Why Practices Use Medical Factoring

Building a new medical practice can seem daunting. From purchasing equipment to paying salaries and bills, worrying about business can divert your attention from patient care. One of the most difficult challenges to manage is the long gap between when you treat a patient and when you are reimbursed by insurance.

Your landlord, your staff and your suppliers need to be paid on time. But insurance companies can take up to 120 days to settle claims. Balancing this equation can be a struggle for any practice. Even established medical offices can be derailed by extended payment timelines. If concerns about cash flow are an ongoing distraction, or actually limiting your practice growth, medical factoring can provide both peace of mind and a more dependable stream of revenue. When you and your staff are not juggling to stay financially current, you and can relax and focus on what you do best.

Avoid Debt

Doctors are fortunate to benefit from a number of loan programs designed especially for health care professionals. If you are considering a doctor loan to take up the financial slack, medical factoring may offer an attractive alternative. Loans are a good way to finance major capital expenses such as a piece of equipment or an office expansion project. But if you are a new practitioner, chances are good that you already have significant educational or other debt. Why borrow more to sustain daily operations when you can use your own receivables without waiting months to be paid?

Have Money When You Need it

Medical factoring is easy to set in motion and easy to administer, especially if your business systems are in good order. It works like this: You partner with a financing company that purchases your insurance claims. After a claim has been approved, it gets submitted to the factor. The factor will immediately pay you a significant portion of the claim. As soon as the claim is paid in full, the factor will send the remaining funds minus a fee. The fees depend upon the amount of your receivables and the insurance company’s payment schedule. Terms typically improve as your business grows. It is important to note, that the factor will only pay the amount that was received from the patient’s insurance. This may be different than the amount that your office billed.

Many Types of Providers Benefit

Doctors are not the only providers who stand to gain from medical factoring. Nursing homes, hospices and pharmacies may also be eligible to participate in a factoring arrangement. Putting receivables to work immediately can help many healthcare businesses to enjoy greater productivity and a more stable business environment.

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