Common Medical Factoring Terms Video

by on 05/14/12 at 10:42 pm

Medical Factoring Terms pdf

Terms:

Terms In this short video, I will explain the major terms used in medical factoring and provide an example of a medical factoring transaction. Understanding the following terms will allow you to make the best financing choice for your practice.

Factoring:

Factoring A transaction in which a business sells its accounts receivable to a third party–called a “factor”–in return for immediate cash. In medical factoring, the accounts receivable are specifically those due from third party insurance carriers and government insurances.

 

Estimated Collectable Value (“ECV”):

Estimated Collectable Value (“ECV”) Most medical providers bill third party insurance carriers a higher amount than they will actually collect. A factor will determine, based on the provider’s historical collection rate and industry standards, the ECV a provider can expect to receive for the invoices billed.

 

Advance Rate:

Advance Rate Since a factor provides immediate cash for a receivable that will pay in the future, the factor will purchase the receivables at a discount. The amount the factor will pay for the receivable is known as the advance rate. In most medical factoring scenarios the advance rate is between 65% and 80% of ECV.

 

Payor:

Payor The person or organization named in a bill or note who has to pay the holder. In medical factoring, the payors are third party insurance carriers.

 

Factor Fee:

Factor Fee Once the receivable is collected from the payor , the factor will recover his advance plus factor fee and return the rest to the medical provider. In most medical factoring cases, the factor fee is between 1.25% and 3%. This amount is determined on a 30 day basis.

 

Example:

Example Doctor has rendered services on a patient and billed the insurance carrier (“carrier”) $100 for the procedure. The doctor’s ECV is determined to be 90%, so the factor can expect to collect $90 on this claim from the carrier. The doctor will sell the receivable to the factor and the factor will advance the doctor $72 (80% of ECV).

 

Example (continued):

Example (continued) Let’s assume the bill is paid two months from the purchase and the factor fee is 2% per month. Therefore, upon the $90 payment from the payor, the factor will keep $72 (the initial advance) plus $3.60 ((factor fee* ECV (4%*$90)) and return the remainder ($14.40) back to the provider.

 

For an application to see if Medical Factoring is right for your practice:

For an application to see if Medical Factoring is right for your practice Go to http://alleoncapital.com/medical-app Also, feel free to contact me directly at Benr@alleoncapital.com 201-340-6346 Or visit our blog http://medicalfinancingreceivables.co Ben Rutkevitz Alleon Capital Partners

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