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Read the following scenario then use the data and formulas below to calculate the Gross Collections Rate, Net Collections Rate, and Average AR Days Outstanding.
John is preparing for the quarterly financial meeting and must present the current figures to the providers of Sunshine Family Healthcare. John has asked you to help him with this task and wants you review the data below and calculate values needed for his presentation.
For the Quarter
Total Charges: 750,000
Total Collections: 525,000
Accounts Receivables: 85,000
Net Charges: 435,000
1. Total Collections / Totals Charges = Gross Collections Rate
2. Net Charges / Total Collections = Net Collections Rate
(net charges are payments a provider has agreed to accept from payers for the services provided)
3. Accounts Receivables / (Total Charges / 365) = Average AR Days Outstanding
(measures collection period of receivables)