Often times medical billings take about 90 days to be paid by insurance companies, HMOs, or Medicare companies. This is a problem for the medical companies because they need to pay their suppliers and employees and they need to purchase new medical equipments to provide health care services to their patients. Receiving money for these billings can be done immediately with medical receivable factoring.
Medical receivables factoring is a process where medical companies receive payments that are already due from their patients. In practice patients entrust these medical receivables to insurance companies that will pay the medical company in return. The problem here is that it usually takes 90 days before these unpaid bills will be fully paid. In order for the medical companies to survive while waiting for the bills to be settled, medical centers sell these bills to third party factoring companies.
With medical accounts receivable factoring, medical companies can have immediate funds for their operations. The medical claims are sent to factoring companies and in return the factoring company will pay the medical company as much as 85% of the value of the medical claims presented to them. After the claims are paid by insurance companies and other third party payers, then the medical company will get the remaining balance from the factoring company less their factoring charges.
Factoring charges usually range from 1.5% to 3.5% on a monthly basis. This is usually charged monthly until the medical claims are settled by the insurance companies. However, the charge varies from one institution to the other depending on the reputation of the business. Usually medical factoring is done with medical institutions that are small in size and limited in financial capability.
Some of medical facilities that use medical receivable factoring include hospitals, physicians who are new in their profession, imaging centers, ambulance service providers, medical laboratories, nursing and rehabilitation homes, dialysis centers, and a lot more.
With this type of financing, medical institutions can generate funds immediately for their cash flows. They don’t have to worry about paying their suppliers and employees and they don’t have to fret about purchasing medical equipment. In general, medical staff and even the management team of the whole institution can focus more of their time and energy in providing the best medical practices without waiting for their medical bills to be paid by insurance companies. Medical companies can have a partner in running their operations with the help of medical factoring companies.
