In the health care industry, there are often two different departments that require the aid of medical services factoring. First there are the medical providers like clinics, hospitals, and private medical offices. Second are the vendors that provide services and supplies to the medical providers such as medical staffing agencies and those that provide medical transcription services. Each affect the other but when cash flow is slow they both suddenly come to a halt. So what is the solution?
Medical Services Factoring Creates Steady Cash Flow
The never ending complication is that medical providers like hospitals often have to wait for months before getting paid. This is because the transaction can go through several billing departments especially now since most patients pay using their personal medical insurances. Securing the payment from the medical insurance will take weeks due to verification and legal procedures. This is then going to go all through the hospital’s billing department a second time before it gets distributed to the proper departments that were intended to get paid in the first place. This last part also includes the vendors.
Because the process takes so long, medical service providers and vendors often have to slow down work or cut down on their staff to compensate. The only other option is to get a loan from the bank yet this can take just as long as receiving their fulfilled invoice. So what option is left but invoice factoring from medical services factoring companies.
How It Works
This is a very simple process. The medical billing department will take their invoices from insurance companies, financial firms, and others that will pay them in the weeks to come and sell them to a medical services factoring firm.
The firm will then process these invoices so that the medical provider can get all their payment in just days (mostly 24-72hrs) instead of waiting weeks. They will only get around 85-95% of the full invoice however as the factoring firm will keep the remaining balance until they paid in full. As soon as your customer pays the total amount you are given the remaining 10% minus the factoring fees, typically 2-3% . Now it will be the factoring firm to process those invoices and get paid in the weeks to come, making it much faster for vendors and medical providers.
This type of instant cash is better than loans because they are processed much faster and they often do not require good credit standing. Some factoring companies will check how the credit standing is for a medical provider or for their clients but over all this will not affect the pay out in many ways.
Another benefit is that you can get invoice insurance. This is very important for medical service providers since they should not be chasing after clients who did not pay their balances.
Without insurance the medical provider will need to pay the money back to the medical services factoring firm as penalty and chase the client to get their money. With insurance, the risk now transferred to the factoring firm. With the risks now taken out of the hands of the medical service provider and with cash flow always constant instead of having to wait for it to return, medical services factoring is often viewed as their financial savior.
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