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.