The medical industry is busy providing health care for its patients. However, a lot of time is also spent processing invoices from doctors and billing insurance. This takes time away from helping patients and is why healthcare financing is a fantastic solution for this industry.
What Is Accounts Receivable Financing?
Accounts receivable financing is a way to help healthcare providers secure money to run their business without waiting for patients or insurance companies to pay their bills. Since most medical bills are costly, patients tend to put them off, sometimes for months at a time. This delays the provider from receiving their payments on time, which hurts overall growth.
In accounts receivable financing, a financing company purchases the debt from the medical provider and pays them 80% to 95% of the amount owed. Usually, a small processing fee is charged as well. The remaining balance is used as a buffer if there are any problems with incorrect billing or if some bills don’t get paid. The reserve is returned to the provider once payment has been received.
This type of financing is not a loan but a cash advance on funds that normally take 30 to 60 days to receive. The financing company then has the responsibility of collecting the debt from the patient and the insurance company. This means that caretakers can focus on their patients and not on billing and paperwork.
Why Is It Beneficial for the Medical Industry?
There are many advantages for medical offices when selling off their debt. Here are a few of the ways this benefits them.
- Money is made available to the doctor’s office within a few days.
- By paying suppliers on time, many practices qualify for discounts, keeping long-term pricing down.
- Having funds readily on hand makes it easier for medical providers to hire and keep good staff.
- A steady supply of cash allows medical offices to expand as needed and purchase new and improved equipment when available.
- The billing process is very efficient, using up-to-date software systems that allow tracking and collections.
- This financing is available for many different medical professionals, including hospitals, physicians, oral surgeons and treatment centers.
Being able to care for patients is the top priority for medical providers. Accounts receivable financing allows for this opportunity by taking away the time-consuming responsibility of the billing process. It also provides businesses with cash to provide the best level of care instead of waiting for delayed payments.