![]() ![]() Included with the invoice, or sent separately, will be a letter to the account debtor to inform them that the account has been purchased and payment should be made directly to the factor. Either the seller will mail out the invoices or the factor will choose to do it. The seller will issue the invoices with the factor’s payment information affixed directly to the invoice. Because of the inevitable delay in payment, and the possibility that the provider will never be paid, the provider decides to sell the account receivable to a third-party at an amount less than the full invoice amount.Īfter verifying the invoices, the factor will pay the seller the advance, which is either a percentage discount of the amount due or a flat-fee per invoice. The healthcare provider provides a medical service to a patient. This translates into more predictable revenues. With the advance in hand, the health care provider has immediate working capital, no longer has to deal with the costs and expenses of ongoing collection efforts, and avoids the risk of non-payment. The party responsible for payment (the “account debtor”) will make payment directly to the factor. In the health care context, a financing company (the “factor”), “advances” to the healthcare provider (the “seller”), some amount in exchange for the seller’s accounts receivables for the medical services provided to patients. 2įactoring occurs when a business sells its accounts receivable (i.e., invoices) to a third party at a discount in exchange for immediate capital. Its origins can be traced back to the Mesopotamian culture and the Code of Hammurabi. ![]() Practitioners should understand how these arrangements work and have them reviewed by a qualified attorney before entering into these arrangements. As a result, medical factoring (or medical receivables factoring) is becoming more common. And even when claims do get paid, the health care provider loses out on the interest they could have earned on their money had they been paid promptly.ĭelays and uncertainties in payment make the healthcare industry uniquely attractive to factoring arrangements. Patients may not have insurance or plaintiffs may lose their case. In between the service and the payment, health care providers do without.Įven after the delay, some claims never get paid. The wait is even longer – sometimes years – for medical claims of plaintiffs involved in lawsuits. Disputed claims can get pushed out an additional 60 days. Though Texas has a prompt payment statute, 1 it can take 60 days or longer for a claim to be paid. One of the immutable truths about healthcare is that it can take a long time to get paid. ![]()
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