The very nature of the health care industry makes it tough to run a medical center like a business. Medical clinics simply can’t refuse to not provide treatment to those who don’t pay for ethical and legal reasons. However, doctors didn’t spend 100 years in school so they could live the rest of their lives in poverty. It’s a conundrum that likely won’t be solved any time soon.

However, there is one solution that can allow busy clinics to grow while maintaining a high level of service: medical receivables factoring.

Normally factoring only has three parties involved, but in the medical world it has four: the medical center, the patient, the insurance company, and the factor. When a patient gets treated he/she incurs an amount payable to the doctors. In many cases the patient will pay for part of the treatment and the patient’s insurance company will pay for the rest. Unfortunately it normally takes 60 to 70 days before the patient or the insurance agency pays. If the doctors want to speed up the time until they receive cash for their work they can take their receivables or insurance claims to a factoring company and sell them at a reduced price.

The amount the price is reduced depends largely on the amount of risk the factor is taking. If a medical center’s patients and insurance company have a good history of making payments, then the price paid for the receivables will be higher and vice versa. The ballpark discount rate is between 2 to 5 percent.

Using medical receivable factoring the doctors now receive the cash for their work much sooner. This allows the company to make better financial decisions, and it can also help the company to grow into new areas. If your medical clinic is caught up in the vicious cycle of being busy but never having enough cash, then you might want to consider factoring your insurance claims.