university of alabama birmingham medical center
A major hospital and nursing home have only a 14% decline in net profit for the fourth quarter of 2006 from the same period last year. The CFO of the company, said the drop was almost entirely to lower Medicare reimbursement rates. Although still very profitable, the company expects to continue the erosion of profits as a further reimbursement rates are expected.
For smaller groups, the problems increased. The Medicare reimbursement, along with skyrocketing malpractice insurance premiums and slow time-to-collection waiting periods by a third party payors have many providers in a precarious situation. A large proportion of doctors have postponed much-needed equipment and staff laid off or are planning layoffs in the near future.
These suppliers have no way of laws related to Medicare reimbursements, but they can be the cause into their own hands, using their assets more efficiently. Medical receivables financing or factoring, the provider will immediately receive cash for their third Billings. Third-party payors include commercial insurance, HMO's, PPO's, Blue Cross / Blue Shield, Medicare, Medicaid, and state entitlement programs. Normally, the provider must wait anywhere from 30 to 90 days to make payment after the service was performed. Factoring that all changes.
Factoring is not a loan: it is the sale of medical claims by third parties. It is not an advantage on the basis of a loan or a debt that investment banks offer. Unlike bank lines, which retain all of your assets, factoring encumbers only your medical claims. Furthermore, it is a dash transaction. In other words, not your balance sheet debt as a result of factoring. This can be important for the case, the practice for sale or new partners added.
The benefits of factoring medical receivables are numerous:
• There is a stable and reliable cash flow
• There is no predetermined funding. The amount will be funded only through the pool of third party claims
• No personal guarantees are
• No collateral other than medical exposures
• Investments made available for expansion, equipment, payment of bills or on time
Which players are candidates for factoring?
• MRI Center
• Home health agencies
• Rehab Centers
• Durable equipment suppliers
• Medical Laboratory
• Drug Abuse Clinics
• Dialysis equipment
• Hospitals
• physician groups
• Physical Therapy Centers
• Outpatient clinic
One of the criticisms of factoring is the price. However, increased competition allows providers to benefit from a reduction in the cost of capital, factoring medical receivables more attractive.
Kent Harlan is a CPA since 1984 and is the owner of Ozarks Capital Funding, LLC, a Springfield, MO, the company provides financing in health care.
Are you a health care provider must be indicated in the Working Capital? Click here to apply.
E-MAIL: kenth@ocflink.com
WEB: http://www.ocflink.com
TEL: 417.849.7394
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