There is much confusion and misinformation about what funding is available for suppliers and professionals in the Healthcare industry. Let’s talk about the two types of accounts receivable medical funding available- Healthcare Factoring vs. Medical Receivables (Third Party Payee) Factoring.
First, there is one common denominator about everyone doing business in healthcare- You get paid slow! OPM (Other People’s Money) is the rule, not the exception. Would you think your clients are purposely paying you slow (wink)? And of course, the government never pays slow now do they (double wink)?
Healthcare Factoring: Like Trucking Factoring, Manufacturing Factoring or Staffing Factoring, Healthcare Factoring describes expertise in buying Invoices in a certain industry by the Invoice Factoring Company. Some Invoice Factors only specialize in one or two industries. For example, there are many trucking only factors. So if you provide Nurse staffing, medical supplies, transcription services or other products and services to the healthcare industry a Healthcare only Factor could help you. However, most Factors are generalists, their expertise lies in credit and collection and they will buy invoices from any company in any niche as long as there is not a THIRD PARTY PAYEE. Why is third-party payee in bold? Because those three magic words get us to our second topic:
Third Party Medical Receivables Factoring: We all understand that when you buy goods you as the consumer typically pay for the goods. However, there are some industries where the consumer does not directly pay for services received but the provider of those services is reimbursed by third-party payers. Healthcare is the primary example of this in the US as Healthcare is 19% of total GDP. In healthcare, those third-party payees could be Medicare, Medicaid, Commercial Insurance, Private Insurance, HMO/PPO, and Managed Care. The average time to collect for these types of Accounts Receivable can range from 90 – 180 days.
Third Party Medical Receivable Factors focus specifically on financing the healthcare and medical community and understand the pressures providers and facilities face on both the cost and revenue sides of the business. They have a thorough understanding of the complexities of billing, monitoring, and collecting medical receivables, as well as the cash flow challenges of managing a healthcare or facilities organization.
As mentioned above, billing and coding expertise are ultra-critical. A Doctor, Hospital or clinic bills $1000 for a procedure under one code and subsequently Medicare or the Insurance carrier changes the code and only remits $200. As a healthcare professional you know the billing dance and the risk to your business. That is why it is best to partner with a Factor who has deep and wide experience in third-party payees and is up to date on recent healthcare legislation.