It’s no secret that vendors who sell to medical providers make great factoring candidates.
Typical vendors who benefit from invoice factoring include: temporary medical staffing agencies, medical transcription services, janitorial companies, and even medical supply companies.
All of these businesses routinely provide services and/or sell goods to medical providers and then have to wait weeks or months to be paid. However, there is another type of vendor that can benefit from invoice factoring that you may not know about—Outsourced Medical Billing Services.
Medical billing is one of the fastest-growing and most dynamic sectors of the healthcare industry. In a nutshell, providers wouldn’t be able to get paid by third-party insurance if it weren’t for medical billing. Because the medical billing preparation and submission process is an immense task, so many medical providers choose to outsource their medical billing. Therefore, outsourced medical billing services act as intermediaries between medical providers and insurance companies.
Of course, medical billing companies charge a fee for their services. Typically, a medical billing company charges a percentage of what the medical provider collects from insurance companies. Moreover, a medical billing service strives to submit claims quickly and correctly to the insurance companies to ensure a speedy reimbursement to the provider.
So if an outsourced medical billing company works hard to get the provider paid quickly, it only makes sense that the provider will pay the medical billing company quickly as well, right? Unfortunately, this is not always the case. Hence, it’s not uncommon for outsourced medical billing companies to run into cash flow problems. Enter outsourced medical billing invoice factoring.
Even though you may not be familiar with the outsourced medical billing industry, the factoring process is virtually the same:
1. The outsourced medical billing service submits an invoice to the factoring firm.
2. The factor verifies that the billing services were performed, and in some cases, verifies that the medical provider has received payment for the processed claims listed on the invoice.
3. Once the factor is comfortable with the verification, it purchases the invoice and funds are advanced electronically to the outsourced medical billing service.
4. When the factor receives payment from the medical provider, it applies the factoring fee and releases the rest back to the medical billing company.
It’s easy to see how these unique medical vendors can benefit by factoring their invoices. The most important thing to remember is that outsourced medical billing factoring is the perfect way for a new or growing business owner to maintain a healthy cash flow. Rather than wasting time and resources chasing providers for prompt payment, outsourced medical billing business owners can factor invoices to access capital immediately. Then he/she can use that incoming cash to focus on business growth efforts.
Keep in mind that as the medical billing industry continues to grow, more players will certainly enter the market. As more outsourced medical billing companies pop up, their need for financing will also increase. When reviewing potential factoring candidates, factoring brokers should definitely include medical billing companies in their portfolio.
Nikki Flores is a Consultant Liaison for PRN Funding, LLC, which is an extraordinarily focused niche player in healthcare factoring.
PRN Funding exclusively factors the accounts receivable of companies that sell goods or provide services to healthcare providers.
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