Medical accounts receivable are the outstanding and unpaid accounts that remain on the books of a medical provider. They represent completed patient treatments with an ongoing collection process. Accounts receivables result in the payment to the medical provider or the account being written off as “uncollected.”
The compounding accounts receivable problem
The longer the patient accounts remain unpaid, the statistically more difficult they become to collect, and the more chance there is of default. Thus the collections process aims to collect on the accounts receivables as quickly as possible to avoid the risks associated with default. Additionally, the fast collection of an account provides the cash-on-hand necessary to continue to maintain operations of the facility itself. However, the expenses associated with treatment are not limited to the medical provider’s time. Expenses can include supplies, rent, utilities, equipment payments, and payroll. All of which must be paid on time, even if the accounts receivable owed to the facility are not collected.
The time gap between treatment and payments creates a unique problem for providers in that they can easily owe more on expenses related to the treatment than the amounts collected in a period. When more cash is owed than is being collected by a medical provider, reserve cash must be drawn upon to keep credit ratings and vendor accounts in good order. In many cases, multiple months compound itself into a situation where cash reserves are depleted, and medical providers either need to secure a loan or find another source of cash to pay for expenses.
Alternative options to loans
Medical lien financing programs like those offered through PROVE provide the options that many providers find crucial in times like these, giving them the ability to sell the rights to collection of the medical accounts receivables at a small discount in exchange for immediate payment. PROVE buys the medical accounts receivable, generating immediate cash for the provider. Medical lien financing removes all risk of default from the medical provider as there is no penalty for uncollected accounts, and no need for repayment if the collections process fails to produce a payment. The lengthy periods of uncollected funds and the inability to accurately predict income to cover expenses through the patient load are eliminated through the medical accounts receivable funding process. Valuable time and resources once bogged down by collections activities can finally be freed up to concentrate on the essential tasks associated with treating patients.