Understanding the MGMA Aging Benchmark
The Medical Group Management Association (MGMA) provides key industry benchmarks that healthcare practices use to measure their financial performance. Among the most critical of these is the benchmark for accounts receivable (A/R) aging. This refers to the process of categorizing outstanding payments owed to a practice, based on the length of time they have been unpaid. By analyzing these "aging buckets" (typically 0-30, 31-60, 61-90, and 91+ days), practices can gain valuable insight into their revenue cycle efficiency.
While specific data can vary by practice size and specialty, the MGMA benchmark serves as a standard for comparison. A key focus is the percentage of A/R that is over 90 days old, as this aging category is a significant indicator of potential revenue loss. The goal for high-performing practices is to keep this percentage as low as possible, ideally within the 12-15% range. A higher percentage often signals underlying issues, such as billing errors, slow follow-up processes, or unresolved claim denials, that can negatively impact cash flow.
The Components of Accounts Receivable Aging
Accounts receivable aging reports break down a practice's outstanding balances into specific time-based categories. Each aging bucket offers a different perspective on the efficiency of a practice's billing and collections process. A healthy aging report shows a high concentration of A/R in the most current category (0-30 days) and a progressively smaller percentage in the older, more difficult-to-collect buckets.
Days in A/R: The 30-Day Goal
Beyond the percentage of A/R over 90 days, another critical MGMA benchmark is Days in A/R, which measures the average number of days it takes for a practice to collect payments. A goal of 30 days or less is often cited as a benchmark for efficient practices. A high Days in A/R figure can indicate problems in the billing cycle, such as delayed claim submissions or poor follow-up. Regular monitoring of this metric allows practices to identify issues proactively before they lead to significant cash flow problems.
Net Collection Ratio: Beyond the Benchmark
The Net Collection Ratio (NCR) measures a practice's success in collecting payments against the net charges (total charges minus contractual adjustments). MGMA guidelines suggest a net collection ratio of 96-97% indicates effective collections, with anything below 95% potentially signaling room for improvement. While not a direct aging metric, a low NCR often correlates with issues that also drive up aging A/R, such as denied claims or inadequate patient collections. Improving the NCR often leads to better A/R aging performance.
Strategies to Improve MGMA Aging Performance
- Prioritize Follow-Up: Focus on claims that are approaching critical aging thresholds, especially those nearing 90 days. The longer a claim goes unaddressed, the less likely it is to be collected. Implementing a systematic approach to follow up with payers and patients is essential.
- Enhance Denial Management: A high denial rate is a primary contributor to aged A/R. Practices should track denial patterns by payer and reason to identify and resolve systemic issues. This may involve training staff on correct coding, verifying eligibility more thoroughly, or improving claim submission accuracy.
- Optimize Front-End Processes: The first step to preventing aged A/R is to get it right from the start. Ensuring accurate patient demographics, verifying insurance coverage, and collecting co-pays at the time of service can prevent many future billing issues.
- Leverage Technology: Modern billing software and analytics tools can significantly streamline the RCM process. These technologies can automate tasks like claim scrubbing, denial tracking, and follow-up, freeing up staff to focus on more complex cases.
- Train Staff Regularly: The medical billing landscape is constantly changing, with new regulations and coding updates. Regular and ongoing training for billing staff is critical to maintaining high performance and reducing errors that lead to aged A/R.
- Outsource When Necessary: For practices struggling to meet benchmarks, outsourcing certain aspects of the revenue cycle, such as collections or denial management, can be a cost-effective solution. Specialized firms often have the expertise and technology to improve performance rapidly.
Aging Benchmarks Comparison: Key Metrics
To effectively manage revenue, practices must track multiple key performance indicators (KPIs). The following table provides a high-level comparison of critical MGMA-related metrics and what they indicate.
| KPI | Description | MGMA Benchmark | Implications of Poor Performance |
|---|---|---|---|
| Days in A/R | The average number of days it takes to collect payments. | 30-45 days or less | Slower cash flow, potential revenue loss, billing inefficiencies. |
| A/R Over 90 Days | Percentage of total receivables that are more than 90 days past due. | 12-15% (Target range) | High risk of bad debt write-offs, unresolved claim issues, poor follow-up. |
| Net Collection Ratio | Effectiveness of collecting net charges after contractual adjustments. | 96-97% (Effective range) | Money is being "left on the table" due to denials, poor patient collections. |
| First Pass Resolution Rate | Percentage of claims resolved on the first submission. | ~90% (Optimal) | High rate of claim rejections and denials, increasing administrative burden. |
Conclusion
Understanding what is the benchmark for MGMA aging is more than just knowing a number; it is about embracing a strategic approach to revenue cycle management. By closely monitoring key performance indicators like Days in A/R, the percentage of receivables over 90 days, and the Net Collection Ratio, healthcare practices can diagnose financial weaknesses and implement targeted solutions. The ultimate goal is to maintain a healthy cash flow, minimize revenue leakage, and ensure financial stability. Continuous improvement in billing processes, denial management, and patient communication, supported by robust data analysis, is the key to aligning with and exceeding MGMA benchmarks for accounts receivable aging. For further reading, consult the financial management resources offered by the MGMA, which provide comprehensive data and tools for medical practice leaders. Medical Group Management Association.
Improving Revenue Cycle Management
Analyzing Aging Trends
Regularly analyzing aging reports can reveal patterns that indicate underlying problems. For instance, a consistent increase in the 61-90 day bucket might suggest a new payer policy is causing delays, or that a specific type of claim is being delayed. By drilling down into the data by payer, provider, or claim type, practices can identify the root causes of their aging issues and take corrective action. This diagnostic approach turns the aging report from a static summary of debt into an actionable tool for performance improvement.
Proactive Patient Communication
Patient responsibility is an increasingly significant portion of A/R. Establishing clear financial policies and communicating them upfront can dramatically reduce aged patient balances. This includes providing estimates for services, offering various payment options, and initiating a consistent follow-up process for outstanding patient payments. Engaging patients early and often is a best practice for minimizing aged patient debt.
The Role of Technology
Advanced RCM technology, often powered by AI, can play a transformative role in managing aged A/R. These platforms can identify claim submission errors before they are sent, automate follow-up communications, and prioritize collections efforts based on the likelihood of payment. Leveraging such tools can help practices stay ahead of the aging curve and maximize their collections effectiveness.
Ultimately, mastering the MGMA aging benchmark requires a holistic view of the practice's revenue cycle, from the moment a patient schedules an appointment to the final payment being posted. By focusing on efficiency at every step, medical practices can not only meet but exceed industry standards, ensuring a healthier financial future.
