Cash flow can be a big challenge for a nursing home, no matter how well run the facility is. As Forbes.com contributor Steven Uster points out, cash flow problems strike many businesses that are reliant on delayed payments from clients. Nursing homes are no exception: Insurance payments can be slow, especially when Medicaid is involved. This can make operating a facility more difficult, particularly if financing or large cash reserves are not on hand.
However, medical factoring can help nursing homes improve their cash flow immediately. This article looks at how the process works.
About Medical Factoring
Though it might have a reputation as a complicated process, medical factoring is actually relatively simple. In the case of a nursing home, the facility will be paid in two phases: an advance installment and a rebate installment.
The first step in the process is that the nursing home submits its claims to the factoring company. Then, the factoring company pays the advance installment, which is 70 to 80% of the net realized value (NRV). The NRV is based on the projected payment from Medicare or the insurance company.
After 30 to 100 days, the insurance company will pay. After that, the medical factoring company pays the rebate installment, covering the remaining 20 to 30% of the NRV (minus fees).
Starting the Process
Medical factoring is a simple process to start. A nursing home seeking the service will submit an application along with any required financial statements. The factoring company may request a visit in the case of facilities that are larger than average. Generally speaking, the application and approval process takes roughly 7 days. Funding can begin shortly after that, providing near-immediate cash flow for the nursing home.
Want more information on financing options? Check out the rest of Aspen Commercial Lending’s blog posts.