The medical and health care industry is infamous for having an outdated billing and payment method. To top it off with the problems of insurance and the administration, the bills could take weeks or even months before they are being paid.
Traditionally, medical companies do have customers with a tendency to pay slowly, which directly affects the business by troubling the growth and the cash flow of the company. For this particular concern, medical companies could advantage from healthcare account factoring, also known as medical invoice factoring.
Medical factoring is a method of financing, but many owners and operators need to understand and know the frequently asked questions in this department. Some of the important medical factoring FAQs are as follows:
Also Read: How Medical Factoring Works?
WHAT IS MEDICAL FACTORING?
Medical factoring guides the medical companies that bill private insurance companies like Medicaid and Medicare that have problems with the cash flow mainly because of delayed and slow payments. This variety of financing is usually used by medical competent and healthcare suppliers.
The lengthy hold up between when the facilities are delivered and when the payment of the bills is done can create enormous problems with the cash flow for suppliers and providers. Medical factoring deals with this problem by offering the healthcare providers with the avenue to cash immediately for invoices that are yet to be paid by Medicaid, Medicare or other independent insurance companies.
Vendors and Providers are the two types of medical companies that profit from medical factoring. Vendors are any person or company that designs, develops, sells, and/or supports goods or services such as apparatus, medical personnel, transcription of documents and paperwork services, shipping services, etc.
Providers are individuals or institutions that aid health care services like therapists, dentists, physicians, nursing, pharmacy, etc. Providers typically invoice third-party payers like insurance companies. Medical factoring is excellent for both vendors and providers because these types of working fields have the character of working with credibility and trustworthy, but clients that pay slowly.
WHICH IS BETTER, MEDICAL FACTORING OR BUSINESS LOAN?
Cash flow challenges always make financial firms and institutions that give medical factoring conscious. Medical factoring is very beneficial because most traditional banks check and see cash flow problems as a qualification when it comes to lending operations.
Due to the global financial crisis, in the United States to receive funding, many business loans have strict policies and requirements. The terms and conditions are not very welcoming either. But with medical factoring, the process is easier and flexible. It only takes a couple of days to receive fast cash and it is a much better option than a bank loan.
WHAT IS THE PROCESS OF MEDICAL FACTORING?
Medical factoring provides you with quick payments for your medical claims. Before signing an agreement with you, the medical factoring company will review your invoices and go through the credit checks on clients and patients.
The transactions are easy; you sell and give your claims to a medical factoring company. The company advances funds for your claims until the time they mature. Once the insurance carrier pays the claims, the transaction is settled.
Firstly, you submit your claims to the medical factoring company. An advancement of up to 80% of the claim is taken up by the medical factoring company. The claim is paid within 30-120 days. The remaining 20% is rebated by the factor, minus the financing fee. This is how medical factoring works, it’s easy and quick.
WHAT TYPE OF ACCOUNT RECEIVABLE PRODUCT IS ACCEPTED?
Valid invoices and insurance claims for services in the health care sector are approved and accepted by medical factoring companies and firms. Claims made to state agencies, insurance companies, Medicare and Medicaid are accepted as well, in the instance of factor funding.
WHO HANDLES THE PROCESS OF BILL COLLECTION?
One of the greatest advantages of medical factoring is that once you set it up, you lift the problems and burden from your shoulders of collection of the bills for many small business owners. The collection process becomes the business of the medical factoring company since they purchase the financial rights to receive payments from account receivables.
There are many options to choose from, like recourse and non-recourse factoring. Non- recourse means that if there are any losses from unpaid claims or invoices, the medical factoring company will be fully responsible. While with recourse factoring, there is an agreement where only a part of the risk will be absorbed by the medical factoring claim.
WILL THE CLIENTS AND PATIENTS NOTICE ANY KIND OF DIFFERENCE IN THE PROCESS OF BILLING?
American clients and patients who are in business with medical services providers know how to deal with third parties when it comes to paying off the claims, invoices, and bills for most of the part. The process of medical factoring is very transparent and simple. Business owners and operators who use medical factoring should explain their clients and patients about the process, terms, and conditions.
HOW DOES MEDICAL FACTORING BENEFIT THE HEALTH CARE INDUSTRY?
The most important aspect of using the medical receivables factoring is that your cash flow dramatically gets enhanced and reformed. Instead of the usual 30-120 days, your medical claims would be paid in just a couple of days. For growing and small healthcare providers, this particular advantage can be very beneficial because they are usually functioning low on resources and assets.
The medical receivable factoring provides you with flexibility and adjustability. Medical receivable factoring allows you to plan for growth and advancement. With predictable and certain revenues and also having improved cash flow, it allows you to plan for the growth of the business.
One other great factor is that medical factoring is applicable for small and growing business both. It is available to doctors and small business owners who are new and are just starting and do not have substantial and sufficient assets. It’s also convenient and accessible to growing healthcare businesses that are running deep on assets and resources.
It can be set up brilliantly quickly. Medical receivables can be set up in not more than a week or two.
These are some important medical factoring FAQs that you should keep in mind while opting for this financial option.