85% Advance Rate On Your Accounts Receivable
Receive $100,000 – $10,000,000 In As Little As 10 Business Days
We Specialize In Funding Medical Providers Who Bill Third Party Insurance Carriers Such As Home Healthcare Agencies, Pharmacies, Drug Rehab Centers, Laboratories and More.
9 Years Experience Exclusively Financing Healthcare Providers
We recently put together a webinar on medical factoring and have included the video and transcript below:
A medical provider’s biggest asset is its accounts receivable (“A/R”)– the payment it expects to get from Medicaid/Medicare, HMOs, private insurances, personal injury lien settlements, or worker’s compensation insurances.
Unfortunately, due to the current inefficiencies and bureaucratic nightmares in our healthcare system a medical provider has to wait 15-150 days, or more, to monetize this asset.
These inefficiencies hinder the provider’s ability to conduct business, pay staff, order supplies, pay rent, advertise and grow the business.
Most providers turn to their local banks for working capital loans, but most of these banks have limits, strict requirements and hindrances that make it difficult to obtain these loans.
Some banks don’t want to lend against A/R, while others only focus on large medical providers with substantial history.
What is Medical Factoring?
Medical factoring is a type of invoice factoring where a financial institution (“Factor”) provides a medical provider with an advance payment based on the provider’s outstanding accounts receivable (“Invoice”).
The factor advances funds and waits for the invoice to be paid from third party insurance carriers.
Medical factors will consider any provider that bills third party insurance carriers, i.e. doctors, doctor groups, DME/HME, Home Healthcare companies, Medical Transport and Translation companies, Imaging Centers, Labs, Urgent Care Centers and many more.
How Medical Factoring Works
A medical provider establishes a relationship with a factor.
A medical provider submits bills to the 3rd party insurance carrier.
A medical provider submits a copy of the billings to the factor.
The Factor analyzes the invoices and uses historical collections and industry standards to establish the Expected Collectable Value or ECV.
The factor advances up to 80% of the ECV. This is important since the advance is not based on gross billings, but rather on the expected net collectable value. Funds can be ACH’d or wired into the provider’s bank account same day.
The remaining 20% is set aside as a reserve in case some bills do not pay or are erroneous.
Once the bill is paid by the 3rd party insurance carrier the factor returns the reserve minus a factor fee of 1-3%/month.
The beauty of medical factoring is that it is determined solely by the provider’s ability to generate claims (invoices) thereby providing access to capital for smaller or non-bankable providers.
There are no limits – you grow, you factor. Most importantly, the provider now has a clear understanding of the revenue cycle process and can finally concentrate solely on providing quality care to its patients!
Provider has rendered services to a patient and billed the insurance carrier (“Payor”) $110.00 for the procedure.
The provider’s ECV based on historical collections and fee schedule is determined to be $100.00.
Factor fee is agreed upon to be 2% of ECV/month.
Factor will advance the provider $80 (80% of ECV).
Let’s assume the invoice is paid two months from the advance date. Here’s what the cash distribution will look like:
Payment from the Payor: $100.00
Factor recoups its initial advance: $80.00
Factor receives its factor fee: $4.00 (2%*2*$100.00)
Provider receives the remainder: $16.00
In summary, provider receives $80.00 immediately, plus another $16.00 when the invoice is paid => $96.00