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Receivable Purchasing
to manage cashflow


Simple accounts receivable factoring services that save your agency time and money while creating positive cash-flow.

 
Accounts Receivables

Medical insurance companies are the main financial stakeholders in client treatment services in the United States, and while insurance is a necessary funding component of the industry, collection can be a serious drain on your cash-flow.

Accounts receivable purchasing provides your agency with a third party collection program that is cash-flow positive from day one. Freedom Consultancy has established links with nationally recognized medical accounts receivable specialists that will provide your agency with a cost effective and timely means of collecting your insurance receivables, funded entirely within 30 days!

Who does this apply to?

Any medical related business that bills a third party payer (either an insurance company or government agency such as Medicare or Medicaid) could be a potential candidate for medical accounts receivable financing.

Doctors who participate in an HMO referral program or as a primary physician in managed health care are prime candidates for medical accounts receivable financing.  Other good prospects could include such facilities as hospitals, MRI facilities, specialty clinics, rehabilitation centers, laboratories, home health care companies, psychiatric and substance abuse facilities, skilled nursing facilities, fertility clinics, and long term care centers.

Providers are not the only prospects for medical accounts receivable financing.  Many durable medical equipment companies (which manufacture and/or sell hospital beds, wheelchairs, etc) also bill insurance companies, Medicare and Medicaid directly.

Typically, the following are common trends of companies that benefit from medical accounts receivable financing:

  • Not Old Enough - Healthcare provider may only have been in business for 2 or 3 years and, while doing very well, may still not be established long enough to qualify for finance with traditional banks.
  • Cash Poor - Healthcare provider may be doing everything right however, collections are slow resulting in a cash drain.
  • No Money to Grow - Healthcare provider is performing well and needs cash injection to expand or acquire.
  • Credit Problems - Principals may not have sufficient credit to approach traditional banks.

  • How does it work?

    The bank funds the accounts receivable of all types of healthcare providers whereby the receivables are payable by Medicare, Medicaid, Blue Cross – Blue Shield entities, HMOs/ PPOs, Commercial Insurance Companies, and Workers Compensation Carriers, generally ranging from $100,000 through $10 Million per month.

    Unlike a typical asset based lender, our bank is much more focused on the value of the healthcare provider’s accounts receivable as opposed to the healthcare provider’s financial / credit condition, and this focus allows the bank to offer much more availability of funding to the healthcare provider, as compared to a typical lender.  Additionally and equally as noteworthy is that due to the bank’s primary focus on the accounts receivable value of the healthcare provider, they does NOT require any financial covenants to be maintained under its accounts receivable funding programs.

    Funding Process
    1. As of the initial funding date (let’s assume this occurs on June 1, 2013), the bank can provide an initial pre-payment of the purchase price equal to 80% of the Net Realizable Value of the healthcare provider’s open accounts receivable.  The bank can qualify all open accounts receivable (excluding self-pay), which have not reached their respective bar date for billing and collection purposes.  This group of open accounts, becomes batch 1, for the funding transaction.  So let’s assume that the Net Realizable Value for batch 1 is $1.0 Million.  So on day one, the bank will pay the healthcare provider $800,000 which represents the 80% advance pre-payment.
    2. As soon as one week after the initial funding of June 1st, the bank is able to provide a second advance pre-payment, based upon the newly generated accounts receivable billed by the healthcare provider, between the dates of June 1st-June 7th.  So, as of June 8th, the bank will be able to provide another 80% advance prepayment.  Let’s assume that the NRV of one week’s worth of newly billed claims equals $250,000, so the 80% advance pre-payment equals $200,000.
    3. The process noted in 2 above can be repeated week after week (and batches 3, 4, 5, 6, 7, etc. can be created this way), as often as the healthcare provider wants to continue funding. The bank can also accept new accounts receivable submissions from the healthcare provider, on a bi-weekly or monthly basis, at the discretion of the healthcare provider
    Collection Process
    1. All collections are paid into a lockbox depositary bank account (we can use the healthcare provider’s existing bank to start with to create this depositary bank account), which bank account has automatic “sweep instructions” established by the healthcare provider and the bank, prior to the initial funding of the transaction.  The sweep instructions establish the fact that all collected accounts receivable proceeds which are deposited into such depositary bank account, will be automatically sent to the bank via wire transfer on a daily basis.
    2. As collections are received by the bank they also receive copies of all Explanation of Benefits/Remittance Advices (the originals are retained by the healthcare provider), reflecting the deposits.  With this information, the bank is able to post the claims on its internal monitoring system on a claim by claim basis, to determine based upon each payment received, which particular claim associated with such payment(s) applies to Batch 1 or Batch 2, or Batch 3, etc.
    3. Even though the bank is posting claims on its own internal monitoring system, the healthcare provider client continues to perform the front line primary servicing of all accounts receivable.  In this regard, the healthcare provider’s own billing, collections and posting activities on its own billing/collections system, continue the same way it had been previously performing this function, prior to the bank’s involvement.
    4. Once the bank has posted enough payments to Batch 1 claims, whereby the 80% pre-payment amount for Batch 1 (in our example under the funding process, this amount equaled $800,000) they will next collect their monthly discount fees from the very next dollars which are received and posted. Once the bank’s discount fees have been collected, for Batch 1, all further monies received for Batch 1 claims (i.e. the remaining 20% less the bank’s monthly discount fees) will be returned to the healthcare provider client.
    5. Similarly, once the bank has posted enough payments to Batch 2’s claims, whereby the 80% pre-payment amount for Batch 1 (in our example under the funding process, this amount equaled $200,000), then the bank will next collect it’s monthly discount fees from the very next dollars which are received and posted. Once the bank’s discount fees have been collected, for Batch 2, all further monies received for Batch 2 claims (i.e. the remaining 20% less the bank’s monthly discount fees) will be returned to the healthcare provider client.
    6. The processes noted in 4 and 5 above are repeated for Batches 3, 4, 5, 6, 7, etc.

    Please contact us for further information or to request an application form.

     

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