Starting your own clinic can be a very complicated process, and as a doctor you really need to be well-versed in the business side of things before you even get started. There are simply too many risks, and many of the problems you will face at the start may distract you from your primary objective: to help people.
But if you are having cash flow problems when your clinic is already up and running, then you can easily get help from a medical A/R lender.
Accounts receivable financing is one of the best ways to obtain the additional funding you need to cover your operational expenses. That’s because the vast majority of patients don’t pay out of pocket. They have insurance companies to do that, and insurance companies are notoriously slow at paying out claims.
In addition, they also have a tendency to pay much less than what you actually bill at the start—if they pay at all.
The Factoring Process
While going to a bank has always been a popular option for additional financing, medical accounts receivable factoring is becoming more common. The process is quite simple.
- The first thing you need to do is to find an experienced medical A/R lender. The health care industry has its own peculiar ways, and a generic factoring company will not be familiar with how things actually work with a medical clinic. By choosing a lender who’s already acquainted with the medical profession, you no longer have to explain the finer nuances of the industry. In fact, you may even learn a few things from the lender.
- Setting up the factoring involves a much faster process, and that includes the getting the approval for the funding. An experienced factoring company already knows which insurance companies are reliable, and all it needs to know is that your practice is stable. You shouldn’t have any serious tax or legal issues, and your accounts receivables shouldn’t have any liens on them.
- Your practice then submits regular billings to the insurance companies (including Medicare and Medicaid) while copies are forwarded to the lender. This can be done by the factor themselves.
- You then receive the advance. This varies depending on the factoring company and the state of your practice. In general, the advance ranges from 70% to as much as 85% of the value of the billings. You can get this advance very quickly in a matter of days instead of having to wait months.
- Once the insurance companies pay, the factoring company sends you the balance, minus their factoring fees.
Distinct Advantages of Accounts Receivable Factoring
The benefits you can get for your clinic are obvious right from the start. You can get the funding you need much more quickly, and that can cover operational expenses and even equipment upgrades. And with an experienced medical factoring company, you can focus your attention on growing your practice and taking care of your patients instead of worrying about where to get financing.