Define a balance threshold below which balances are automatically written off after insurance adjudication. Common thresholds range from $5 to $25 depending on the organization's volume and cost structure.
Apply after insurance has paid: Small balance auto-write-offs should only apply to the patient responsibility portion after insurance has fully adjudicated. Never auto-write-off insurance balances.
Track and report: Even though individual small balance write-offs are immaterial, the aggregate can be significant. Report total small balance write-offs monthly to ensure the threshold is not too generous.

Preventing Small Balance Accumulation

Collect at point of service: The best way to prevent small patient balances is to collect copays and known patient responsibility at the time of the visit. A $20 copay collected at check-in never becomes a $20 receivable.
Credit card on file programs: With patient consent, keep a credit card on file and charge small balances (under a defined threshold) automatically after insurance adjudication. Notify the patient before charging.
Round-up patient estimates: If the estimated patient responsibility is $23, collect $25 at the time of service and refund or credit the difference. Slight over-collection is far less expensive than post-visit billing for small amounts.

A/R Reduction Strategies

Reducing A/R is not a one-time project. It requires sustained operational discipline across multiple functions. The following strategies are proven approaches that high-performing organizations use to keep days in A/R below 35.

Weekly A/R Meetings

Establish a weekly A/R operations meeting with a standing agenda:

Review total A/R and aging distribution vs. prior week
Identify the top 10 payer balances driving aged A/R
Review denial trends and appeal outcomes
Assign action items with owners and deadlines
Review status of prior week action items

Attendance should include the billing manager, A/R team leads, and the denial management lead. Keep the meeting to 30 minutes and focus on actions, not just metrics.

Aging Goal-Setting

Set specific, measurable A/R reduction targets:

Reduce A/R over 90 days from X% to Y% within 90 days
Reduce days in A/R from X to Y within 6 months
Achieve a net collection rate of 96% or higher within the current quarter

Goals should be tied to individual and team accountability. A/R specialists should know their personal metrics and how they contribute to the team target.

Payer-Specific Campaigns

When one payer is driving a disproportionate share of aged A/R, launch a focused campaign:

Pull all outstanding claims for that payer aged 45+ days
Sort by dollar value (highest first)
Assign a dedicated team member to work the entire payer queue over 1-2 weeks
Escalate unresolved claims to the payer's provider relations department
Document patterns and convert findings into preventive workflow changes

Process Fixes That Prevent A/R Growth

The most effective A/R reduction strategies prevent receivables from aging in the first place:

Faster claim submission: Reduce the lag from date of service to claim submission to under 48 hours. Every day of submission lag adds a day to A/R.
Higher clean claim rate: Claims that pass on first submission get paid faster than claims that are rejected and resubmitted. Invest in pre-submission quality controls.
Faster payment posting: Post payments within 24 hours of receipt. Unposted payments inflate A/R artificially.
Proactive denial prevention: Preventing a denial is always faster and cheaper than appealing one. Feed denial trends into front-end workflow improvements.

KPIs and Benchmarks

The following metrics define A/R management performance. Track these monthly, trend them over time, and benchmark against industry standards to assess whether your A/R operation is healthy, improving, or deteriorating.

Days in A/R (target: <35 days): Total accounts receivable divided by average daily charges. This is the single most important A/R metric. It measures how quickly revenue converts to cash. Practices above 45 days have systemic issues that need immediate attention.
A/R over 120 days (target: <15% of total A/R): The percentage of total outstanding receivables aged beyond 120 days. This bucket has less than a 30% collection rate. High percentages indicate inadequate follow-up, unworked denials, or premature claim abandonment.
Net collection rate (target: >96%): Total payments collected divided by total allowed charges (billed charges minus contractual adjustments). This is the ultimate measure of revenue cycle effectiveness. Below 90% signals a systemic breakdown.
Write-off rate (target varies by type): Total write-offs as a percentage of net revenue, segmented by category: contractual (expected and routine), bad debt (target: <3%), charity (varies by organization), and administrative (target: <1%). Tracking by category reveals whether write-offs are routine contractual adjustments or represent lost revenue.
Appeal success rate (target: >50% for first-level): The percentage of appealed denials that are overturned. A success rate below 40% may indicate that appeals are not well-documented or that the wrong denials are being appealed. A success rate above 70% may indicate that you are only appealing easy wins and missing harder but still recoverable denials.
Cost per dollar collected: Total A/R management operating cost (staff, technology, outsourcing) divided by total collections. Target: under $0.04 per dollar collected. Above $0.06 signals inefficiency that may warrant process redesign or technology investment.

Frequently Asked Questions

What is a good benchmark for days in accounts receivable?

Industry benchmarks target less than 35 days in A/R for well-performing organizations. Leading practices sustain 28-32 days. Practices above 45 days typically have systemic issues in claim submission, denial management, or payer follow-up. Every day above benchmark ties up working capital and reduces the likelihood of collection, as collectability drops significantly after 90 days.

How should A/R follow-up be prioritized?

Prioritize A/R follow-up using a matrix of dollar value and age. High-dollar recent claims should be worked first because they have the highest recovery potential. Low-dollar aged claims should be batch-processed or evaluated for write-off. Within each priority tier, segment by payer so that follow-up staff can batch calls and portal inquiries efficiently. Assign payer-specific queues to individual A/R specialists to build expertise and payer relationships.

When should a balance be written off vs. appealed?

A balance should be written off when all appeal options are exhausted, the timely filing deadline has passed, the patient is confirmed uninsured with no financial assistance eligibility, or the cost to collect exceeds the balance amount. A balance should be appealed when documentation supports the service, when an authorization was obtained but not linked, when the patient was retroactively eligible, or when the payer applied incorrect bundling or fee schedule rules. Never write off a balance simply because it is old -- many aged balances are recoverable with proper follow-up.

What is the cost of collecting old A/R vs. current A/R?

Current A/R (0-30 days) costs approximately $5-10 per claim to collect through routine processing. A/R aged 60-90 days costs $15-25 per claim due to the additional follow-up required. A/R over 120 days costs $30-50+ per claim in staff time and often has less than a 30% chance of recovery. This is why preventing A/R from aging is more cost-effective than working aged A/R after the fact. Investing in front-end accuracy, fast claim submission, and proactive denial prevention yields far greater ROI than expanding the collections team.

Editorial Standards

Last reviewed: February 19, 2026

Methodology

Analyzed A/R aging patterns, collectability curves, and follow-up workflows across ambulatory practice types.
Benchmarked A/R management KPIs against HFMA, MGMA, and AAPC published performance data.
Mapped appeal workflows and write-off governance structures to compliance requirements and operational best practices.