According to the U.S National Library of Medicine and the
National Institutes of Health Medline dictionary the word stat is an adverb
for the latin word: STATIM. Statim is an
adverb that means immediately or without delay. When a persons arrives at the
hospital emergency room with a gunshot wound, the staff might say, We need to
get this patient to surgery stat! meaning immediately, now. In a medical
situation stat connotes extreme urgency. Does your medical business need to
accelerate cash flow with accounts receivable financing stat?
One of the greatest challenges for medical professionals is
managing their accounts receivable. Medical accounts receivable typically are
the largest asset on their balance sheet. It typically takes 60 to 120 days or
more to collect medical accounts receivable because of the long reimbursement
process from third party payors, such as Medicare, Medicaid, and commercial
insurance companies. The collection process is long and complex. Disputes
regarding payment amounts are common. Medical accounts receivable financing
accelerates cash flow to pay for expenses such as payroll, malpractice
insurance, rent, inventory and advertising.
What are the types of medical professionals that may qualify
for medical accounts receivable financing? The following is a partial list:
hospitals, medical centers, rehabilitation centers, medical laboratories,
surgical centers, sports medicine centers, MRI imaging centers, physical
therapy centers, substance abuse clinics, physical therapy centers,
manufacturers and/or distributors of medical devices, and physicians practices
whether general or specialized from A to Z such as anesthesiologists,
gastroenterologists, obstetricians, and Zygote Morula Specialists.
How lengthy is the process to obtain medical accounts
receivable? It generally takes four to eight weeks to obtain funding because of
the unique issues presented. The commercial finance company must perform
extensive audits and analysis of the prospective clients financial situation.
They need to determine that the business is and will be a going concern. They
need to examine billing practices which often are outsourced. This may require
a separate audit of a third party. And they need to examine the forseeability
of collection of the outstanding accounts receivable by auditing the accounts
receivable aging reports from a historical collection perspective. In other
words, how much of the amounts owed will be collection losses? How much will
actually be collected?
What are other unique issues regarding medical accounts receivable
financing? There are potential bankruptcy issues, lien priority issues and the
big bad wolf issue: after a commercial finance company has purchased medical
accounts receivable, the federal government can assert lien priority on the
assets of a bankrupt medical company. One example of this is the case of
American Investment Financial (AFI) versus the US
also known as the internal revenue service.
AFI loaned over 800,000 to a pediatric and urgent care
clinic. The clinic defaulted on their financial obligations to AFI and also
defaulted on their tax obligations to the federal government. It was undisputed
that AFI had followed the rules correctly in terms of filing their liens and
perfecting their security interests. Nevertheless, the court held that pursuant
to Federal law, after a 45 day statutory safe harbor period had passed, the
governments lien took priority. AFI lost hundreds of thousands of dollars
because of federal tax law and IRS
regulations. It is no wonder that commercial finance companies look very
carefully before they purchase medical accounts receivable.
Commercial finance companies will generally advance an
amount equal to 70% to 80% of a borrowing base, which may be called the
aggregate amount of eligible accounts, net realized value or net expected
collections. You can expect the following items to be excluded from your
borrowing base: accounts which are subject to dispute, counterclaim or setoff;
accounts of any account debtor who has filed or has filed against it a petition
in bankruptcy; accounts owed directly by patients or customers.
The bottom line: medical accounts receivable financing, or
medical factoring, is more difficult to obtain than other types of factoring
because of the legal risks and business risks faced by the lenders. The process
to obtain medical accounts financing usually takes much longer than accounts
receivable financing for other industries, such as a manufacturer. This good
news is, once the credit facility is established, funding can take place in a
day or less from your request for financing. You can have medical accounts
receivable financing stat!
Copyright © 2007 Gregg Financial Services
http://www.greggfinancialservices.com
