Medical Receivables Factoring

 

The dramatic shift in the financial structure of the health care industry has placed health care providers – from hospitals to private practitioners – in a difficult position. Long time-to-collection waiting periods coupled with a bureaucratic and very cumbersome third-party billing system has created an opportunity for Associates Financial Solutions to help health care providers with more consistent cash flow and growth options.

 

Medical receivable funding can take many forms.

Cash is advanced by the funding source to a provider of health care services (typically, a physician group or some type of medical center). The funding source then collects payment from third-party payors such as insurance companies and government insurers.

The funding source holds an ownership position on the health care provider’s receivables that are factored, and a security interest on the provider’s remaining receivables.

In a factoring relationship, the receivables are purchased, thereby passing ownership and the credit risk of non-payment onto the factor.

The sale of receivables provides "off balance sheet" funding. Cash replaces accounts receivables which are normally valued by traditional financial institutions at much less than their true worth. The sale of receivables, unlike a loan, causes no additional debt to you and your balance sheet.

 

The Funding Process

1) An application is completed by the health care provider.

2) A Letter of Intent is sent to the health care provider.

3) The health care provider executes the Letter of Intent and returns to the funding source with a due diligence fee.

4) The funds are wired into the health care provider’s account upon satisfactory completion of final due diligence.