Medical financing is challenging many health care businesses like never before. Among the numerous hurdles are the lingering effects of the economic slump on traditional business financing, declining profit margins due to third-party “compensation guidelines,” and the ever-increasing complexity in obtaining timely reimbursements. As a result, medical practices and healthcare businesses are turning to medical factoring to alleviate cash flow problems.
January 13, 2011 – Fredericksburg, VA – (http://www.smart-business-financing.com) – Medical financing and alternative business financing are not terms typically used in the same discussion. Although it is not uncommon to hear experts predicting doom and gloom in the healthcare industry, the fact is that the industry as a whole is booming. The demand for medical services, hospitals and other healthcare facilities, medical testing and medical supplies keeps getting stronger and is expected to continue as the population ages.
Even though the sector looks healthy, running a medically related business keeps getting more and more difficult. Spiraling expenses, declining profits, and continued cutbacks from third-party payers increasingly limit a healthcare business’s access to capital. Because commercial banks – long the traditional source of working capital for healthcare companies and practitioners – have made medical financing more difficult and expensive, healthcare companies have been turning to the creative financing options used successfully by other industries for many years. Enter the technique of medical factoring.
“Medical factoring is a simple and elegant solution for healthcare companies who want to even out their cash flow,” says Mike Lieber, a 13-year finance industry veteran and creator of the business financing web site, www.smart-business-financing.com.
According to Lieber, account receivable factoring is an ancient business financing technique, still used in Europe more than bank loans, in which factoring companies provide businesses with advance payments based on their outstanding accounts receivable. A business gets funding as soon as it invoices its customer, and the factoring company waits for the invoice to be paid.
“In a medical factoring situation, the factor does the waiting for the slow paying customer, insurance company, or Medicare or Medicaid reimbursement,” he says. “And it works as well for individual practitioners and small offices as is does for large suppliers, labs, testing facilities and hospitals.”
For the practitioner, receivables factoring would work as follows:
•The medical office sends claims to an insurance company
•A copy of the claims is sent to the factoring company for financing
•The factoring company advances between 60% and 85% of the claims
•Once the claims are paid, the transaction is settled
Medical factoring is relatively easy to obtain and quick to set up, often in as little as 5 days. The biggest requirements are that the business be well run and that it invoices for its services or supplies. The cost of factoring varies and will be determined by a number of parameters such as the types and sizes of invoices generated and the credit quality of the payer.
For the thriving healthcare business that could use a financial lift or would like a reliable cash flow, medical factoring is a powerful technique worth considering.
About AEGIS Financial Solutions, Inc.: Since 1998, AEGIS Financial Solutions, Inc. has offered uncommon solutions to common problems using the fast, flexible and powerful resources of the cash flow industry and asset-based finance techniques. Helping people solve financial problems and get money when they need it most, without bank loans, is what we do best.
Mike Lieber, President
AEGIS Financial Solutions, Inc.
88 E. River Bend Road
Fredericksburg, VA 22407
PH: (540) 548-2270