When a practice wants to understand the health of its revenue cycle, the insurance aging report is the first place to look. But reading that report — and knowing what “good” looks like — requires context.
## The 3 Components of Insurance Aging
Every aging report you generate from your practice management system should break down each payer’s balance into three components:
1. **Charge** — The amount billed to the insurance company
2. **Contractual Adjustment** — The portion of the charge that has been written off per your contract with the payer
3. **Payment** — What the payer has actually paid
The net balance remaining (Charge minus Adjustment minus Payment) is your outstanding AR. This is the number that matters.
## What Are the Benchmarks?
Benchmarks vary depending on the source, but here are two commonly referenced standards:
**MGMA (Medical Group Management Association)**
MGMA data suggests that a healthy practice should have approximately **57% of insurance AR in the current bucket** (0–30 days).
**Collection Agency Standard**
A more aggressive benchmark — often used by revenue cycle consultants — is **62% current**.
The gap between 57% and 62% might seem small, but at scale, it represents meaningful dollars. A practice with $500,000 in monthly charges that improves its current percentage from 57% to 62% is collecting an additional $25,000 per month faster.
## Why Benchmarks Are Subjective
Raw aging benchmarks have a flaw: they are influenced by your fee schedule. If your charges are set too low (at or near Medicare reimbursement rates), the contractual adjustment column will be small — making your aging look healthier than it actually is.
**Best practice for fee schedule pricing:** Set your fees at **120–150% of Medicare reimbursement**. This ensures:
– You have room to accept commercial payer contracts at market rates
– Your aging report accurately reflects true payer behavior
– You are not inadvertently leaving money on the table with non-contracted payers
## How to Use This Data
When reviewing your aging report, ask:
– **What percentage of my AR is over 90 days?** Anything over 15–20% warrants investigation.
– **Which payers have the most aging over 60 days?** These are your denial problem payers.
– **Is my fee schedule masking true collection problems?** Run a comparison against Medicare fee schedules.
## Bottom Line
Aging reports are a window into the health of your revenue cycle. If you do not have a clear picture of where your AR stands relative to industry benchmarks, start there. It is the foundation of every other improvement you will make.
Need help reading your aging report or setting up benchmarks? Contact MedLink Services for a free revenue cycle review.