Factoring is when a business sells its receivables for a service or product delivered to another business. Many people in the healthcare industry think that medical receivables can't be factored because the "customer" is a person and not a business. But medical receivables can be factored because in most cases, your payment comes from Medicare, Medicaid, Blue Cross/Blue Shield, Aetna, etc. In other words, the payment is coming to you from a business, so the receivables CAN be factored.
In the past, healthcare professionals could depend on efficient operations to keep
their cash flowing, but that often is not enough now. Increased costs and longer
times for insurance companies and Medicare to pay the bills are making it
impossible for them to keep their practices running smoothly.
Most factoring companies do not factor medical receivables, but there are several
that specialize in this niche. They fully understand that accounts that are paid by
third party payors take more due diligence and more things have to be looked at
than with "regular" factoring. They know these receivables are filed and paid
differently by different states and then have elaborate payment methods and
computations. There are government and insurance regulations, delayed
reimbursements, HMOs, contractual allowances, multiple payors and many more
challenges that are only found in the healthcare industry. The factors who specialize
in your industry know all the lingo and terminology and will immediately understand
your needs.
The healthcare businesses that will most easily be approved for factoring are: Acute
or Rehab or Specialty Hospitals, Physicians, Surgery or Imaging Centers, Dialysis or
Urgent Care or Rehab Centers, Ambulance companies, Medical Labs, DME/HME,
Osteopaths, Oral Surgeons, Pharmacies, Home Health Care and Workers Comp
Healthcare Providers and some Chiropractor groups.
There are certain types of health related businesses that might be more difficult to
factor, mostly because the net collectable value from the private insurance
companies or government is too small each month for a factor to be interested.
These are small chiropractors, dentists, cosmetic surgeons and Lasik doctors (often
not covered by insurance) and some nursing homes because of credit problems.
Medical receivable factoring companies all have different minimum monthly net
collectable amounts, so ask your broker for the one that will be able to help your
business. Some work with amounts as small as $35,000-$50,000, others have a
minimum of $200,000.
Once your account is set up with the factor, you will receive up to 85% of the
invoices within hours of turning them in each week. When the bills are finally paid,
you will receive the rest of the amount owed, minus a small fee. The fee depends on
many things and will probably range somewhere between 2% and 6%.
You will lose all the stress of not knowing when you will be paid for the work you
are doing. You'll be able to pay all your vendors and staff on time, you'll be able to
keep up with all your bills. You will even be able to hire more staff or buy more
equipment, because you'll know you can accept more business.
There have been instances when a medical business has been on the brink of
bankruptcy and decided to try factoring as a last ditch effort and it saved them.
They were able to turn everything around and are thriving now.
Factoring should be considered as a tool for growth and management, not as a last
resort to save your business. Unless your practice has very expensive equipment or
diagnostic devices, your largest asset is its accounts receivables and these assets
can be used to keep your business running smoothly and growing.
Donna Poisl is President of Creative Funding Solutions. CFS works closely with several of the best factors in the country, each with different rates, fees and requirements and is able to find the best one for each client. Contact Donna at Medical Factoring.
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