The metric reflecting the average number of days it takes a healthcare provider to collect payment after a claim has been submitted is a key performance indicator in revenue cycle management. It is derived by dividing the total accounts receivable by the average daily revenue. For example, if a hospital has $5 million in outstanding receivables and averages $500,000 in daily revenue, the resulting value would be 10 days.
Maintaining a low value for this metric is crucial for healthcare organizations. A shorter collection timeframe translates to improved cash flow, reduced bad debt, and enhanced financial stability. Historically, a longer timeframe indicated inefficient billing processes, delayed insurance reimbursements, or challenges in patient payment collection, negatively impacting an organization’s ability to invest in patient care and operational improvements.
