Medical Accounts Receivable Financing-Stat
According to the U.S National Library of Medicine and the National Institutes of Health Medline dictionary the word “stat is an adverb for the latin word: STATIM. Statim is an adverb that means immediately or without delay. When a persons arrives at the hospital emergency room with a gunshot wound, the staff might say, “We need to get this patient to surgery stat!” meaning immediately, now. In a medical situation “stat” connotes extreme urgency. Does your medical business need to accelerate cash flow with accounts receivable financing “stat”?
One of the greatest challenges for medical professionals is managing their accounts receivable. Medical accounts receivable typically are the largest asset on their balance sheet. It typically takes 60 to 120 days or more to collect medical accounts receivable because of the long reimbursement process from third party payors, such as Medicare, Medicaid, and commercial insurance companies. The collection process is long and complex. Disputes regarding payment amounts are common. Medical accounts receivable financing accelerates cash flow to pay for expenses such as payroll, malpractice insurance, rent, inventory and advertising.
What are the types of medical professionals that may qualify for medical accounts receivable financing? The following is a partial list: hospitals, medical centers, rehabilitation centers, medical laboratories, surgical centers, sports medicine centers, MRI imaging centers, physical therapy centers, substance abuse clinics, physical therapy centers, manufacturers and/or distributors of medical devices, and physician’s practices whether general or specialized from A to Z such as anesthesiologists, gastroenterologists, obstetricians, and Zygote – Morula Specialists.
How lengthy is the process to obtain medical accounts receivable? It generally takes four to eight weeks to obtain funding because of the unique issues presented. The commercial finance company must perform extensive audits and analysis of the prospective client’s financial situation. They need to determine that the business is and will be a “going concern”. They need to examine billing practices which often are outsourced. This may require a separate audit of a third party. And they need to examine the forseeability of collection of the outstanding accounts receivable by auditing the accounts receivable aging reports from a historical collection perspective. In other words, how much of the amounts owed will be collection losses? How much will actually be collected?
What are other unique issues regarding medical accounts receivable financing? There are potential bankruptcy issues, lien priority issues and the “big bad wolf” issue: after a commercial finance company has purchased medical accounts receivable, the federal government can assert lien priority on the assets of a bankrupt medical company. One example of this is the case of American Investment Financial (“AFI”) versus the US also known as the internal revenue service.
AFI loaned over $800,000 to a pediatric and urgent care clinic. The clinic defaulted on their financial obligations to AFI and also defaulted on their tax obligations to the federal government. It was undisputed that AFI had followed the rules correctly in terms of filing their liens and perfecting their security interests. Nevertheless, the court held that pursuant to Federal law, after a 45 day statutory safe harbor period had passed, the government’s lien took priority. AFI lost hundreds of thousands of dollars because of federal tax law and IRS regulations. It is no wonder that commercial finance companies look very carefully before they purchase medical accounts receivable.
Commercial finance companies will generally advance an amount equal to 70% to 80% of a borrowing base, which may be called “the aggregate amount of eligible accounts”, “net realized value” or “net expected collections”. You can expect the following items to be excluded from your borrowing base: accounts which are subject to dispute, counterclaim or setoff; accounts of any account debtor who has filed or has filed against it a petition in bankruptcy; accounts owed directly by patients or customers.
The bottom line: medical accounts receivable financing, or medical factoring, is more difficult to obtain than other types of factoring because of the legal risks and business risks faced by the lenders. The process to obtain medical accounts financing usually takes much longer than accounts receivable financing for other industries, such as a manufacturer. This good news is, once the credit facility is established, funding can take place in a day or less from your request for financing. You can have medical accounts receivable financing “stat”!
Why Early-Stage Startup Companies Should Hire a Lawyer
Many startup companies believe that they do not need a lawyer to help them with their business dealings. In the early stages, this may be true. However, as time goes on and your company grows, you will find yourself in situations where it is necessary to hire a business lawyer and begin to understand all the many benefits that come with hiring a lawyer for your legal needs.
The most straightforward approach to avoid any future legal issues is to employ a startup lawyer who is well-versed in your state’s company regulations and best practices. In addition, working with an attorney can help you better understand small company law. So, how can a startup lawyer help you in ensuring that your company’s launch runs smoothly?
They Know What’s Best for You
Lawyers that have experience with startups usually have worked in prestigious law firms, and as general counsel for significant corporations.
