Days Sales Outstanding (DSO)

The standard formula is net accounts receivable divided by average daily net revenue, usually measured over a rolling 90-day period to smooth out census swings. If an agency carries $1.2 million in receivables and books $20,000 in net revenue per day, DSO is 60 days. Read it alongside an accounts receivable aging report: two agencies can share the same DSO while one has clean current receivables and the other has a growing tail of claims over 120 days that will likely never collect. DSO trending up is the earliest broad signal that something in the revenue cycle broke, before denials and write-offs make the cause obvious.

Home health DSO is shaped by mechanics specific to the setting:

• Billing timing: Medicare pays final claims for 30-day periods, so documentation or orders that delay claim submission directly add days
• NOA problems: a late or rejected Notice of Admission holds up everything behind it
• Sequential billing: Medicare periods must be billed in order, so one stuck claim dams the episode
• Payer mix: Medicare Advantage and Medicaid managed care typically pay slower than traditional Medicare and add authorization friction
• Review programs: ADRs, Targeted Probe and Educate, and Review Choice Demonstration prepayment paths suspend payment while review is pending
• Physician signatures: unsigned plans of care and orders are a classic hidden bottleneck, since claims cannot be billed without them

Benchmarks vary with payer mix, but well-run agencies with heavy traditional Medicare books often hold DSO in the 30 to 45 day range, while agencies with significant Medicare Advantage or Medicaid managed care exposure typically run higher. More useful than any external benchmark is internal discipline: set a target by payer, track DSO weekly, and investigate any sustained move of more than a few days. Pair DSO with companion metrics, unbilled days (revenue earned but not yet claimed), percentage of AR over 90 days, and clean claim rate, so you can tell whether the problem is upstream in documentation, midstream in billing, or downstream in payer follow-up.

Start upstream, because most home health DSO lives before the claim is ever submitted. Shorten the referral-to-billed cycle: complete documentation at the point of care, chase physician signatures systematically, and submit NOAs within the 5-day window. Bill on time every cycle rather than batching. Then attack the back end: post payments daily, work denials and rejections the week they land, and run structured follow-up on claims pending with payers. Watch for the vanity fix of writing off aged AR to make DSO look better; it lowers the number while destroying the revenue. Sustainable DSO improvement is a documentation and process outcome, not a collections outcome.