| Medical Billing Articles (updated Frequently)
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| Medical receivables Factoring: A tool to Finance your Medical Office |
| By: Marco Terry |
Regardless of what industry pundits say, opening a medical
practice can be both very rewarding and very lucrative. Of
course, as with any business, medical offices have their own
specific financial challenges. One of the biggest challenges for
medical practices of all sizes is adjusting to the long payment
cycles of private insurance providers and Medicare/Medicaid. It
is not uncommon for bills to insurance companies to take up to
120 days to pay. This slow payment cycle wreaks havoc in the
office's cash flow, forcing the medical office to carry the
costs of doing business - paying rent, equipment leases and
office staff - while waiting to get paid. This can be
prohibitively expensive and prevent the office from growing and
hiring additional staff. At its worst, it can threaten the very
existence of the medical practice.
However, there is a light at the end of the tunnel. There is a
financing tool that lets you capitalize on your slow paying
insurance companies and turn their slow payments into immediate
payments. The solution is to factor your medical receivables.
How does medical receivables factoring work?
Medica
l receivables factoring (or medica
l factoring for short) is a financing tool that allows you
to turn slow paying invoices into actual cash, by selling them
to a medica
l factoring company. The medical factoring company pays you
for them and waits to be paid by the insurance companies. It
eliminates the slow payment cycle, reducing the payment time
from 90 days to two days. This provides the medical office with
the necessary funds to meet expenses, such as paying rent and
staff. It also frees up capital to grow the business into new
areas.
The medica
l factoring process is fairly simple. Once a factoring
arrangement is established, your office sends its weekly
receivables to the factoring company for immediate financing.
The factoring company will calculate the actual amount paid by
insurance companies (called the net collectibles) and advance
you up to 80% of that amount. The remaining 20% is called the
reserve, and is used to settle billing discrepancies. Once the
insurance company pays the medical bill, the remaining 20% is
rebated, less the financing fee. The financing fee varies based
on how long the invoices were financed.
Although qualifying for factoring is relatively simple, most
financing companies will only work with medical offices that
have net collectibles of at least $50,000. Terms usually get
better as the practice grows. Medical practices, testing centers
and medical supply companies that have over $200,000 a month in
net collectibles are in the best position to get the best terms.
This is because insurance payment processing can be very complex
and there are a number of efficiencies that can be realized with
high volumes.
Advantages of medical office factoring
Medica
l office factoring has some advantages over other financial
products. The most important is that the financing is recurring
and happens every time you invoice an insurance company. This
makes it a cash on demand product. As opposed to loans and lines
of credit, the factoring line has flexible limits. As a matter
of fact, the limits are based on your ability to invoice, making
it an ideal growth tool. Lastly, doctor
office factoring is easy to qualify for and the personal
credit of the practice owners is usually not involved in the
financing decision.
Invoice Factoring Group
Invoice Factoring
Group is a factoring
company and can provide you with a free medica
l factoring or medica
l receivables factoring quote. Marco Terry, the president,
can be reached at (866) 730 1922.
About the author:
None
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| Keywords: Medical Claim insurance, medical offices, Medical Claim, medical office, any business medical, medical practice can, opening a medical, medical practice, medical, factoring |
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