Demystifying Revenue & A/R Calculations for FQHCs

Introduction 
For Federally Qualified Health Centers (FQHCs), understanding the true value of your revenue and accounts receivable (A/R) is more than a financial exercise—it's essential to sustainability and compliance. Yet, many FQHC leaders find these calculations complex or inconsistent. This blog will break it down clearly, providing the foundational formulas and factors every health center should understand.

1. What Is Accounts Receivable (A/R) and Why It Matters

A/R represents revenue that has been earned but not yet collected. It is a critical indicator of your center’s financial health and billing efficiency. The longer an account remains uncollected, the less likely it is to be recovered.

 2. How to Calculate Net A/R

You must first determine gross A/R and then subtract contractual allowances and bad debt.

Formula: 
🧮 Net A/R = Gross A/R – (Contractual Allowances + Bad Debt) 

• Gross A/R: Total charges outstanding 

• Contractual Allowances: Expected reductions based on payer agreements 

• Bad Debt: Write-offs for uncollectible balances 

 3. Understanding Your A/R Aging Report

Break down A/R into age categories (0–30, 31–60, 61–90, 91–120, 120+ days). The older the A/R, the less valuable it becomes.

Industry Benchmarks for FQHCs (may vary): 

• Over 90 days: Should be < 25% of total A/R 

• Over 180 days: Should be < 10% of total A/R 

 4. Calculating Average Days in A/R

This tells you how long, on average, it takes to collect payment.

Formula: 
🧮 (Total A/R ÷ Average Daily Charges) = Days in A/R 

• Ideal benchmark for FQHCs: < 40 days 

 5. Revenue Realization Rate (Gross Collection Rate)

This tells you how much of your charges actually convert to collected revenue.

Formula: 
🧮 Collections ÷ Charges = Realization Rate (Gross Collection Rate) 

• Ideal benchmark: At least 85%, though it varies by payer mix 

Conclusion 
Calculating the value of your revenue and A/R gives you the power to make data-informed decisions. With accurate benchmarks and tracking, your FQHC can minimize leakage, improve cash flow, and strengthen operational health. If you’re unsure where your center stands, Synergy Billing offers tools and expert guidance to help you make sense of the numbers. We are here to support your center; we work exclusively with FQHC’s schedule a discovery call today.