Medical Invoice Factoring – How to speed up cash flow in tough times

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These are tough times for the Health industry. Revenues in general have slowed due to the recession, as more people have lost their jobs and health insurance. Elective operations and methods have also fallen. To compound the problem, Medicare is offering a lower reimbursement rates and insurance companies are taking longer to pay. Medical invoice factoring is an important tool now more than ever to bring much needed capital into practice or hospital.

Accounts receivable factoring has been in existence for centuries, but is relatively new for the medical and dental industries. Medical invoice factoring is available to Billings third party only. These are government programs like Medicare, Medicaid and various state programs and insurance companies such as Blue Cross and Aetna. Patient responsibility expenses such as copays, deductibles, and the selected action can not be a factor.

Medical Accounts factors in a nutshell

Simply put, it is to buy a medical practice, clinic, or a third party receivables hospital discount. The factoring company advances 75% to 85% of net collectible value of Billings in the local money, which is wired directly to a bank account held. The remaining amount (15% to 25%) is called the reserve and returned to the doctor or dentist hand with the government or an insurance company pays the bill less elements collected during the period.

Set up an account factors arrangement

The types of initial information required on the front end varies from episode to episode. But in general, a completed application that requests basic information about the practice, the past two years financial statements, articles of incorporation or LLC operating agreement and existing third-party receivables aging report is required. If an episode like what they see, they will issue a letter of intent otherwise known as a term sheet. This document states the proposed terms of the contract, such as advance rate, the fee rate of thirty days, and the cost of the due diligence review.

If the provider agrees to the terms, he signs a memorandum of intent and puts a check for the amount due diligence review. The revision is necessary for the element to review billing and collection systems analyst, analyzing the history museums of the payer, and determining the average percentage of Gross Billings are expected to be paid. Clean collecting percentage will be applied to accounts received by factors.

If the element is satisfied with the results of due diligence, agreement concluded as follows in specific terms how the relationship will work for both parties. I always advise my clients that they review the deal very carefully, or have their lawyer look over so they will feel good about what they are buying. I represent only medical invoice factoring company producing contracts are straightforward and relatively easy to understand, so it is not likely to be any “surprises” in the document. Once the contract is signed, financing can start immediately.

How Invoice Factoring differs from a bank credit line

Many banks are not comfortable lending to medical and dental providers when insurance is third party accounts of their reach. That’s why they put restrictions on the credit line. With medical accounts receivable factoring, financing is usually limited to the pool a third party claims. There are other differences:

  • Factoring is not a loan, so it will not adversely affect the balance available is
  • Unlike most bank loans, personal responsibility is not required
  • No additional insurance is needed
  • The credit score of the hand is not the case

Medical invoice factoring has grown significantly in volume in 2009 as banks have pulled back on their lending. Although capital costs are generally higher than traditional loans, the inflow of cash flow allows the hand to count on a stable working capital base to maintain or grow their practices.

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