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Healthcare Receivables – Bridge the Gap with Invoice Factoring

Category: Invoice Factoring

 According to the Congressional Research Center, more than 90% of the US population has some type of health insurance. While having health insurance increases the patient’s access to proper medical care, waiting on healthcare receivables can have a negative impact on the provider’s cash flow. Healthcare providers from individual physicians to large medical facilities all have to deal with disruption to their cash flow due to third-party billing. 

Medical accounts receivables

Medicare, Medicaid, and private insurance companies aren’t known for their quick turnaround times on making payments. Also, if there are any mistakes made when submitting the invoices to these third-party agencies, payment is denied. Then the provider will have to start the whole process over. The disruption to cash flow from third-party billing can strain a healthcare provider’s working capital. It can even result in a struggle to keep up with operating expenses. 

Although some banks offer loans specifically designed for healthcare providers, financing from traditional financial institutions is becoming increasingly difficult to obtain. So how can healthcare providers maintain a sufficient level of cash flow while waiting on third-party payments? Invoice factoring can be the perfect solution.

How Factoring Healthcare Receivables Works

When factoring healthcare receivables, the provider would send a copy of the outstanding invoices they want to submit to the factoring company, often referred to as the factor. The factor will purchase the invoices for 80 to 90% of their expected net collectible value. The remaining 10 to 20% is held back by the factor in case the actual third-party payment differs from the expected value or is denied. If the invoice is satisfied as submitted, the remaining balance minus the factoring fee will be sent to the healthcare provider.

Factoring Benefits

Besides allowing providers to avoid the cash flow disruption caused by the slow payment of third-party healthcare receivables, factoring also offers a few other benefits.

Predictable Cash Flow

When budgeting to cover operating expenses, it is important to know how much incoming revenue will be available. Factoring provides physicians and healthcare facilities with a predictable cash flow they can count on. This type of financing is also flexible and can increase or decrease with the fluctuation of your healthcare receivables.

Growth Opportunities

Without the long wait for third-party healthcare receivables to be paid and no disruption to their cash flow, healthcare providers will have the funds on hand to take advantage of growth opportunities. Whether it is an equipment upgrade or opening an additional facility, factoring can help keep your growth trajectory on course.

Avoid Long-Term Debt

Getting a loan to cover outstanding healthcare receivables will create long-term debt. Factoring is simply an advance on money already owed to you. It provides a short-term solution to the common cash flow disruptions created by the snail’s pace typical of third-party billing. The length of a factoring agreement can vary among providers. They typically last 2 years, whereas a bank loan will not only last 3 years or more but will also add debt to your balance sheet.

healthcare receivables financing

Invoice Factoring – The Healthcare Receivables Solution

Think factoring could be the right solution for your healthcare or medical business? Let’s talk. Capflow Funding Group specializes in factoring and will work with you to find the best funding solution to provide your business with immediate working capital. We service many different industries with a variety of different funding needs. If invoice factoring isn’t the right solution for your business, we offer merchant cash advances and work with trusted partners to provide you with the perfect funding solution for your business. Contact us today and find out how invoice factoring can help grow your small business.


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