It is very challenging to run a successful nursing home in today’s economy. It requires a significant amount of cash flow and a close management of outstanding accounts receivables. The thing that’s different about having cash flow issues in the nursing home industry is that the lack of funding could result in compromising proper care.
Slow Payments is the Biggest Cash Flow Problem in the Nursing Home Industry
Slow payments from both private individuals, Medicaid, and other insurance companies often contribute to cash flow shortage issues. This has a great effect on the operation of the facilities and makes it difficult to stay in compliance and provide proper care overall.
Problems Faced With Traditional Business Loans?
Unfortunately, there are problems associated with obtaining business loans from traditional banks, the SBA or obtaining lines of credit. Not only is there a lengthy application process, but there is often collateral and a personal guarantor required that may impact the approval process. As this process takes quite some time to complete, nursing facilities must still face their current cash flow challenges and the impact that it poses on their ability to properly care for their patients.
Alternative Solutions to Improve Cash Flow by Utilizing Medical Factoring
Medical factoring can be the solution to many cash flow problems faced by today’s nursing home facilities. Why is this considered a good solution? Because it provides accelerated payments against insurance claims and significantly reduces cash flow problems. Instead of waiting between 30 to 120 days before you receive a payment, you can receive a much more immediate payment to cover your working capital when you factor your outstanding medical claims.
How Medical Factoring Works
Medical factoring involves a financing company providing funding for your medical receivables. This usually takes place in two installments. The:
- Advance installment, and the
- Rebate installment
The advance installment is first paid right after a claim is submitted, which typically covers 70% – 80% of the remaining net realized value (NRV) of the claim.
The remaining amount of 20% – 30% is then rebated, less the associated fee which occurs when claims are paid according to the normal schedule.
Need More Information?
If you’re considering medical factoring for your nursing facility, please contact Affinity Capital Funding today for more information.