Many small to mid-size hospitals have difficulty managing their cash flow since their expenses are constant, but their incoming revenue can often be slow or erratic because insurance claims can take up to 180 days to process. One of the best ways of overcoming this cash flow problem is to use medical factoring, because it provides you with cash immediately, rather than waiting for claims to be paid.
How Medical Factoring Improves Cash Flow
Medical factoring is a fairly simple process, but it can literally be a lifesaver for small to mid-size hospitals that are struggling with managing their cash flow. Factoring works by establishing a relationship with an alternative lender who agrees to advance you a percentage of your medical insurance claims, somewhere usually in the neighborhood of 75%, and in exchange for surrendering those claims, your hospital would get immediate cash.
This can then be used to manage your monthly expenses and keep your hospital running smoothly. After insurance claims have been settled so that the lender receives their money, the remaining 25% of the claim would be remitted to the hospital, after the lender’s fee has been subtracted out. The specific size of the fee imposed by the lender will be based on the quality of insurance claims and how long it takes to get them paid, as well as the level of your financial need, and the effectiveness of the department in charge of medical collections at your hospital.
Many factoring companies will make discounts available to hospitals when insurance claims are provided in high-volume, so if you have a fairly large account with a lender, it will be possible to secure more favorable terms regarding your fee. Virtually all insurance claims are eligible for this process, including Medicaid and Medicare, and that makes it a very valuable financial solution for a number of hospitals.
Do You Need Funding for a Hospital?
If you’re trying to raise funds to cover a gap in your hospital’s cash flow, medical factoring may be a big help to you. Contact us at Affinity Capital Funding, so we can discuss the possibility of medical factoring as one of your fund-raising initiatives.