The Benefits of Factoring Medical Receivables for Medical and Dental Clinics

The medical profession is a noble calling, and there’s not much doubt of that when you consider how difficult it is to maintain a clinic. Nowadays, many clinics close down because following an insurance-based reimbursement model is full of problems, and because expenses can outpace gross profits considerably. Even free health clinics are closing down because donors mistakenly believe that universal coverage is in play.

In any case, many clinics need steady funding to survive, and banks aren’t providing enough. This is why many clinics are turning to factoring medical receivables instead. In medical factoring, invoices are turned over to the factor which advances about 80% of the value of the invoices to the clinic. The factor also takes responsibility in dealing with the paying customers, which are often medical insurance companies along with Medicare and Medicaid. Once the payment is sent in full, the rest of the money is forwarded to the clinic after the factor has deducted its fees.

This arrangement offers several key advantages for medical and dental clinics.

  • They are likely to receive financing. The most obvious drawback to applying for a bank loan is that banks today are extremely picky in approving loans. In addition, even if they do approve a loan application in the end they take a very long time to process an application.

In contrast, applying for medical factoring is very easy. It doesn’t take more than a few days to know if you get approved or not, and approval is also more probable. Setting up a factoring line takes about a week, and then you’re set. Once you submit your medical receivables to the factor, you get the advance in a day or two.

  • The factor deals with the insurance companies. First of all, this is a headache that many doctors would rather not bother with, and the fact that factors take on this responsibility is a true benefit. This frees up clinic personnel from having to deal with insurance companies themselves, which are also notorious for never paying completely or on time.

Because of this service, clinic staff can concentrate on actually providing health care to patients instead of worrying about getting paid.

  • The clinic can improve its cash flow situation significantly. Many insurance companies can take 90 or even 120 days before they pay up, and many clinics can’t wait that long. It’s for that reason why the advances from the factors are so important. They can be used for many crucial purposes.

For example, they can be used to buy new medical equipment that can improve the clinic’s ability to provide quality care (and also to compete with other clinics in the area). It can also be used to cover the payroll, buy common medical supplies and pay for utility and rental bills.

Running a medical clinic is hard enough without funding, and many health care professionals realize this. At least by factoring medical receivables, they have a chance of continuing their efforts.

 

 

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Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions.

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