Medical Factoring Article: A Financing Option For Medical Professionals
Doctors and professionals that bill insurance, HMO’s or Medicare/Medicaid know how the payment cycle of the industry works. Basically, hurry up and wait, is the call of the day. It is not uncommon for a medical professional to send a bill to an insurance company and have to wait 30, 90 or even 120 days before they get paid. In the meantime, the office needs to pay employees and suppliers.
Unless the medical office has a large cash reserve, it is likely to run into problems. Sooner or later, it may run out of cash. One alternative is to go to the bank to obtain a business loan or similar product. That works, sometimes. But banks can be hard to work with and seldom increase loans after giving them. What happens if your medical office keeps growing and needs more cash?
Medical receivables factoring is usually a better alternative. Medical factoring eliminates the payment wait, getting your insurance claims paid in as little as 2 days. This streamlines cash flow, allowing the medical office to easily meet its obligations.
Factoring receivables is simple and works as follows:
- The medical office sends claims to an insurance company
- A copy of the claims is sent to the factoring company for financing
- The factoring company advances between 60% and 85% of the claims
- Once the claims are paid, the transaction is settled
Invoice factoring is relatively easy to obtain and quick to set up. The biggest requirement is that the medical office be well run and that it bill private insurance companies or Medicare/Medicaid. Factoring lines can be set up in as little as 5 days. The cost of factoring varies and will be determined by a number of parameters such as the types of claims you handle and the size of the claims.
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