Factoring

By Dylan Mazeika

When insurance companies and customers don't pay their bills within a timely manner, it's easy for health care businesses to get stuck in a short-term cash crunch. This shortfall can have a huge impact on payroll and other big expenses. With too many accounts tied up in receivables, a business is at a major disadvantage. But obtaining a loan isn't the only option to improve cash flow.

Medical factoring allows health care companies to quickly receive money based on the total value of outstanding receivables. Receivables factoring may be the best solution for medical offices, medical supply companies, and health care practitioners that need funds for business operations and don't want to or can't obtain additional financing from a bank.

Who benefits from medical factoring?

Often forced to wait up to 90 days to get paid by insurance companies, HMOs, or Medicare/Medicaid, healthcare professionals and medical equipment providers routinely confront a number of financial challenges when attempting to grow their practice or business. But with medical factoring, you can get your insurance claims paid in as little as two days, producing the financing required for payroll, supplies, and rent.

This practice makes medical receivables adjustments ideal for:

• Hospitals
• Growing medical practices
• Laboratories & medical testing centers
• MRI & radiology clinics
• Nursing homes
• Rehabilitation and physical therapy practices
• Ambulance services
• Medical supply companies
• Other types of health care businesses that work with insurance companies

Advantages of medical factoring

Unlike typical factoring for businesses, medical factoring for the health care market offers more options for receivables that pass their 30-day and 60-day terms. In doing so, medical factoring allows health care companies and businesses to accelerate outstanding payments, improving short-term cash flow.

Similar to any financial service, there is a fee involved. These fees are based on the volume of claims that you decide to finance and how efficiently your business is run. In general, if you're able to finance a high medical claim volume, you'll qualify for lower rates. Based on this criteria, medical factoring rates currently range from 2% to 3.5% per month.

That said, there are several advantages to using this type of service when funds are low, including:

• Quick receipt of funds. Instead of waiting up to 90 days to receive payment from an insurance company, a business can obtain funds within 24-48 hours from a medical factoring company.
• Financing based on net collectibles. Money received is based on the amount an insurance company would be paying for the claims, not the gross amount.
• Low rates. The fees involved with medical factoring vary by company, but most offer discounts on large volumes.
• Simple financing process. Most medical factoring companies work by requesting a copy of all billings and then send an advance for a certain percentage. The remainder of the funds is put into "reserve" until the invoices are paid by the original client. After the percentage fee is calculated, the remainder is sent back to the medical office or put directly into a rebate account.

Looking for a medical factoring company for your practice or business? Try our free request for quotes service. We'll match you to qualified factoring providers who can help get your cash flow back on track.