Medical Accounts Receivable Financing FAQ’s
Medical accounts receivable financing, synonymous with the term “medical factoring”, is a significantly helpful working capital tool that is available to healthcare providers. The goal of this post is to address some of the more common questions surrounding A/R financing within the medical field. However, for additional information, feel free to visit our Medical Receivables Financing page. Following are just a few of the frequently asked questions:
What is medical accounts receivable financing?
It is a process whereby a provider can submit their pending claims to a specialized factoring company and receive advanced funding for those receivables. Rather than waiting the typical 90+ days for reimbursement, the provider can obtain capital within a matter of days.
After services are performed, the provider simply completes the typical billing process while also submitting copies of the paperwork to the factoring company. The factor will then deposit funds (typically 80% of net collectable value) directly into the provider’s bank account. As soon payment is received by the factoring company, any remaining funds are deposited into the provider’s bank account less a small factoring fee.
What types of providers typically use medical receivables factoring?
While this working capital program is generally available for all providers that are billing insurance companies and Medicare/Medicaid, some of the more common clients are sole and group practitioners, specialty surgery centers, chiropractors, rehabilitation and physical therapy facilities, and nursing homes.
Do I have to factor all of my claims?
No, you choose which claims to factor and when to factor them.
Are there monthly minimum and maximum funding requirements?
Yes. In most cases, there is a “soft” minimum expectation that the provider will fund at least $100,000 per month. However, in the event a provider is billing less than $100,000, factoring may still be available if there is growth potential.
The maximum monthly purchase limit is $10 million.
What happens if the payer remits a lower amount than anticipated?
First, funded amounts are based on the anticipated net collectable value of the receivable (as determined by reviewing the provider’s historical collection reports). If the actual payment is still lower than the expected net collectable value, the 20% “reserve” (remaining after the initial 80% advance) will help to cover any shortages.
Am I restricted as to how I can utilize the funds?
Absolutely not. In contrast with the restrictions associated with traditional lines of credit, providers are free to use the factoring proceeds for anything deemed necessary. Whether that means covering payroll or other operating expenses, purchasing new equipment, expanding the current practice, or just about anything else, there are no limitations imposed on the use of the funds.
How long does it take to set up a factoring account?
In most cases, new accounts can be ready to fund within about 10 business days. Once an account is established, recurring fundings are typically executed on a same day/next day basis depending on what time of day the paperwork is submitted to the factor.
While this article certainly does not answer all questions related to medical accounts receivable factoring, we hope it provides a good starting point. If you would like to learn more about the process and how it works, feel free to Contact Us today. Our specialists are prepared to answer your questions and help set up your account if you decide to move forward.