The medical industry faces the challenge of keeping their practices or medical institutions functioning smoothly for the need of timely working capital. The health care industry is bogged down by the growing accounts receivables from their patients' providers of medical insurance carriers. The medical fraternity also faces the difficulty in keeping tracks of invoices and the billing process; this diverts them from their mainstream work of providing medical care to their patients. Accounts receivable financing is fast emerging solution to this specialized sector.
Many accounts receivable financing companies offer services to the medical world, which act as a respite for securing cash to run their daily operations smoothly. These financing companies have customized processes specific to this segment. In simpler terms, medical factoring or medical accounts receivable financing means selling off the accounts receivables accrued by the medical institution to the financing firm. The claim owed to the patients' medical insurance provider by the patients' medical insurance carrier is the accounts receivable in this case.
Medical practice provides its service to the patient and the medical insurance company is billed on behalf of the patient, this is the receivable accrued by the medical industry. The medical industry then approaches the accounts receivable financing industry and sells these accounts receivables which in turn releases about 80% to 95% of the net collectible amount for a small fee ranging from as low as 1% to 5%. The funding company assumes the responsibility of collecting the receivable amount from the medical insurance companies and pays up the balance amount once the entire amount is collected from the insurance company.
The medical industry in this way can gain a lot of advantages by selling off their receivables. Most funding companies release funds in about one to two days. The funding companies also provide regular reports to update and enhance the billing process. The ready cash flow also increases the ability of the medical industry to get discounts from their suppliers for regular and timely payments. The capital can be rightly used to enhance services and stimulate growth by attracting and retaining good support staff. The balance sheet will also have a positive effect, as accounts receivable financing is different from a loan. It just advances the cash that will otherwise come in after 30 to 60 days. It is just a conversion of a non-liquid asset, the account receivable into a liquid asset, cash. Thus the debt capacity of the medical institution also remains strong.
Thus, with the help of medical receivable financing the medical practice can reap the benefits of fast and continuous cash flow streaming in to stimulate the growth and expansion of medical facilities. Other benefits also include enhanced business efficiency, by electronic updates on billing, tracking and collections. A wide range of medical industry professionals can get the advantages of this type of hassle free financing. This includes hospitals, nursing homes, surgeons, physicians, osteopaths, oral surgeons, and treatment centers, like rehab, dialysis and surgery centers. Imaging and medical laboratories and even ambulance providers can benefit from this effective funding solution. |
