Is your small medical business billing Medicare, Medicaid, or private insurance companies but still struggling to collect payment? Is the worry of meeting weekly or bi-weekly payroll draining your health and reserves?
This is common in the medical industry. In healthcare, there are over 20% of our economy, and over 75% of businesses fail due to cash flow. However, the medical industry is rapidly growing and expects to be the leading employer in the USA by 2024.
Entrepreneurs, small businesses, and emerging medical companies need reliable cash flow solutions to capture this excellent market opportunity. With the help of Bankers Factoring, we strategically partner with our clients to bridge their cash flow gaps and provide efficient business financing.
What is Third-Party Medical Factoring?
Medical invoice factoring helps businesses that bill private insurance companies, Medicare, Medicaid, and private healthcare facilities and need help with cash flow problems. But cash flow issues are caused by slow-paying or late-paying customers and extending lengthy credit or payment terms.
Medical factoring is also commonly referred to as medical invoice factoring or medical accounts receivable (A/R) financing. Medical factoring is also frequently used by healthcare providers, medical professionals, independent contractors, and other healthcare-based businesses.
If you want to learn more about third-party medical factoring, then visit our Medical Factoring page.
Does medical factoring solve cash flow issues?
Businesses in the healthcare and medical industries face the challenge of lengthy payment cycles. It is common for medical claims to be paid slowly, somewhere between 30 to 120-days or longer. However, these extended payment terms create gaps in your cash flow, creating problems for paying employees, bills, or rent.
As a result, this problem can affect healthcare businesses of all sizes. However, it predominantly affects new companies and those that are snowballing. This is highly prevalent in small businesses, entrepreneurs, and business owners expanding and scaling their businesses.
To learn more about factoring invoices, visit our Cash Flow Guide.
How does medical factoring work?
Medical factoring is when businesses (clients) sell their customer invoices or receivables to Bankers Factoring. By selling your invoices to Bankers Factoring, we provide a cash advance of up to 90% of the invoice value.
For example, if your medical business has $100,000 in receivables from your customer (the account debtor). You can sell these invoices to Bankers Factoring and receive an initial cash advance of up to $90,000.
Medical factoring solves cash flow problems by providing quick payments for your medical claims or invoices. Transactions are simple, fast, and hassle-free.
The typical medical factoring transaction follows these steps:
- The client invoices their customer (account debtor) for delivered goods or services
- You submit your approved claims or invoices to Bankers Factoring
- After approval, we cash advance up to 90% of the accounts receivable value
- The claim or invoice is paid in 30 – 120 days to Bankers Factoring
- We rebate the remaining invoice balance, less the factoring fee
The amounts advanced (in steps 2 and 4) vary based on the size of the business, the size of the claims, or the creditworthiness of the account debtor.
Financing is based on net claims
In medical factoring, the transaction is financed given the net payment of the claim. Net payment is the actual amount insurance will cover and pay for the claim. It is common for the net payment to vary from the gross invoice amount.
Handling Medicare and Medicaid claims
Financing Medicare and Medicare claims require a particular procedure since they cannot assign like conventional medical claims. Bankers Factoring can process Medicare and Medicaid claims with our proven process of complying with federal and local regulations.
Medicare and Medicaid claims are usually handled using a bank account called a sweep account (also known as a control account). Sometimes this refer to as a managed account. The type of account retains the client’s ownership but provides Banker’s Factoring the operational control to obtain its payment.
Since you (the client) own the account, Medicare/Medicaid can still remit your payments to it. This still allows Bankers Factoring to secure their position and enable the client to continue factoring receivables.
Advantages of Medical Factoring
The main advantage of medical factoring is that it can solve cash flow issues created by slow-paying insurance companies or providers. With the rapid growth of the healthcare industry, many businesses in expansion mode benefit from payroll factoring.
Additionally, medical factoring is a flexible type of financing. The line can adapt to your business and grow, or shrink, as needed. This flexibility allows you to control your cash flow and your financial costs. Few products offer this flexibility.
The Bankers Factoring Advantage
- Same day funding after approval up to 90%
- We take on the credit risk
- Total A/R Management
- Flexible line of financing
- No hidden fees
- Rates as low as .75%
Who can use medical receivables factoring?
Businesses use this solution to bill private or government insurance programs. Some examples include:
- Medical offices
- Nursing homes
- Medical supply companies
- Diagnostic imaging centers
- Surgery facilities
- Rehab clinics
- Travel Nursing Companies
- Home health care agencies
- Medical staffing agencies
Improve your cash flow and work with Bankers Factoring, your local medical / healthcare factoring company.