How Can Medical Factoring Help the Health Industry?
One of the major problems that plagues the health industry happens to be the slow payment of insurance claims. Claim denials and delays in payments from the insurance carriers, including Medicare and Medicaid, have gone up considerably. These delays lead to irregular and inconsistent cash flow which makes it more difficult to operate. The one thing that can help them in such cases happens to be medical factoring.
Medical factoring is essentially a way of helping companies that face cash flow problems due to health insurance claims. It’s a specific kind of financial option for them, and is exercised nationwide by all kinds of health care providers and medical specialists. Let’s have a look at how it helps.
What Can Medical Factoring Fix?
As mentioned, a major problem that negatively affects the health industry is the time it takes to get payments for insurance coverage. Very few claims are met quickly, with the average claim being met after a period of time that can be anything from 30 days to even 120 days.
It’s a problem that affects the health care business at every single level, with providers of all stature being affected by it. Of course, no one can or wants to wait that long for money and nor does anyone want to incur cash flow problems because of it. This lateness is hardest on new and emerging companies and is something that they can struggle with in their early life.
How Does It Work?
Medical factoring provides your health care practice with quick payments for medical claims. The claim is sold to a company offering medical factoring and the company in turn advances funds for your claims. The factoring company is responsible for holding the claims until they have matured. The transaction process is then completed by the insurer who pays off the claims.
The normal procedure for the transaction process is usually as follows:
- You get your claims approved and submit them to a medical factoring firm
- The factoring firm gives your practice an advance of up to 80% of your claim
- The claim, once it has matured, is paid by the insurer over a period of 30-120 days
- The firm then rebates the remainder of the claim that was left minus a small percentage
The percentages in steps 2 and 4 are subject to factors that include the size of the medical factoring company along with the amount of the claims.
What Does Medical Factoring Deal With?
Medical factoring mostly works with net claims as opposed to gross claims. The entire transaction and related process are financed based on the net payment that is supposed to be received over a claim. Hence, the figures you might find in your documents and the ones you’d receive from medical factoring will be different.
What About Medicaid and Medicare?
Medicare and Medicaid have a different process when it comes to medical factoring. Because they are different from the norm, a lot of medical factoring companies do not offer support for either of them. Some do, however, and it is best to contact them and learn how they handle medical factoring for both.
The typical process for medical factoring when it comes to Medicaid and Medicare usually takes place using a special bank account. This account is usually called the “sweep account” or the “control account.” Although this is a common process, different firms handle factoring differently in the case of Medicaid and Medicare. So make sure that you learn as much about the process being offered before you hire an insurance firm.
What Are The Advantages?
Medical factoring can help your healthcare practice fix cash flow problems that arise from slow payments of claims. The cash flow problem may seem trivial, but for a small provider it’s something that could change the outlook of their entire year. Money not coming in at the proper time with the expenses taking place normally means that you’re lacking the cash your practice needs to stay afloat and progress. One way to make sure that you don’t get bogged down by this impeding lack of money is by using medical factoring.
Medical factoring also happens to be a flexible solution for your health care insurance claims. You receive claims based on the percentages and the requirements you set for yourself. You can modify your claims at any point in time, helping you to grow, shrink, or change your business as you please. In addition, it also allows you to control your cash flow the way you want. It empowers you to control your claims and the money you get from them to a certain degree.
Who Can Utilize It?
Medical factoring can be utilized by almost any health care practice responsible for billing either government or private insurance providers. Examples of businesses that can utilize medical factoring are:
- Rehab clinics
- Home health care agencies
- Medical staffing agencies
- Surgery facilities
- Diagnostic imaging centers
- Nursing homes
- Medical supply companies
- Medical offices
The Medical Factoring You Need
If you’re looking for a top invoice factoring company to assess your medical factoring needs, contact us today. We will help you evaluate each and every claim and make sure that you get the money you need, when you need it.