Prioritizing “Days Sales Outstanding” to Get the Best Out of Your Practice

What Is Days Sales Outstanding?

 Days sales outstanding(DSO) is an important metric which measures the average number of days it takes for a practice to collect the complete payment for services provided and is usually calculated on a monthly, yearly, or quarterly basis. Days sales outstanding are an important performance indicator that shows how well your practice manages its revenue cycle.

To calculate DSO, Divide the total accounts receivable for a certain period of time by the total net payment. This number is then multiplied with the days in that particular period.

The standard DSO for a well managed revenue cycle is less than 40-45 days. A DSO of more than 90 or 120 days should be avoided as much as possible because it increases the risk of payments going unpaid, which can result in significant revenue loss for your practice. Having a DSO that is neither too high nor too low might be challenging, but doing so can result in better cash flow.

How Do Days Sales Outstanding Help Your Practice?

• It shows the performance of your practice’s revenue cycle during a particular period.
• It shows how quickly patients pay their payments.
• It helps identify patients or insurance providers who are always late in paying their payments.
• It helps you understand if you are moving in the right direction with payment collection.
• It shows if your practice is doing well at customer satisfaction.
• Can act as an early warning sign for the management of your revenue cycle.

How Can a Standard DSO Be Maintained?

Have a Well Planned Patient Payment Terms

Make sure that your practice has well planned payment terms which are neither too tight nor too loose. In general, a practice with more flexible payment terms has a larger DSO than one with extremely strict ones. Although strict payment terms can decrease DSO and increase cash flow, if the payment terms are too tight, chances are high that the customers will leave your practice and find one with loose payment terms. Having well planned patient payment terms helps in ensuring that no patients or insurance providers are at the risk of slow payment or non-payment.

Accurate Claims Documentation

Make sure that the claims are correct and accurate before submitting them. Practices in their hurry to submit claims are likely to make errors or mistakes. Therefore make sure that you don't submit them before thorough checking. Any errors in it can cause claim denial or rejection, lengthening the payment process and increasing DSO. Always have accurate patient data and information. Even a small, tiny mistake can lead your practice to a huge revenue loss. Always bear that in mind while processing claims.

Do Not Overlook Receivables

Overlooking receivables is one of the common mistakes that practices tend to make. Just because your practice is making enough revenue doesn't mean you shouldn't pay attention to your accounts receivable. You never know how it will impact your practice in the long run. You need to observe and make sure that your practice gets paid for every service that they provide. Proper management of accounts receivable can help decrease the DSO, aiding the smooth functioning of your practice.

Proper Follow-up on Claims

Your job doesn't end with submitting claims, as you have to do proper follow-up on those claims. This is really important in making sure that the claims get paid without much delay. The longer it takes for the claims to be accepted, the higher the risk of payments going unpaid. Even if the claims get rejected, remember to start reworking on the claims as soon as possible for a faster payment cycle. A proper follow-up on claims helps your practice reduce its DSO, thereby helping with faster reimbursements.

Stay Focused and Determined

Bear in mind that reducing your practice’s DSO doesn't happen overnight. Making considerable improvements in your DSO and maintaining them overtime requires a lot of effort and hard work from your staff. Therefore, it is important to stay determined and never lose focus. Setting goals and analyzing your previous DSO metric can help in maintaining focus and determination as well as ensuring that all the effort put into lowering the DSO was not in vain.

Timely Claim Submission

Make sure that you submit the claims within the given time frame. Any delay can cause a mishap in your entire revenue cycle, delaying the payment process and thereby increasing the DSO. Late submission of claims is one of the common reasons for claim denials. Hence timely submission of claims should be at the top of your practice’s priorities , especially if you want to reduce the DSO. It could be your first step in reducing your practice’s Days Sales Outstanding.

Partnering With an RCM Service Vendor

As mentioned before, reducing DSO requires a lot of effort and hard work which can add an extra burden to your practice and its staff. Your staff already has a lot on their hands and this only makes things even more difficult, making them want to quit their job. And that's exactly why you should partner with an RCM service provider. They provide your practice with skilled professionals who are efficient at clearing unpaid claims, submitting them on a timely basis, and also help you reduce the practice’s Days Sales Outstanding. Consequently, your practice's overall revenue will be maximized.