In the medical field, slow payments can be a problem. When invoices are not paid promptly, it means the business side of the nursing home may struggle to keep up with expenses and financial expectations. A loan may seem like the right solution to provide money for the nursing home, but it will include an additional bill that will need to be accounted for and does not solve the problem of slow invoice payments. Instead of a loan, a nursing home may consider medical factoring to address cash flow problems and slow invoice payments.
Medical factoring finances your medical receivables in two installments. The first is the “advance,” and the second is the “rebate.” The advance, which is paid shortly after the claim is filed with the factoring company, is approximately 70%-80% of the NRV (net realized value) of the claim. The NRV is the amount the insurance company or Medicare is expected to pay. The rebate, which is the remaining percentage (20%-30%) minus applicable fees, is provided based on the claims being paid on their schedule.
One of the advantages of medical factoring is that the application process is easier and faster than a traditional bank loan. Along with the application paperwork, the nursing home will need to provide some financial paperwork. A visit may be scheduled, as well. The factoring company typically needs approximately one week to approve an application unless additional information is needed from the nursing home. Comparatively, the processing time for an SBA (Small Business Association) loan is a minimum of 60-90 days.
Despite slow payment on invoices, a nursing home needs cash flow to meet financial obligations. In order to meet those obligations, medical factoring may be a good solution. Not only is the application process faster compared to traditional bank loans, but the terms may be more favorable to the nursing home to maintain long-term business success.