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How to Get Approved for Healthcare Invoice Factoring

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By Phil Cohen

To learn how to get approved for healthcare invoice factoring, you need to understand the requirements, prepare a thorough application, and properly evaluate your receivables. This guide will walk you through every step, offering practical tips to help you secure the funding your practice needs.

Understanding Healthcare Invoice Factoring

Healthcare invoice factoring is a financial process where medical providers sell their unpaid claims to receive immediate cash flow. This method converts unpaid invoices into immediate working capital, providing the necessary funding for healthcare operations. Medical receivables factoring allows healthcare providers to cover essential expenses immediately.

The benefits of healthcare invoice factoring are manifold. Here are some key advantages:

  1. It improves cash flow.
  2. It reduces administrative workload as the factoring company manages the collection process.
  3. This service helps providers get paid sooner, addressing the dependency on delayed payments from third-party payers.
  4. Healthcare providers often face challenges such as slow payments and outstanding accounts receivable due to complex billing systems and regulations.

Typically, payment terms for third-party payers can range from 90 to 180 days, necessitating the need for factoring. Factoring companies usually pay between 70% and 90% of the invoice value upfront, aiding cash flow management. This makes healthcare invoice factoring an invaluable tool for any healthcare provider who works with private or government insurance.

Healthcare invoice factoring ensures a steady cash flow, enabling healthcare businesses and the healthcare company to focus on patient care and operational efficiency within the medical industry. This solution is particularly beneficial for medical supply companies, home healthcare agencies, diagnostic imaging centers, and other healthcare facilities, including healthcare factoring companies. Additionally, medical invoice factoring provides a valuable resource for managing financial operations effectively.

Key Requirements for Approval

Healthcare providers must meet specific requirements to qualify for invoice factoring. One of the primary criteria is having net monthly receivables of at least $100,000. Factoring companies accept a range of net monthly receivables from $100,000 to $10,000,000, making it accessible to both small and large healthcare providers.

Factoring companies may conduct personal and business credit checks on owners to assess overall financial responsibility. However, a provider’s credit score does not influence the qualification for medical factoring. Providers must issue invoices for completed claims, with eligible invoices typically not older than 90 days.

Additionally, factoring companies often perform a review of compliance standards specific to the healthcare industry. The operational focus of the business must be B2B (business-to-business) to qualify for factoring. Factoring companies prioritize the quality of eligible receivables and competency within the billing department, and they evaluate the net realized value (NRV) of receivables to determine funding quality.

Preparing Your Application

A comprehensive application is vital for securing healthcare invoice factoring. Collecting essential documents like financial statements, accounts receivable aging reports, and proof of delivery is necessary. Errors in documentation and coding can lead to claim denials and payment delays, necessitating thorough training for healthcare staff.

Accurate patient information at registration is crucial to avoid insurance claim rejections, highlighting the need for robust verification processes. Compliance with evolving healthcare regulations requires regular updates and training for healthcare teams.

Although the application process is straightforward and requires minimal documentation, preparing a detailed and accurate application is essential for a successful outcome.

Evaluating Your Receivables

Assessing receivables is a key step in the factoring process. A detailed accounts receivable aging report shows outstanding invoices, helping factoring companies assess the quality of your receivables. Invoices with payment terms of 90 days or less are typically preferred by factoring companies to minimize financial risk.

The creditworthiness of third-party payers is reviewed by factoring companies to assess receivable reliability. Contracts with customers can enhance your application by demonstrating the stability of revenue streams and the reliability of cash flow. Invoices need to be clear and complete, including necessary details like amounts due and payment terms, to facilitate the verification process.

Evaluating receivables is crucial for factoring companies to determine the potential value of your outstanding invoices. This ensures that the factoring process runs smoothly and that you receive the maximum possible funding for your receivables.

Choosing the Right Factoring Company

Selecting the right medical factoring company is essential. Factoring companies’ expertise in medical billing and reimbursements can benefit healthcare providers. Experience funding healthcare companies is important when selecting a factoring partner.

Compare factoring rates and fees across companies to ensure the best value for services. Medical factoring companies typically advance 80-90% of the face value of invoices, and the factoring fee deducted from the invoice payment can range from 0.69% to 1.59%.

Thoroughly review contract terms, including financial responsibilities and cancellation fees, before signing. Flexibility in the factoring agreement can include terms such as the contract duration and the number of invoices to be factored. Additionally, good customer service from a factoring company is essential for maintaining effective communication throughout the partnership.

The Approval Process Step-by-Step

The approval process for healthcare invoice factoring can be streamlined by following a few key steps. Healthcare providers can request funding for their invoices by submitting outstanding invoices via an online platform. Accurate and well-organized documentation can expedite the factoring approval process significantly.

Organized records of invoices and supporting documents are crucial for verifying transaction legitimacy during the application process. Businesses can be approved for healthcare factoring in as little as eight hours, with the typical timeline for application approval ranging from 3 to 5 days.

Once an invoice is submitted to the factoring company, it is reviewed and its value verified. After approval, funding can be received in as little as 24 hours.

Benefits of Healthcare Invoice Factoring

The benefits of healthcare invoice factoring are significant and multifaceted. Factoring provides immediate cash advances on qualified receivables, often within 24 hours, significantly improving liquidity. This immediate cash flow allows healthcare providers to cover daily expenses, pay payroll, and expand facilities.

Factoring services enable healthcare providers to concentrate on growth activities rather than administrative tasks. Factoring can scale with business growth, providing more working capital as sales increase. Eliminating debt from the balance sheet through factoring eases access to other financing options and enhances financial stability.

Non-recourse factoring mitigates the risk of bad debts, offering additional financial stability. Factoring arrangements, free from long-term commitments, allow flexibility in financial management. Overall, healthcare invoice factoring is crucial for managing cash flow, overcoming financial challenges, and supporting growth opportunities.

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Phil Cohen

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