Average time to payment for hospitals: how to reduce it

The hospital’s average time to payment measures how long the hospital takes, on average, to get paid by health plans after the service is provided. It is the indicator that translates the efficiency of the revenue cycle into time: the lower it is, the faster care turns into cash.

According to the Anahp Observatory 2025, the average time to payment for member hospitals was 68.56 days in 2024, an improvement over the 76.38 days recorded in 2023. The figure is positive, but 68 days is still too long between the patient’s discharge and receipt of payment. For hospitals with a high volume of health plan patients, this interval means tied-up working capital and a permanent financial cost.

What the hospital’s average time to payment is

The average time to payment, known in Portuguese by the acronym PMR and in English as Days Sales Outstanding (DSO), is the average number of days the hospital takes to receive payment from payers after the bill is issued. It is a financial management indicator and an operational one at the same time: financial because it directly affects cash flow and the need for working capital; operational because it reflects the quality of the entire process leading up to payment.

A high DSO does not necessarily mean that the payer is slow to pay. It can also mean that the revenue cycle has inefficiencies that delay payment (in closing the claim, in late submission, in generating denials that require an appeal or in the delay in filing the dispute). DSO is the cumulative result of everything that happens between the patient’s discharge and the hospital getting paid.

That is why DSO is more useful as a diagnostic indicator than as a stand-alone target. Reducing DSO without understanding where it is being generated is difficult. Breaking it down by payer, by type of care and by process stage is what makes it possible to identify where improvement actions have the greatest impact.

How to calculate the hospital’s average time to payment

The DSO formula is:

DSO = (health plan receivables ÷ gross health plan revenue for the period) × number of days in the period

For a 30-day monthly period, if the hospital has R$ 6 million in health plan receivables and billed R$ 3 million in the month, DSO is: (6,000,000 ÷ 3,000,000) × 30 = 60 days. The result indicates that, on average, the hospital takes 60 days to get paid after billing. The lower the result, the faster the revenue cycle.

Two points affect the quality of the calculation. The first is what goes into “receivables”: ideally, only health plan claims that have already been sent and not yet paid should be counted, excluding those held up by internal issues. Including claims with pending issues distorts DSO because it mixes internal operational delays with external delays on the payer’s side.

The second is frequency: DSO calculated monthly with data from that month alone can swing widely due to seasonality. A three-month moving average gives a more stable reading that is comparable over time.

What DSO reveals about the revenue cycle

DSO is an outcome indicator: it does not show where the problem is, but it confirms that one exists.

Three causes account for most of a high DSO.

The first is the internal time to close the claim: the longer the hospital takes to close, review and send the claim after discharge, the higher the DSO, regardless of how the payer behaves.

The second is the denial rate: each disputed denial adds a full cycle to the timeline, with the hospital waiting for the payer’s response to the appeal.

The third is the contractual payment term: health plans with longer payment terms structurally contribute to a higher DSO.

DSO can also reveal significant differences between payers. A hospital with an overall DSO of 68 days may have health plans with a DSO of 45 days and others with a DSO of 90 days. This variation indicates that the problem is concentrated in certain payers, whether because of payment behavior or a higher denial rate in those contracts.

The main levers to reduce DSO

DSO is reduced by acting on the stages of the revenue cycle that contribute most to the delay. Four levers have a direct and measurable impact.

Lowering the denial rate

Each denial avoided removes a dispute cycle from the process. A denial appeal can add 30 to 60 days to the payment timeline of that claim, depending on the payer’s contractual response time. Hospitals that lower their denial rate through internal auditing before submission consistently shorten DSO, without depending on negotiations with payers.

Faster claim closing and submission

The time between discharge and sending the claim to the payer is entirely controlled by the hospital. Claims with missing documentation, incomplete medical records or poorly structured review processes are held up internally, increasing DSO without the payer bearing any responsibility. Structuring the closing process with set deadlines by type of hospital stay and clear responsibilities for each stage reduces this component of DSO.

Tracking contractual deadlines by payer

Each payer has a contractual payment term after the claim is received and validated. Hospitals that do not track these terms by health plan cannot tell when a payer is paying outside the agreed term. Actively tracking contractual terms makes it possible to identify delays, trigger the collection mechanisms provided for in the contract and, in renegotiations, use the history of noncompliance as an argument for better terms.

An effective appeal process

Denials that reach the appeal stage need to be disputed quickly and with proper documentation. A slow or poorly structured denial appeal process prolongs the cycle of each denied claim, increasing DSO.

The denial resolution rate is the indicator that complements DSO in assessing this point: the higher the resolution rate and the shorter the average resolution time, the smaller the impact of denials on total DSO.

How to monitor DSO in hospital management

DSO should be tracked monthly as part of the hospital’s financial indicator dashboard. A single number has little value: its evolution over time and the comparison between segments are what guide improvement decisions.

Three breakdowns are especially useful.

The first is by payer: calculating DSO separately for each health plan reveals which contracts pay more slowly and where the denial rate is highest. This view guides both internal improvement actions and contract negotiations with each payer.

The second is by type of care: outpatient care, elective admissions and emergency care have different billing profiles and payment timelines. Lumping them together in the overall DSO can hide bottlenecks specific to one setting that do not show up when the indicator is calculated in aggregate.

The third is by cycle stage: separating the internal time to close and submit from the payer’s external time to review and pay makes it possible to tell whether the problem lies in the hospital’s internal process or in the payer’s behavior. This separation completely changes the improvement actions: an internal problem calls for a process change; an external problem calls for contract negotiation or escalation to ANS (Brazil’s National Supplementary Health Agency).

A high DSO is a financial cost

Every day of delay in getting paid has a real financial cost. A hospital that takes 68 days to get paid has to finance its operation during that period: salaries, suppliers, supplies and fixed expenses are paid with its own capital or with credit while health plan revenue has not yet arrived. The greater the volume of health plan patients and the higher the DSO, the more working capital is needed to sustain the operation.

Reducing DSO by 10 days at a hospital with R$ 10 million in monthly health plan revenue means bringing forward approximately R$ 3.3 million in revenue. That amount no longer needs external financing or to tie up operating cash.

Rivio reduces DSO by automating the audit of 100% of hospital claims before submission, eliminating avoidable denials, making sure claims reach payers complete and within the contractual deadline, and speeding up the appeal process for the denials that do occur. The result is a shorter revenue cycle, with less tied-up capital and more financial predictability for the hospital.

Frequently asked questions about the hospital’s average time to payment

What is the hospital’s average time to payment?

The average time to payment, or DSO, is the average number of days the hospital takes to receive payment from health plans after providing the service and sending the claim. It is a financial and operational management indicator that reflects the efficiency of the entire revenue cycle, from closing the claim to payment by the payer.

How do you calculate a hospital’s DSO?

DSO = (health plan receivables ÷ gross health plan revenue for the period) × number of days in the period. For a more stable calculation, it is recommended to use a three-month moving average instead of a single month, and to count only claims that have already been sent and not yet paid, excluding those held up by internal issues.

What is the average time to payment for Brazilian hospitals?

According to the Anahp Observatory 2025, the average time to payment for member hospitals was 68.56 days in 2024, an improvement over the 76.38 days recorded in 2023. The indicator had been rising since 2021 and reversed in 2024, but it still means almost 70 days between the patient’s discharge and payment.

What can be done to reduce the average time to payment?

The main levers are: lowering the denial rate through internal auditing before submission, speeding up claim closing and submission after discharge, monitoring and enforcing each payer’s contractual deadlines and structuring an effective appeal process for the denials that do occur. Each of these fronts acts on a different point of the revenue cycle and has a cumulative impact on total DSO.