Medical receivables factoring can be a great option for many practices waiting on insurance payments but need the money for daily expenses now. With insurance payments taking any where from 30 to 90 days, waiting is not always an option. Medical receivable factoring will free up those funds and only cost you a small percentage, allowing you to meet your regular financial needs as well as any that may be unexpected.
What is Medical Receivables Factoring?
Medical receivables factoring includes a third party payer (i.e. Medicaid, Medicare or private insurance company) within the medical invoicing process. Payments from these third party payers can take any where from 30 to 90 days to receive, at times longer. They clog cash flow within many medical practice, especially small practices or those just starting out. The medical receivables factoring process takes these accounts receivables insurance payments and offers “x” amount of funds in return, charging a fee for their services.
The Medical Receivables Factoring Process
- You medical practice submits bills to a third-party payer (i.e. Medicaid/Medicare, HMOs, private insurances, personal injury lien settlements, or worker’s compensation insurances, and so on) for the medical services provided to said patient.
- Your practice then sends a copy of the invoices to the invoice factoring firm.
- The factoring company then purchases the invoices from your practice and advances up to 80% of the expected net collectable value. The funds are usually deposited directly into your medical practices bank account within 24-72 hours.
- The factoring company uses the remaining 20%, also known as the reserve, as a buffer in case some of the medical practices bills does not get paid or if the bill was incorrect.
- When the invoice is paid by the third-party payer, the reserve, minus the factoring fee, is then released back to your medical practice.
Free Up Cash Flow Within Your Practice
The process is simple, the benefits are eminence, making Medical Receivables Factoring a great option for nearly any medical practice. If your practice has a block with its cash flow, turning to a factoring company may be the best option. They will get you the money your practice needs quickly and take away the wait of third party payments. Your medical practice will find financial stability just by taking part in this simple medical factoring process.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.