A medical provider once told me that; “Medicare pays me in about 30 days, Medicaid about 20 days and my commercial insurance carriers usually pay me in about 40 to 50 days.”
That seems fair, the provider is paid in full on all of his claims in no longer than two months. FAIR? Yes fair, assuming that the provider’s landlord can wait 60 days to be paid, assuming that his/her employees can wait to be paid in 60 days, assuming the car payment can be paid every 60 days etc… Why does the provider let this happen? There is no choice, that is the nature of the business. The provider will tell you that although balancing cash flow is somewhat challenging to accomplish, It really doesn’t cost him anything to live this way.
What the providers do not realize is that they are giving financing to their carriers every time a patient leaves the office and full payment is not immediately made. Banks provide financing but they are paid for it, its called interest. Medical providers give financing to their carriers and it’s called “free money.” There is a definite cost when a medical practice has to wait for a month or two to be paid. The provider either uses the credit card approach, borrows from a lender at an interest cost or a factor which would cost a percentage of the claims’ value, or cut back on marketing expenditures or vendor “early-pay” discount opportunities. Indeed, there is a significant cost in being a banker and a medical provider.
From the prospective of the insurance carrier, look at the benefit to them. If they hold $50,000,000 in reimbursements for one day longer, keeping the money in a 2% interest bearing security, they gain on a daily basis, $2,739.73, enough to pay the salaries of 2.5 clerical level employees for one year. Are they motivated to pay claims on a timely basis?
Sometimes, even the busiest practices need readily available cash flow to keep operations running smoothly. This is where medical factoring can really come in handy for businesses. Learn more today.
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