Med Factoring – NeeBo Capital Blogs

How to Get Low Rates for Medical Factoring

For many doctors who are just starting their private practice, as well as for hospitals and nursing homes, it may not be easy to get the startup capital or operational cash flow needed to operate your business. When banks aren’t as open and enthusiastic about lending money to medical professionals and businesses, factoring becomes the only real possibility. You just have to hope that you get low rates for medical factoring so that you don’t overpay your financing.

Sure, the more innovative medical companies get millions in financing, but for most health clinics it doesn’t come easy. There’s also the very distinct possibility that you haven’t paid off your student loans yet. And if that’s case, the government may even ban you from billing Medicare and Medicaid to get you to pay back your loans first.

But how do you get low rates? It’s not as easy as just checking Google for low rates, however. Just because a factor boasts that it offers rates as low as 1.5% a month doesn’t mean that such a rate will apply to your business.

What you need is the right medical factor, that’s already configured to specialize in your industry. Here are some things you need to check:

The factor should have extensive experience working with companies or clinics like yours. By doing so, you’ll know that the medical factor knows which procedures and processes work best in your case. They already have a basic working system in place, and all they need to do is to tweak it to fit your situation. They don’t have to set up a brand new system from scratch. That’s means less work for them, and lower rates for you.
They already have prior experience with health insurance companies you normally deal with. Factoring provides you with the advance money you need to run your clinic, but it all depends on whether the paying customer actually pays on time.

For doctors that usually means insurance companies. You may be able to get low rates if the medical factor has worked with these insurance companies before, and the factor has confirmed that the insurance company does pay in full and on time. They no longer have to do extensive background checks on the insurance companies, as this has already been done before. It also assuages any worries that they won’t get paid back.

It also helps if you only deal with a select group of insurance companies, which helps lessen the worries of the medical factor. The more insurance companies are involved, the higher the risk of not getting paid.

You give them high-value invoices. It would be better if you have only a few patients, but each one owes you a lot of money for your services. This is better than dealing with numerous invoices worth very little money. For the medical factor, each invoice requires the same amount of work to process, so it would be beneficial for everyone if you only submit high value invoices.
You have a long term relationship with the medical factor. Medical factors charge more for short term deals. It might be better to find a factor you can trust and do business with them for the long haul.

Find the right medical factor, and you’ll get comparatively low rates for medical factoring.

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Just like any other business, medical services companies need to maintain their cash flow. They have a constant need for the supplies that are required to conduct a number of different procedures: everything from routine blood tests, to x-rays, all the way up to the more costly process of giving patients dialysis.

There is one difference that separates medical services from almost any other type of company, and that’s the fact that nearly all of their income is received via health insurance companies.

Doctors routinely refer their patients to medical services companies for screenings, treatments, and even transportation – activities that do not require the presence of a physician or the facilities of a hospital.

Upon arrival at a medical services office, the first thing that the receptionist will do is ask that person to complete a form, often several pages long. And on the first page will be a place for that person to enter his or her health insurance details.

Usually, there is a co-payment that the patient must contribute. This is to minimize fraudulent claims. But, the largest part of the bill issued for the service is paid by the insurance company to the firm providing the medical care.

The health insurance industry in the US is big business. But it’s also a complicated and time-consuming one. Doctors, medical services, and hospitals routinely file health insurance claims on behalf of their patients, but each insurance company has its own requirements and makes its payment according to its own timetable. Not only that, but there are dozens of them.

However, there is another side to invoicing that many firms never have to worry about, and that’s dealing with the US Government. That’s not to say the no other company gets contracts with them. They do. But contracts of that kind tend to be less complicated than those that deal directly with Government programs, such as Medicare and Medicaid.

An invoice that would normally be paid within 30 days by an insurance company could instead take three months or more, depending on how complicated the treatment was, and whether or not the patient and the clinic had completed all of the necessary documents.

All of these things can put pressure on the cash flow that medical service providers depend on to keep them in business.

And, as we all know, this kind of care can be very expensive. That means that the slow or non-payment of invoices can have a much greater impact on the survivability of these kinds of companies in the short term.

That makes factoring a particularly important option. So far, no one has been able to figure out a way to make the Government work faster or to write its regulation in language that people can understand, nor has there been any progress on lowering the costs of medical care.

And so for both of those reasons, medical services ought to consider selling their invoices so that they aren’t held hostage by those from whom they receive the majority of their income.