How is Days in Net Patient Accounts Receivable (DNR) calculated, and what does it indicate?

• A. DNR = Net Patient A/R divided by Net Patient Revenues; indicates profitability.
• B. DNR = Net Patient A/R / Net Patient Revenues; indicates liquidity ratio.
• C. DNR = (Net Patient A/R / Net Patient Revenues) x number of days in period; indicates receivables collection efficiency.
• D. DNR = Net Patient Revenues / Net Patient A/R; indicates operating margin.

Answer: (C)

Days in Net Patient Accounts Receivable shows, in days, how long it takes for patient receivables to be collected, reflecting cash-flow efficiency. The way it’s calculated is to take the ratio of net patient accounts receivable to net patient revenues, and then multiply that ratio by the number of days in the period. This converts a size relationship into a time measure.

For example, if net patient A/R is $2 million and net patient revenues are $4 million over a 90-day period, DNR = (2,000,000 / 4,000,000) × 90 = 0.5 × 90 = 45 days. A lower DNR means faster collection and better liquidity, while a higher DNR indicates slower collection and potential cash-flow risk.

The other forms are not correct because omitting the multiplication by days yields just a ratio, not a time measure, and inverting the ratio would misstate what the metric represents—focusing on profitability or a different relationship rather than the time to convert receivables into cash.