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The healthcare services industry earned nearly $1.75 trillion in revenues during 2010 while employing over 14 million workers. At nine percent of the U.S. workforce, this is a significant contribution to the economy. Healthcare providers are hard pressed to take care of physical illnesses and contend with payment delays that can impact services.
Employers shifting healthcare costs to employees and the uninsured make collecting payment more difficult. The decline in reimbursements from government insured programs only compounds the issue. Typically, insurance carriers and other third-party payers such as Medicare and Medicaid can take up to 90 days or longer to process medical payments.
Relief for healthcare providers comes through factoring receivables for medical providers. Various forms of asset based lending have become popular lending sources for cash-strapped healthcare providers. Basically, these companies offer reasonable terms to purchase accounts receivable for hospitals and medical facilities struggling through waiting for payment.
Benefits of Factoring Receivables for Healthcare Providers
Factoring receivables services offer many benefits for healthcare providers. Some benefits include:
• Immediate advance on client invoices to stabilize cash flow
• High advance rates
• Healthcare providers can meet operational expenses and focus on patient care
• Continuous, debt-free funding
• Predictable financial source
Specific terms are negotiable between the factoring company and healthcare providers. Building an ongoing relationship helps to ensure that healthcare providers are profitable enough to meet the demands of healthcare services.
Generally, factoring provides working capital without the burden of debt-ridden balance sheets. As medical receivables increase, providers have a continuous flow of working capital that can be used in any way to grow the business. Rather than waiting months to purchase an advanced imaging system, healthcare providers can buy equipment to serve patients better much sooner.
Factoring is Part of a Growing Service for Healthcare Providers
Since the early 1990s, according to INC Magazine factoring has tripled to more than $1 trillion annually. However, like most industries, factoring experienced a lull during the recent economic crisis. This is compatible with the slowdown in economic activity across all sectors. The area least affected was healthcare since it is considered a necessity even during a recession.
Nevertheless, healthcare did not leave the recession unscathed. Increased unemployment coupled with the loss of employer-sponsored health plans did cause some slowing in healthcare spending. A decline in health spending, compounded by a delay in invoice payments, can impact the cost of taking care of patients.
Consider the fact that for every dollar spent in the American healthcare system, private insurance companies contribute approximately 33 cents. Medicare and Medicaid spending equates to nearly 20 cents and 15 cents respectively. Close to 12 cents comes from out-of-pocket expenses, with the remainder coming from various payment sources. Where does funding come from if insurance companies and other third-party payers are slow to pay invoices?
With challenges such as slow reimbursements, regulations, technology advances and rising healthcare costs, healthcare providers need a stable source of capital. This is where factoring receivables companies contribute to the continuation of healthcare services in the country. Factoring receivables provide a cash flow solution that keeps medical facilities operational for patient care.