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Three Questions to Ask Before Choosing a Medical Coding Accounts Receivable Factoring Company

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By Phil Cohen

Selling outsourced medical coding invoices to a factoring firm, a form of accounts receivable financing, is a great way for a business owner to ease cash flow tensions. However, if a medical coding service starts working with the wrong factoring company, then it could create a completely different kind of cash flow problem. Here are three questions medical coding company owners should ask to ensure that they find the right account receivable factor for their medical coding service.

What is Medical Coding Factoring?

Medical coding factoring is a specialized form of invoice factoring tailored specifically for medical coding companies. These companies play a pivotal role in the healthcare industry by assigning codes to diagnoses and procedures, which are essential for insurance reimbursement. However, they often encounter cash flow challenges due to delayed payments from healthcare providers and insurance companies. Medical coding factoring addresses this issue by providing immediate access to working capital. By advancing a significant portion of outstanding invoices, medical coding factoring enables medical coding companies to maintain a stable cash flow, allowing them to focus on their core business operations without financial strain.

Benefits of Medical Coding Factoring

Medical coding factoring offers several key benefits to medical coding companies:

  • Improved Cash Flow: By advancing a significant portion of outstanding invoices, medical coding factoring provides the necessary funds to meet financial obligations and invest in business growth.
  • Reduced Administrative Burden: Factoring companies handle the collection of payments from healthcare providers and insurance companies, freeing up medical coding companies to concentrate on their core activities.
  • Increased Flexibility: Medical coding factoring allows companies to choose which invoices to factor, providing the flexibility to manage cash flow according to specific needs.
  • Enhanced Creditworthiness: Partnering with a reputable medical factoring company can improve a medical coding company’s creditworthiness, opening doors to better financing options in the future.

How Medical Coding Factoring Works

The medical coding factoring process typically involves the following steps:

  1. Invoice Submission: A medical coding company submits its outstanding invoices to a medical factoring company.
  2. Invoice Review: The medical factoring company reviews the invoices and verifies the creditworthiness of the healthcare providers and insurance companies.
  3. Advance Payment: The medical factoring company advances a significant portion of the outstanding invoices to the medical coding company.
  4. Payment Collection: The medical factoring company collects payments from the healthcare providers and insurance companies.
  5. Balance Release: Once payments are collected, the medical factoring company releases the remaining balance to the medical coding company, minus a small fee.

Three Questions to Ask A Potential Factoring Company

Is Your Medical Receivables Factoring Firm Familiar with the Outsourced Medical Coding Industry?

Account receivable factoring firms come in all different shapes and sizes. However, the best place to start is to try finding one who understands the outsourced medical coding business model within the broader context of a healthcare business. Choosing to partner with a medical coding account receivable factor who understands the unique characteristics of your business ensures that the ongoing factoring process will run smoothly. Instead of wasting valuable time explaining medical coding industry jargon, traditional payment terms and / or day-to-day business procedures to a factor that is unfamiliar with your company’s industry, select a funder that already knows about the medical coding business. Doing so will let you focus your attention on more important matters-like growing your outsourced medical coding business.

Does Your Medical Coding Medical Factoring Company Offer Flexible Terms?

There are a number of specific questions that a medical coding service owner should ask in regards to a factoring firm’s ongoing funding specifications. The questions below encompass the majority of those specifics:

  • Is there a specific length of time that I’m required to remain in the account receivable factoring relationship?
  • Do I have to sign a personal guaranty, whereby I would be held personally responsible for any unpaid invoices?
  • Am I required to sell all of my medical receivables?
  • Am I required to factor a minimum amount of invoices? And if so, what penalties are involved if I do not meet the minimum requirements?
  • On the other hand, is there a maximum funding amount that I cannot exceed?

Although there are some factoring firms who will answer NO to all of these questions, many will not. It’s important for a business owner to know the level of flexibility their intended factoring company can offer so he/she won’t be surprised later on in the financing relationship.

What Kind of Customer Service Does Your Medical Coding Account Receivable Factoring Firm Provide to Healthcare Providers?

A good medical coding factoring firm, like many healthcare factoring companies, is one who is available when its clients need it. Pay attention to response times for both email and telephone communications during the sales process. Take note of who responds to your inquiries as well. For example, some factoring firms assign personal account managers to each of its clients, whereas other companies have a team of employees handling each client’s account. Regardless of how many people are working to fund your outsource medical coding business, make it a priority to choose an invoice factoring company who offers a level of customer service that meets your standards.

Of course there are even more variables to consider when choosing a medical coding funding firm that could not be explained adequately in this article because of constraints on space. Just remember that there are a lot of factoring companies out there, each with their own unique practices and policies. It’s important to weigh the options of the all-encompassing package of what each factor has to offer before making a final decision. To find the best factor for your medical coding company’s needs, make it a priority to ask the questions shared within this article.

Qualifying for Medical Factoring

To qualify for medical factoring, medical coding companies typically need to meet the following criteria:

  • Minimum Volume of Outstanding Invoices: Companies should have a sufficient volume of outstanding invoices to factor.
  • Good Credit History: A solid credit history is essential for qualifying for medical factoring.
  • Stable Business Operation: Companies should demonstrate stable business operations.
  • Clear and Transparent Billing Process: A transparent billing process is crucial for smooth factoring transactions.
  • Strong Relationships with Healthcare Providers and Insurance Companies: Established relationships with healthcare providers and insurance companies enhance the likelihood of qualifying for medical factoring.

Choosing a Medical Factoring Company

When selecting a medical factoring company, medical coding companies should consider the following factors:

  • Experience in the Medical Industry: Choose a factoring company with a proven track record in the medical industry.
  • Reputation and Credibility: Look for a reputable and credible factoring company with positive client reviews.
  • Fees and Rates: Compare fees and rates to ensure they are competitive and transparent.
  • Level of Customer Service: Opt for a factoring company that offers excellent customer service and support.
  • Flexibility and Customization Options: Ensure the factoring company provides flexible and customizable solutions to meet specific business needs.
  • Compliance with Industry Regulations and Standards: Verify that the factoring company complies with industry regulations and standards.

By carefully evaluating these factors, medical coding companies can select a reputable and reliable medical factoring company that meets their specific needs and helps them achieve their business goals.

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Phil Cohen

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