What is medical factoring?
Factoring is a process of financing that varies from lending in the sense that the clients do not actually borrow money. In the healthcare industry, the factoring firms mostly buy insurance claims and invoices. They can even buy medicare claims. This is done by obtaining the financial rights to account receivables items. The factoring firm tends to cash advance in exchange for an outstanding invoice.
Medical factoring vs business loan
The financial firms providing medical factoring are aware of the cash flow challenges. That the healthcare providers frequently face. This is important because most of the banks see cash flow difficulties. As being harmful to their lending operations. Business loans in the United States have become strict. It is because of the global financial crisis. The lending terms are not attractive for any small business owners. This kind of process takes only a few days and it provides cash in advances to approved clients.
Here are the medical factoring tips that you need to know
Costs
The cost of factoring medical accounts receivables depends on the amount of the factored invoices. and the duration between the factoring and the date when the invoice was paid.
Payouts
You will be receiving funds between 24 to 48 hours after the initial approval. The average time can take up to 7 days. And the invoice has been submitted to your factoring partners.
How much percentage of the invoice will be advanced?
Your advance will fall between 70 to 95% of the approved receivables. Upon the payment from the third party. Any of the remaining payments that have not yet been paid by the advance and fees will be returned to your company.
Choosing the claims to be submitted for factoring
It may be submitted individually or by batch. You can select which claims to submit or withhold. The advantage of submitting the volume is that they often mean lower fees. Medical factoring is flexible, it grows and shrinks your business. This allows you to be in control of your cash flow and your financial costs.
Audit is required
The billing audit may be performed by the factoring company before an agreement. This is also for your protection. The factoring company wants to help you protect your cash flow. By securing that the medical insurance companies and government payers are billed properly.
It will be sector-specific
You will be doing the research and talking with the factoring companies. That has a great experience with healthcare factoring. Most of them have representatives who specialize in more sectors in the industry. Such as hospitals, laboratories, and diagnostics. It will be fluent in the needs and the challenges of the specific medical sectors.
Medical vs Healthcare factoring
The medical provider is good service provided. The invoice will be then factored in. Medical receivables factoring, the third party is billed by the medical provider. The invoice can be factored in.
Both of the vendors and insurance providers can be slow payers. The company uses factoring to connect the cash flow gap that exists in each situation.