How Medical Receivable Factoring Can Save Clinics

Talk to any medical doctor doing private practice these days, and they’re going to tell you that times are tough. That may not seem so for the Mt. Pleasant clinic in Michigan, which was awarded $707,167 in federal funding under the Affordable Care Act. Unfortunately for the rest of us, the $5 million slated for funding for Michigan is only for 8 new health center sites in the state.

The scenario many health care clinics can relate to is the one that’s now affecting the Ellsworth Free Medical Clinic, which may not be able to keep its doors open for the rest of the year. It was in the same situation last year, but $45,000 in donations prevented it from folding up.

If closure is an unpalatable but still very likely result for your clinic, you may be able to stave it off by getting an additional source of funding. But if the banks won’t help and donations aren’t forthcoming, then there’s still another hope: medical receivable factoring.

How It Works

Medical receivables factoring is a bit more complicated than the usual process of factoring. Here there is a third party that must be accounted for—the insurance company. This can be Medicare, Medicaid, or a private insurance company.

As the medical provider, you send your bill to the insurance company while you also give a copy of the invoice to the factor. The factor then buys the invoice from you, and in return you get a large percentage of the value of the invoice. The percentage may differ depending on the factor you choose to work with, but an 80% advance is typical.

The 20% is held back by the factor as a reserve, because as you know the medical insurance company may refuse to pay part of the bill or it may pay later than you expected. When the factor gets the payment from the insurance, it then gives you the rest of the payment minus the factoring fees and any penalties for late payment.

Because of this process, you really need to make sure that you only choose among experienced medical factoring companies. Not all factoring companies will chose to work in medical receivable factoring because of the inherent uncertainty of dealing with insurance companies.


The cost of this type of funding can be more expensive than a traditional bank loan, but medical receivable factoring does have its advantages. You can get the funding you need because the factor doesn’t really care about your credit score, and the application process is faster than with a traditional bank loan application.

With the money you have, you can then meet your payroll obligations and pay the salary of your administrators, nurses, and other doctors. You can buy the supplies you need in the clinic such as gloves and bandages. You can even use the money you have to invest in better medical equipment so that you can provide better medical service to your patients.

You don’t have to close down when you’re having working capital problems in your clinic and your bank or donors can’t help. You still have medical factoring companies standing ready to provide their own brand of emergency services.