A New Take on Accounts Receivable [AR] Factoring for Doctors

 Understanding How Medical Practice Business Factoring Works

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AR factoring is a financial transaction whereby a business, like a medical practice, sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business.

Factoring differs from a bank loan in three main ways.

First, the emphasis is on the value of the receivables (essentially a financial asset), [1][2] not the firm’s credit worthiness.

Second, factoring is not a loan – it is the purchase of a financial asset (the receivable).

Finally, a bank loan involves two parties whereas factoring involves three.

Factoring: ARs 1


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One Response

  1. Patient Payment Expectation Policies

    The best way to reduce ARs is to prevent them in the first place.

    Expectations are an important element of any business. Physicians who set payment expectations tend to have more satisfied patients. The key is to make sure patients know the expectations beforehand and there are several elements to consider when adopting these types of payment policies.

    • Find out what will work for your specific healthcare entity setting. Is there an ATM nearby, should the patient pay at the end of the visit or before service is rendered, will there be any penalties for postponing a co-pay, etc.

    • If substantial debt is built up will the patient still be seen? At what point is the patient turned over to collections?

    • Keep in mind legal and ethical issues (i.e., emergencies).

    • After policies are in place, make sure the staff is aware and ready to keep up the standard.

    • The policies need to be clear to the patients through mailings, the practice’s website, signs posted in the facility, etc.

    There are many others, as well!



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