The medical and health care industry is infamous for having an outdated billing and payment method.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.
Also Read: How Medical Factoring Works
TOP 11 IDEAS HOW MEDICAL FACTORING WORKS?
Here we will be discussing how medical factoring works and what are the important details regarding it.
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.
SIMPLE AND EASY
Healthcare institutions and companies should work with a factoring company to procure financing. There are numerous healthcare invoice factoring companies, and each of them operates along similar ways for a similar purpose.
Transactions and arrangements are straightforward. You auction and appoint your claims to a medical company. The financial company accelerates funds for the claims and maintains the claims until the time of expiration. The transaction is clear when the insurance bearer pays the claims.
Transactions work in order. Firstly, you deliver your supported claims to the factor. Then the factoring company moves forward up to 80% of the claim. The claim is generally paid in about 30-120 days. The agency reimburses the resting 20%, minus the financing fee. These steps differ based on the capacity of the claims and the capacity of the business. This is how medical factoring works.
ANALYZE AND INSPECTION
Once a medical company picks a factoring company, then the factoring company will analyze and inspect the business. They will also survey the account statements and information on clients and patients.
After considering and examining the company, the healthcare company will wave an agreement and arrangement with the factoring company. This agreement would include information about the payment method, and the maximum dollar credit line.
Once the agreement has been arranged and signed, the factor will deliver amelioration to the healthcare company also known as the advance rate, which is normally 80-90% of the account’s rate. Factoring involves transmitting the authority of bill and check collections of the factoring company.
The clients would then be contacted by the factoring company regarding how to deliver the payment. Once the client has cleared the payment, the factoring company would send the remaining amount also known as the reverse amount, to the company. The factoring company would also reimburse or compensate for their assistance by deducing their service fee or provide a bonus from the payment.
WHO CAN USE MEDICAL FACTORING?
Medical factoring can be used by a business that bills or invoices government or private schemes. Many healthcare factoring companies are useful to businesses. Some examples are Hospitals, Medical offices/clinics, Pharmacies, Medical supply companies, Rehabilitation centres, Medical staffing agencies, Nursing homes, Nursing providers, Hospices, Diagnostics centres.
There are also other examples like surgery facilities, durable medical equipment providers, MRI clinics, laboratories, Cancer care centers, etc.
EASY TO QUALIFY
It is often easy to qualify for medical factoring than a business loan. Your business needs to meet standards and some requirements to qualify for medical receivables factoring. This includes at least three months of medical bill history.
A minimum of $35,000 every month in accounts receivables. You would also need insurance claims that are due in 30-120 days. You would also need to show other invoices that are due in 30-90 days. There should be no unpaid taxes or liens.
Medical factoring companies base their financing on the net payment only, for insurance claims. This is the amount the insurance company covers and not the total invoice amount.
CHOOSING A FACORING COMPANY
There are many steps that you need to consider while choosing the right medical factoring company. You need to find candidates; the easiest way is to search companies that provide medical factoring on the internet. Once you have the names of the factoring companies, you must get all the important information you need.
You should interview the factoring companies, ask them questions. You should also have knowledge about the areas that these companies specialize in. Some companies focus on specific industries such as nursing homes, medical offices, imaging centers, or hospitals. You need to be sure that the elements you select are comfortable with your specific field.
You must also ask your factors to provide you with references and sources. Proper information about the fees structure is important too. You need to know if companies charge a due diligence fee. Some companies charge nominal fees, while others charge fairly high upfront fees. It varies from company to company.
You need to identify the best proposal by comparing factoring proposals which is not always easy since there are different programs. You should not only focus on the costing but other factors too. You need to consider if the company was forthcoming with information, and if they were helpful and do you feel comfortable with them and if they are easy to work with?
There are many benefits to choosing medical factoring as a financial option. You receive the money fast and easily. It is a flexible option. It allows you to plan for growth and advancement. It’s also convenient and accessible to growing healthcare businesses that are running deep on assets and resources.
One other important aspect is that it works with Medicare and Medicaid. It can be used to finance Medicaid and Medicare receivables. This example is very important for healthcare providers who assist a large patient base.