Three Reasons to Use Medical Receivables Factoring
What do you do when the insurance company or Medicare does not pay your claim for several weeks and you have employees to pay and other overhead expenses to cover? The costs associated with operating any sort of medical practice are often quite high. Combine these expenses with all the outstanding claims that remain unpaid for weeks or months and the result is never pleasant. While a business line of credit may be the first choice for most providers, the borrowing limits imposed by lenders can often become too restrictive very quickly, especially for a growing practice. If this becomes your reality, or if a line of credit is not an option in the first place, it may be wise to consider Medical Receivables Factoring. Following are a few of the primary reasons why medical factoring is a viable solution:
Medical Receivables Factoring Provides Immediate Access to Working Capital
As soon as your practice bills the patient and submits the paperwork to the insurance company or Medicare, simply submit a copy of your paperwork to the factoring company. The factor will then deposit up to 85% of the net collectable value of each claim directly into your practice’s bank account. This “advance” is typically executed within 24 hours or less from the time the factoring company receives the paperwork. These funds can be used for anything your practice deems necessary. Common uses include payroll and other, general overhead expenses. As soon as the insurance provider or Medicare remits payment in full, the factor then releases the remaining funds to the practice after deducting a small factoring fee. By factoring your medical receivables, the burden of dealing with extended payment terms now falls largely upon the shoulders of the factor as opposed to your practice.
Factoring Companies Always Provide Collections Support
One, often overlooked facet of the factoring industry is the support that these companies provide in the realm of collections. When a practice turns its receivables over to a medical receivables factoring company, it is in both the factor’s and medical practice’s best interest for payments to be received in a timely manner. As a result, factoring companies provide assistance with and specialize in collecting on outstanding claims as quickly as possible. Most medical practices have a multitude of tasks to accomplish in their daily operations. As a result, turning collections over to an interested third party is often an easy decision to make.
Medical Receivables Factoring is More Flexible than a Line of Credit
When a medical practice has an immediate need for working capital, waiting several weeks for a bank to approve a line of credit may be detrimental to its operations. However, depending on the size of the practice, establishing a medical factoring facility can take anywhere from a couple of days up to one week. Furthermore, if a practice only chooses to factor some of its claims, it can do so and therefore reduce costs by avoiding unnecessary factoring fees. Best of all, there is no ceiling on the dollar amount that a practice can factor whereas all traditional lines of credit are limited by the bank to a pre-determined borrowing capacity.
Conclusions
According to this Washington Post article by Lenny Bernstein:
“The United States faces a shortage of as many as 90,000 physicians by 2025, including a critical need for specialists to treat an aging population that will increasingly live with chronic disease, the association that represents medical schools and teaching hospitals reported Tuesday.”
With patients finding fewer and fewer options for providers, it is expected to put additional strain on all existing practices. While a growing patient load obviously translates to additional revenue opportunities, it is even more vital for practices to have the working capital needed to capitalize on this growth opportunity. To learn more about how medical receivables factoring can help, feel free to contact us today for a personalized discussion focused on your practice and its capital needs.