Some factors insist on sending invoices directly to the debtors, i.e. The provider collects invoices with the necessary support documentation attached and submits them to the factor. Usually, the factor will provide the provider with documentation containing the remittance instructions and a statement that the invoice has been assigned to the factor. In the vast majority of cases, factors require providers to generate invoices with the factor’s remittance address and letterhead already on them. In general, the process of medical factoring contemplates the following events. The specific process by which a provider submits invoices, receives payments and receives reports will depend, among other considerations, on the type of factoring arrangement, the size of the factor’s operation, and the quantity of provider invoices. Once the factor and the provider have executed a formal factoring agreement, the factoring relationship begins. “Non-recourse” factoring, on the other hand, places the risk of non-collection on the factor itself, who is responsible for carrying 100 percent of the risk that some or all of the purchased invoices may not be collectable.Īlthough both methods may be used depending on the circumstances, non-recourse factoring is often a more attractive option for healthcare providers who are willing to sell their invoices for a discount in exchange for the certainty of knowing that they bear no risk for unpaid accounts. “Recourse” factoring places this risk of non-collection on the invoice seller, who typically agrees in such cases to buy back any uncollected invoices from the factor. When invoices are purchased, there is always a risk that a receivable may not be collected for a variety of reasons. Factoring is a common practice for healthcare providers working in the personal injury industry, and less common in the Worker’s Compensation industry in light of recent legislative developments. Factoring companies also provide relief through the handling of all invoicing, and transfers the responsibility of collecting payment from no-pay and slow-pay clients from the provider to the factor. Factoring also provides immediate cash access with little to no wait period, as factoring companies disburse payments quickly following invoicing. This makes factoring a suitable transaction for many growing businesses when traditional medical financing or commercial lending proves impractical or unavailable.
Factors primarily focus on the ability to collect the account receivable being purchased rather than the credit worthiness of the healthcare provider. Factoring companies engaged in the business of purchasing accounts receivable are called “factors.” Healthcare providers selling their accounts receivables in the factoring transaction are referred to as “sellers.” The seller’s customers, who are in some instances the patients receiving healthcare services from the provider, and in others insurance carriers or government payers, are generally referred to as “account debtors.” The cash which a factor disburses to the seller as payment for the accounts receivable for services rendered to the debtor are typically called an “advance.” Why is medical receivables factoring advantageous?įactoring receivables is an attractive option for healthcare providers in that it involves the transfer of an asset rather than a loan of money.
INVOICE FACTORING SERVICES CALIFORNIA FULL
The term “factoring” refers to the outright purchase and sale of accounts receivable (“A/R”) invoices at a discount from a provider’s full billed charges. Healthcare factoring, sometimes called “medical factoring” or “medical receivables factoring,” provides instant capital to medical providers, including, physicians, medical practices, diagnostic and imaging facilities, nursing homes, hospitals, home health care companies, and surgery centers to fund ongoing business operations.
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