EPIC Resolute Hospital Billing Fundamentals Practice Test

What is DSO, and how is it calculated in hospital billing?

Days Sales Outstanding measures average days to collect payment; calculated as ending AR balance divided by average daily charges or payments. DSO is the total number of days in a billing cycle. DSO equals the total revenue divided by total charges. DSO is the number of days to deny a claim.

Correct Answer:

Days Sales Outstanding measures average days to collect payment; calculated as ending AR balance divided by average daily charges or payments.

Explanation:

DSO measures how long, on average, it takes to convert a service into cash in the hospital setting. It’s calculated by taking the ending accounts receivable balance and dividing it by the average daily net revenue (or average daily charges/payments) for the period. In practice, this shows how many days’ worth of revenue is tied up in receivables. A lower DSO means faster collections and better cash flow, while a higher DSO indicates slower payment collection and potential cash flow concerns. The other descriptions don’t fit because they describe cycle length, a revenue-to-charge ratio, or denial timing, none of which reflect the speed of collecting payments.

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