Selling your practice? Your aged AR is worth more than your buyer will tell you

When a practice sale gets to the letter-of-intent stage, one asset reliably gets treated worse than every other: accounts receivable, and especially the aged, denied, and disputed portion of it. Buyers will fight over your provider roster, your payer contracts, and your lease terms. Your aged AR they will wave at with a discount schedule, often excluding it from the deal entirely, or crediting it at a small fraction of face value. The buyer is not necessarily wrong to do this. From where they sit, your unworked denials are a pile of paperwork with unknown yield. But from where you sit, that discount is real money, and it is more negotiable than most sellers realize, provided you do the work before the buyer's diligence team shows up, not after.

Why buyers discount aged AR to near zero

Put yourself on the buyer's side of the table. They are acquiring receivables generated under your billing processes, your documentation habits, and your payer relationships, none of which they control or fully trust yet. Aged and denied claims are the least legible part of that book: nobody on the buyer's team knows which denials were correct, which are past appeal windows, and which are genuinely collectible. Diligence teams resolve that uncertainty the only way they can: by assuming the worst and pricing accordingly. The result is a structural gap: the buyer prices your aged AR at its value to someone with no information, while its value to someone who actually works the claims is far higher. Advisory Board research indicates roughly two-thirds of denied claims are recoverable. The buyer is not paying you two-thirds. The buyer is often paying you close to nothing.

How big the discounted pile usually is

Larger than most owners guess, because the pile grows silently. Per MGMA data, 50% to 65% of denied claims are never reworked or resubmitted, and in a practice that has been running for years without dedicated denial follow-up, those unworked denials accumulate into exactly the aged bucket the buyer will discount. HFMA-aligned analyses find that practices not actively managing denials commonly have 5% to 10% of gross revenue tied up in denied or underpaid claims at any given time. Run a hypothetical: a practice grossing $3 million a year sitting at the midpoint of that range has roughly $225,000 parked in denied or underpaid status. In a sale where that bucket gets credited at ten cents on the dollar, the seller hands the buyer about $200,000 of theoretical value in exchange for roughly $22,500, and the buyer may never work the claims either, in which case the money simply dies. And the pile is growing industrywide: initial denial rates hit 11.8% in 2024, up from about 10.2% a few years earlier, so a practice that last thought hard about denials in 2021 is accumulating aged AR faster than its own mental model suggests.

Do not forget the underpayments buried in the 'paid' claims

Denials are at least visible. Underpayments are not, and they will not appear on any diligence schedule, because the claims show as paid. Industry revenue-integrity analyses put commercial underpayments at 1% to 3% of net revenue annually: money that was contractually owed, partially paid, and never flagged. In a sale context this cuts twice. First, historical underpayments are recoverable cash that belongs to you, not to the buyer, if pursued before close. Second, systematic underpayment means your reported historical revenue understates what the practice actually earned under its contracts, which is an earnings conversation, not just a balance-sheet one, and earnings are what multiples get applied to.

The two clocks: timely filing versus the deal timeline

Here is what makes pre-sale recovery time-sensitive rather than merely advisable. Every denied claim sits on a contractual clock: appeal windows and timely filing limits that expire on fixed dates regardless of your transaction. A practice sale, meanwhile, routinely takes six to twelve months from first conversation to close. Denials that are collectible when you sign the LOI can be legally dead by closing day. Waiting to address aged AR until after the deal, or leaving it to the buyer, does not defer the value. It forfeits it. The window to convert that bucket into cash is now, while the claims are still inside their appeal periods and you still own them.

The pre-sale playbook

Twelve to six months out: inventory the entire denied and underpaid book, tag every claim with its remaining appeal runway, and triage by expected value. Work the winners aggressively: every dollar recovered pre-close is a dollar collected at face value instead of surrendered at the buyer's discount, and cash costs nothing to diligence. Six to three months out: document the recovery process itself, because a practice that can show a functioning denial-management operation presents a cleaner revenue cycle to buyers, which shrinks the uncertainty that drives AR discounts in the first place. What remains uncollected at close, you can now negotiate over with data (actual recovery rates on your own book) instead of accepting a discount schedule built on the buyer's ignorance.

The first step is knowing what the pile is worth, claim by claim, before anyone else puts a number on it for you. That is what our Recovery Audit is built to do. It is a $500 analysis we currently run at no charge for a limited number of practices each month: a full accounting of your denied and underpaid AR, what portion is recoverable within its remaining appeal windows, and what it is worth in real dollars, ending in a written go/no-go on whether recovery work makes sense on your numbers. If you are within a year of a possible sale, it is the only free diligence you will get on either side of the deal.