How to Use Medical Factoring to Finance a Hospital

How to Use Medical Factoring to Finance a Hospital

Small and medium-sized hospitals often struggle with funding. It takes funding to pay salaries and purchase equipment as well as other supplies needed to run a hospital. Often, waiting on insurance companies to pay claims is one of the ways that a hospital receives the funding it needs to operate. However, insurance claims can take as long as 180-days to be paid, too long for most hospitals to wait. Often, medical factoring of insurance claims is one of the ways that hospitals can get the funds they need quickly while waiting for insurance companies to pay claims. 

What is Medical Factoring?

Medical factoring is a way of receiving financing for slow-paying insurance claims. A medical factoring company provides a hospital with a portion of the claims/funds right away, and the insurance claims act as collateral. As the insurance claims are paid off the claims are settled, less the financing fee. The medical factoring company determines how much of the insurance claims/(money owed) are funded based on a case by case basis. The upfront funding allows hospitals to pay salaries, business and equipment expenses, and more. 

How Does Medical Factoring Benefit Hospitals?

In short, when a hospital is able to receive upfront funding for its insurance claims, cash flow is greatly improved. Improved cash flow stabilizes a hospital’s financial situation and creates predictable cash flow. This allows a hospital to purchase and pay for needed equipment, as well as pay salaries, and meet any unexpected financial needs that a hospital may experience. All of these benefits equal more financial stability and effective business management for a hospital. Medical factoring┬ácan be used with both Medicaid and Medicare as well as most third-party medical insurance claims. This includes private medical insurance. This often provides a hospital with the funding they need on an ongoing basis.

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