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How Federally Qualified Health Centers Can Benefit From Medical Factoring

Max 3 min read
A Federally Qualified Health Center (FQHC) is a medical facility that qualifies for Medicare and Medicaid reimbursements. Health Center Program award recipients, look-alikes, and outpatient clinics associated with tribal organizations are all covered by the general term “FQHC.”
FQHCs were formed to provide primary care services to rural and urban communities that may not have sufficient access to medical care. FQHC facilities act as safety net providers that offer not only medical care but also the following:
● Public housing centers
● Community health centers
● Outpatient health programs run by the Indian Health Service
● Other programs serving homeless populations and migrants

What Medical Factoring Can Do for FQHCs

FQHCs that have just opened a facility in a new location may find it challenging to keep up with all the costs required to operate the clinic. There are several factors that may contribute to cashflow issues in FQHCs, such as rate-setting delays and an overall complex billing procedure.
Even during the normal course of operations, waiting for payments may typically take anywhere between 30 to 90 days. When you’re a newly-opened facility with an influx of patients looking for much-needed medical care, however, the bills you need to pay can’t wait.
Some typical operating expenses* of an FQHC are as follows:
● Staff salaries
● Employee benefits
● Medical service fees
● Medical supplies
● Contract labor
● Purchased services
● Interest expense
● Other contingent expenses
Having a medical factoring company by your side can change the game and allow your clinic to operate as it normally would. Medical factoring allows health facilities like FQHCs to sell accounts receivables in exchange for instant cash.
The medical factoring company, also known as a “factor,” will then be in charge of collecting dues from payors. Among the usual payors of FQHCs are Medicare, Medicaid, commercial clients, other governmental organizations, and uninsured patients.
Through factoring, newly-opened FQHC service locations can operate at full strength and serve all patients in need. This is because the FQHC can get immediate access to working capital without worrying about the tedious administrative tasks involved in collecting payments from insurance companies and government agencies.

How Does it Work?

Medical factoring allows FQHCs to work with a medical factoring company that will purchase the facility’s invoices at a discounted rate (usually 1% to 5%). This rate is applied to the total amount of invoices that a facility wishes to sell to its factor.
So, for example, if the Golden Health Center, was to sell $50,000 worth of invoices at a discount rate of 2%, then this means that the factor will purchase the invoices for $49,000.
A factoring advance rate is then applied, typically between 75% and 95%. As the term suggests, this is simply the percentage of the purchase amount Golden Health Center will receive upon selling its invoices.
If the FQHC agrees to an advance rate of 85%, for example, it will immediately receive the amount of $41,650 (or 85% of $49,000) within 28 to 48 hours via wire transfer. The remaining 15% will still be issued to it, but only after the factor has collected payments from the FQHC’s payors.
Are you an FQHC in need of a financial services partner to keep your operations afloat? Get in touch with us at Factoring Express, a leading medical factoring company that has helped countless practices and businesses with unpaid invoices.
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