Receivables Financing for Healthcare
Providers
A Quick Cash Flow Solution!
How does receivables based financing work for healthcare
providers?
A typical example of how receivable finance works with healthcare
providers is as follows:
An ambulatory surgical center has 6 months in business,
self-financed until now or has a small loan at the bank. The
majority of its receivables are paid by commercial insurance
companies that pay in 90 to 120 days and
Medicare/Medicaid reimbursements that collect within 30 to 60 days.
Due to the rapid growth and success of the business, the principles
find themselves short of liquidity and unpredictable cash flow for
ongoing financial obligations. The principles must find a fast and
flexible way to convert the receivables to cash flow in order to
continue daily operations.
Receivables based financing has become a
popular solution for this type of industry. It establishes an
unlimited credit line that is solely based on the net realized value
(NRV) of the accounts receivable. The credit line grows proportionately as
the eligible receivables increase and the initial funding can take
place in as
little as two to three weeks.
What is usually required in obtaining healthcare receivables
based financing?
Factoring companies or asset based finance companies that specialize in healthcare receivable
financing will base their decisions on several factors and may vary
from lender to lender. The first thing that needs to be evaluated is
the net realized value (NRV) of the receivables. The primary reason for
this evaluation is to determine the quality of the receivables that
are going to be considered for the “funding base”, also know as the
borrowing base. Ineligible items such as private copay receivables,
contractual reserves, and receivables past 180 days will not be
considered and will be excluded from the funding base. This
evaluation will determine the advance rate.
The second thing is to conduct a third party payer analysis and
compliance review. Since the factoring company or asset based lender is going
to collateralize on the receivables, this review will identify clinical
liability issues that expose the client and the finance company
regarding the receivables (Collateral). Verification of proper and
current licensing, a review of current surveys and frequency of
payment for each payer class will be evaluated.
And last, "financial statements". Factoring companies are usually
more liberal and flexible than asset based lenders due to the nature
of the collateral that will be encumbered.
Asset based lending institutions
will be more diligent and base their funding decision on a good
balance sheet, proof of profitability, and reviews mentioned above.
Factoring companies are more concerned with the quality of eligible
receivables and competency within the clients billing department.
Funding decisions are not based heavily on a balance sheet that may show major fluctuations
but so long as it can provide proof of profitability, the factoring
company may still go forward with funding the client.
Healthcare providers are considering receivables financing as a
viable option in funding their growth. The demand for this type of
service is much needed within the Healthcare industry. Receivable
based financing creates predictable cash flow in an unpredictable
payment cycle industry.
If your business would benefit with a receivable based funding
program. Please give us a call or
request a proposal online.
NOW offering Medical
Billing Services as an option
Request a proposal at 1 800 450 9653
1st Commercial Credit provides
healthcare receivable
funding for two types of clients. If you are a
Healthcare staffing agency invoicing
to a commercial account (i.e. Hospitals, Nursing Homes, etc.)
please go to this web page " Medical
Staffing Finance".
Click Here- Medical Billing and Collections with Finance
Currently providing receivables
based financing for healthcare in
the following states: Alabama, Alaska, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware, Florida, Georgia,
Hawaii, Idaho State, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire,
New Jersey, New Mexico, New York, North Carolina, North Dakota,
Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South
Carolina, South Dakota, Tennessee, Texas, Utah, Vermont,
Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
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Factoring is an alternative form of business financing
08-28-2006
How to hurdle fast growth financing without adding debt to your business?
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