For small to mid-sized hospitals, managing cash flow can be a challenge. After all, one of their primary revenue sources is claim payments from insurance companies- and unfortunately, these companies often pay slowly. Claims often take 30 to 180 days to pay and slow payments negatively impact cash flow.
Despite the slow payments, these hospitals still have regular expenses that must be paid including equipment, payroll, and overhead. This combination makes it easy to understand how hospitals can struggle with cash flow. There are very few companies that have the resources to wait 60+ days for payments, putting them in a precarious financial position.
Medical Factoring Improves Cash Flow
One way to improve cash flow is to speed up insurance claim payments. However, it’s almost impossible to negotiate faster payments with insurance companies. You can, however, use medical receivables factoring to accomplish similar results. Factoring will provide you with immediate funds with your claims as collateral. When used properly, factoring can improve cash flow for your hospital. This will minimize financial issues, which means you can more effectively manage your business.
How Does Factoring Work?
The idea behind medical factoring is fairly straightforward. The hospital will work with a factoring company that advances a portion of the claim. On average, the advance rate is 75% of the net payable claim. Once the claim is settled, the factoring company will pay the remaining 25% minus the finance fee.
Receivable factoring can be used to fund most medical insurance claims, as well as Medicare and Medicaid. When used properly, medical factoring can help your hospital with cash flow.
Is Your Hospital a Candidate for Medical Factoring?
If your hospital has cash flow issues due primarily to slow-paying claims, you may benefit from medical factoring. Medical factoring, like most lines of credit, can be used by hospitals that have financial issues including:
Bankruptcy in process
Cash flow issues
Do You Need Medical Factoring?
If your hospital requires medical factoring, contact Point High Finance today. We can help you learn more about your options and get you started with medical factoring to improve your hospital’s cash flow.