Their strategy creates more efficient, responsive, and, ultimately, more successful solutions – relies heavily on this high degree of broad legal and commercial knowledge.
They prioritize learning about a clients’ businesses and interests and obtaining the necessary outcomes as quickly as feasible.
Also, they provide an insider’s viewpoint and an intelligent methodology to produce agile, creative solutions for their clients, based on their many years of expertise as attorneys and experience dealing with corporations.
They Contribute to the Increase in the Value of Your Business
Startup attorneys help represent a wide range of entrepreneurs, operating companies, venture capital firms, and financiers in the education, fashion, finance, health care, internet, social media, technology, real estate, and television sectors.
They specialize in mergers and acquisitions as well as working with companies that have newly entered a market. They also can manage real estate, securities offerings, and SEC compliance, technology transactions, financing, employment, entertainment and media, and commercial contracts, among other things.
Focusing on success must include delivering the highest levels of representation in resolving the legal and business difficulties confronting clients now, tomorrow, and in the future, based on an unwavering dedication to the firm’s fundamental principles of quality, responsiveness, and business-centric service.
Wrapping Up
All in all, introducing a startup business can be overwhelming. You’re already charged with a host of responsibilities in which you’re untrained as a business owner. Legal problems are notoriously difficult to solve, and interpreting “legalese” is sometimes required. Experienced business lawyers know these complexities and can help you navigate them to avoid stumbling blocks.
Although many company owners wait until the last minute to deal with legal issues, they would benefit or profit greatly from hiring an experienced startup lawyer even before they begin. Reputable startup lawyers can give essential legal guidance, assist entrepreneurs in avoiding legal hazards, and improve their prospects of becoming a successful company.
Think Twice Before Getting Financial Advice From Your Bank
This startling figure comes from a recent review of the financial advice offered from the big four banks by the Australian Securities and Investment Commission (ASIC).
Even more startling: 10% of advice was found to leave investors in an even worse financial position.
Through a “vertically integrated business model”, Commonwealth Bank, National Australia Bank, Westpac, ANZ and AMP offer ‘in house’ financial advice, and collectively, control more than half of Australia’s financial planners.
It’s no surprise ASIC’s review found advisers at these banks favoured financial products that connected to their parent company, with 68% of client’s funds invested in ‘in house’ products as oppose to external products that may have been on the firms list.
Why the banks integrated financial advice model is flawed
It’s hard to believe the banks can keep a straight face and say they can abide by the duty for advisers to act absolutely in the best interests of a client.
Under the integrated financial advice model, there are layers of different fees including adviser fees, platform fees and investment management fees adding up to 2.5-3.5%
The typical breakdown of fees is usually as follows: an adviser charge of 0.8% to 1.1%, a platform fee of between 0.4% and 0.8%, and a managed fund fee of between 0.7% and 2.1%. These fees are not only opaque, but are sufficiently high to limit the ability of the client to quickly earn real rates of return.
Layers of fees placed into the business model used by the banks means there is not necessarily an incentive for the financial advice arm to make a profit, because the profits can be made in the upstream parts of the supply chain through the banks promoting their own products.
This business model, however, is flawed, and cannot survive in a world where people are demanding greater accountability for their investments, increased transparency in relation to fees and increased control over their investments.
It is noteworthy that the truly independent financial advisory firms in Australia that offer separately managed accounts have done everything in their power to avoid using managed funds and keep fee’s competitive.
The banks have refused to admit their integrated approach to advice is fatally flawed. When the Australian Financial Review approached the Financial Services Council (FSC), a peak body that represents the ‘for-profit’ wealth managers, for a defence if the layered fee arrangements, a spokesman said no generalisations could be made.
There are fundamental flaws in the advice model, and it will be interesting to see what the upcoming royal commission into banking will do to change some of the contentious issues surround integrated financial advice.
Many financial commentators are calling for a separation of financial advice attached to banks, with obvious bias and failure to meet the best interests of clients becoming more apparent.
Chris Brycki, CEO of Stockspot, says “investors should receive fair and unbiased financial advice from experts who will act in the best interests of their client. What Australians currently get is product pushing from salespeople who are paid by the banks.”
Brycki is calling for structural reform to fix the problems caused by the dominant market power of the banks to ensure that consumers are protected, advisers are better educated and incentives are aligned.
Stockspot’s annual research into high-fee-charging funds shows thousands of customers of banks are being recommended bank aligned investment products despite the potential of more appropriate alternatives being available.