Using Medical Factoring for a Struggling Practice
Running a private practice for healthcare is rife with the risks of financial struggles, especially when it comes to startup funds, and particularly because insurance payouts are received up to four months after the treatment is dispersed. In these cases, an ideal solution is to work with a medical factoring company, which finances insurance fees until they are paid in a system similar to short term loans.
Financial Risks of Private Practice
The financial problems with running healthcare centers stem from there being many day-to-day operational costs, including rent, paying staff, and buying medical supplies, which can be expensive. While these are all predicable expenses that generally occur on a regular schedule, the income returns are often just the opposite. Insurance companies, including Medicare and Medicaid, on average pay healthcare practices between 30 and 120 days after the treatment or consultation has been billed. Because of these delayed and sporadic payments, private practices often find themselves struggling to stay afloat.
How Medical Factoring Provides a Solution
While the common solutions to finance healthcare centers are to invest more private capital or take out bank loans, these are less than ideal. Just to start the business in the first place usually requires heavy investment by the primary doctor, and likely some loans as well. Thus, digging deeper into this hole can run up the practice’s debt unsustainably. Medical factoring, however, provides immediate payments of up to 80% of each issued invoice, with the remaining amount (less financing fees) issued after the insurance payment is made. Factoring therefore allows the practice to receive predictable and stable income to offset operational expenses.
What To Know Before Choosing a Factoring Company
It is usually easy to qualify to receive medical factoring, though it often requires an audit of the practice’s financing before funds are provided. This is to ensure that the healthcare center is billing insurance companies correctly and is getting paid as expected. Some factoring agencies may also charge an upfront due diligence fee, which varies depending on the size of both the agency and the practice. It is also important to note that only some factoring companies work with Medicare and Medicaid claims. These usually have to be handled through a separate line of financing, though there are some factoring agencies who specialize in dealing with public insurance claims.
After deciding to work with a medical factoring agency, private practices can begin submitting approved insurance claims to receive immediate partial payouts. The benefits of this system are superior for practices that are just starting out, are growing quickly, and need tangible solutions for day-to-day financing.