The healthcare industry is one of those sectors where there is a long wait between the time patients receive medical treatments or services and the when the medical facilities get paid. In most cases, it takes up to 120 days for insurance to pay medical claims.
Eventually, slow payments take a toll on the cash flows of hospital and medical facilities, specifically new and startup businesses. When lulls become too much, many healthcare providers and medical professionals turn to medical factoring. Medical factoring is a type of financing that provide you with quick payments for your medical claims.
Medical Factoring Explained
Medical factoring is simple and straightforward. Basically, you sell and assign your claims to a medical financing company, which advances up to 80% of the funds to you. The company holds onto the claims until they mature. It takes insurance companies between 30 and 120 days to pay a claim. When the insurance carrier pays the claims, the transaction settles. At this time, the medical factoring company rebates you the remaining 20% of the funds minus the financing fee. The amount of money the financing company gives to a business depends on the company’s size and the size of the claims.
Types of Businesses that Can Apply
Any business that bills private or government insurance programs, such as Medicare or Medicaid, can apply for medical factoring. Types of businesses that can take advantage of this unique financing are:
- Diagnostic imaging centers
- Home health care agencies
- Medical offices
- Medical staffing agencies
- Medical supply companies
- Nursing homes
- Rehabilitation clinics
- Surgery facilities
In most cases, healthcare businesses should bill a minimum of $40,000 per month and be able to produce at least three months of collections history to qualify for financing.
Important Details About Medical Factoring
An important fact about medical financing transactions are that they are based on the net payment of the claims, which are the amounts the insurance will pay for the claim. It is equally important to note that the amount paid amount may be different that the gross billed amount by the medical business.
Since Medicare and Medicaid cannot be treated like traditional medical claims, these types of claims need to be handled with a special type of bank account known as a sweep or control account. Not every medical factoring company are authorized to handle these types of claims and those that do, their processes vary.
The Benefits of Medical Factoring
In addition to alleviating cash flow problems, which is common for medical businesses that are growing at a rapid rate, this type of financing is flexible. This means if your business continue to grow or suddenly takes a step back, you can adjust the financing as needed.
Receiving claim payments quicker also allows you to put more money into your business, such as hire new employees, expand or update your current building, or open new locations.
When It’s Time To Apply
Medical professionals and healthcare facilities no longer need to be at the mercy of insurance companies that take long times to pay out claims. Medical factoring helps you get the money you need when you need it. This versatile type of financing give you the opportunity to ensure you have enough capital on hand to pay operating expenses or to build up enough cash flow to better your business. use the money to better your business.Get Started Now