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1. Learning the Language
Who are medical providers? Some examples are: doctors, hospitals, labs, hospices, home healthcare providers, rehabilitation centers, durable medical equipment providers, and in general any medical professional that provides services, products or treatments to patients and are paid for these services by a “third party payor” (a medical insurance company or Medicare or Medicaid responsible for paying the medical bills issued to patients for the services or treatments rendered by providers). One can clearly see that the services and treatments provided by these and other medical providers are highly diverse and each provider is very different from the other based on the varied jobs each has. The third party payors are broken up into two main categories, a) Commercial Carriers and b) Governmental Payors. The commercial carriers are easily recognizable by their names to wit, Aetna, Cigna, Blue Cross/Blue Shield, Avmed, Oxford, Humana, United Health, etc... The governmental payors are also commonly known as Medicare and Medicaid. This introductory explanation is designed to point out the commonly used terms and definitions which are part of the healthcare industry.
Understanding the preceding paragraph, one can certainly see there is vast differentiation in the types of a) providers and again in the b) “third party payors” (responsible for reimbursing these professions for their goods, services, or treatments provided). With this massive diversification in medical services and in the parties responsible for paying the providers performing them, there is one commonality……. DELAYED PAYMENTS!
2. What is the Pain?
Labs doing analyses of various anatomical sample have huge equipment that actually do these analyses. Each month, the labs have financing payments due for this equipment (usually this equipment is leased with monthly payments). All medical providers that have staff members who require their weekly or biweekly salary payments (payroll). Medical equipment providers need inventory to keep up with calls for wheelchairs, oxygen, walkers, canes, hospital-type beds, orthopedic braces, etc., and in general for all providers, overall operational costs inherent to these and all businesses. Third party payors typically pay in 30 to 90 days depending on the type of medical services provided. With the medical billing process being very detailed and intricate, errors in billing are common which further delay these already slow payments. Do we see the pain? Daily and weekly demand for cash needs and reimbursement profiles going out to 90 days or more. This gap usually causes medical providers to “max out” credit cards and live a stressful life running to the mailbox daily (or looking in their bank accounts) to see if United Healthcare sent in a payment or Medicare deposited funds for last month’s billing.
3. The Right Prescription
Specialized finance companies with expertise in a) understanding medical receivables and b) financing (lending against Accounts Receivable [AR]) or purchasing (factoring the AR), have grown over the past few decades but still remain “few and far between.” The reason your typical factor or lender will shy away from entering into a finance agreement secured by these receivables is because the valuation process needed to understand the amount being paid for each medical claim sent to the third party payor is not intuitive, obvious or easily attainable. Only specialized finance companies will be comfortable providing loans or (in the case of factoring) purchasing this AR. However, receivables finance is the direct line to immediate cash flow improvement and ease in meeting operational expenses for medical providers. Of the two solutions (loans and factoring), factoring is the most efficient and can provide in general, more cash than typical loans. Medical provides can send a listing of their billing for the week to their Factor and be funded by Friday (or Thursday) to meet payroll and any other payments or purchasing needs. Factoring can take the reality of not knowing what money is coming in the mail or to the bank and convert it to a predictable weekly cash flow based on the amount of patients for which billing has been already submitted to the third party payor during that week. The medical provider using factoring is not borrowing so the balance sheet sees no additional debt. The fee paid for factoring is a discount fee based on how long, following the factor’s purchase of the medical receivable, it takes for the third party payor to pay that claim. As an example, if a doctor sends in a claim valued as $1000 to the factor for SALE (not a loan) and it takes United Healthcare (the insurance carrier) 30 days to pay, a typical discount fee may be $20, or if paid in 60 days the fee may be $40. The doctor will have received $980 or $960 for the $1000 claim BUT the funds arrived to him/her within days of having treated that patient. There is no interest rate as there is no loan in factoring. It’s simply an “early pay” discount that the factor is receiving for paying the provider and waiting for the money to come from the third party payor. Most medical providers would easily give a twenty, forty or sixty dollar fee to the factor for getting that money 30 or 60 or 90 days sooner.
4. The Right Factor
Marco Capital Inc. has the expertise needed to factor healthcare receivables by its experienced staff’s understanding of the healthcare industry and the nature of the receivables applicable thereto. The process is simple and requires interested providers to send in a billing and collections history and other basic financial and regulatory data. Marco maintains HIPAA security and executes a Business Associates Agreement with the provider assuring patient information confidentiality and conformity with governmental rules and regulations.