With all the talk about swine flu, epidemics and pandemics, it is no wonder the general public gets a bit edgy about the possibility of becoming ill. But there is another type of epidemic associated with healthcare, only this epidemic will not make you physically ill. But it may leave your physician financially debilitated.
The issue facing your physician is cash flow and the epidemic is the amount of time it takes many doctors and medical facilities to get paid by those responsible for medical reimbursements. Typically, these are the payments provided by Medicare, Medicaid and health insurance companies. Once your doctor provides a service to you and the other patients of his or her practice, the bills for this service, less your co-pay, is forwarded on to a third-party. Then the waiting game begins.
At any given time, your doctor may be awaiting payments totaling tens-of-thousands of dollars. Meanwhile, rent, salaries, supplies, insurance and all of the expenses of running a business must be paid. Granted, awaiting payment from clients and customers is a problem in virtually every industry. But when you are relying on complex bureaucracies like the Federal government and major health insurance for the vast majority of your revenue, the delays can be a major financial challenge.
To address and rectify this ongoing dilemma, many medical practitioners and facilities are taking advantage of companies that provide a solution in the form of medical receivables factoring. Simply stated, a factoring company advances cash to a business based on the anticipated revenues from the invoices they have issued. In the case of the medical industry, these would be claims for reimbursement. These medical invoices are stated as accounts receivables in financial records. As such, they are considered assets since, eventually, they should be collected.
Typically, a factoring company will issue up to 85% of the value of these invoices to the physician immediately. The balance, less a fee for providing the factoring service, is forwarded to the physician once the invoices have been paid. Fees for medical invoice factoring can be as little as 1-½ % or as high as 5%, depending on the assessment by the factoring company of the financial health of the physicians practice and the confidence the factor has of being paid for the invoices.
Medical receivables financing addresses another issue that affects all of us. There is currently a fairly dramatic shortage of physicians in the United States. Part of the problem is the financial challenges of running a successful practice whether as a general practitioner, a specialist or as a member of a hospital staff. Doctors spend years in training and incur significant debt to finance their education. When they finally become fully licensed and certified and can begin earning significant income in their own practice, further debt is incurred as startup expense and medical malpractice insurance is astronomical.
Under these circumstances, positive cash flow is critical. Waiting anywhere from one to three months for payment can compromise the financial health of a physician. And if these financial realities remain as a significant deterrent to qualified individuals that otherwise would enter the medical field, the physician shortage will only worsen. And, eventually, more and more Americans will go without proper healthcare, not because of lack of health insurance, but for want of a healthcare provider.
Medical accounts receivable financing is not the solution to the financial challenges faced by doctors. But receivables factoring is a legitimate and increasingly utilized method of remaining financially solvent by both healthcare providers and other industries especially with the current tight credit policies.
So next time you present your insurance card at your doctor's office for that routine checkup, you will be aware that, while your doctor may have just recorded a payment due of $125 for the visit, he or she may not see that money for quite some time, unless, however, they have taken the prudent step of engaging in medical invoice factoring.
Here's to your financial health!
Source by Terry McDermott
