Medical Accounts Receivable Funding: 7 Points for Orthopedic Surgeons and Practices

Practice Management

This article is written by Lawrence Hoffman, owner of and, has been a personal injury attorney for 15 years.

Medical Accounts Receivable Funding, typically known as MAR Funding is accounts receivable funding customized for healthcare providers. It allows you to transform your accounts receivable (A/R) into cash. MAR programs give you the ability to receive payment on your outstanding bills. You receive an immediate large cash infusion, generally somewhere around 65-75 percent of your outstanding receivables. Basically, you receive a large upfront payment from a MAR Funding Company based upon your outstanding receivables, which you then repay as the receivables are collected. For example: If you submit $1 million of your outstanding bills through the MAR Funding Company you may receive an immediate wire into your bank account of $750,000.00 from the MAR funding company. The payments, which come in later from the insurance companies for the services you rendered are used to repay the MAR Funding Company.  

When the advanced amount (in this example $750,000.00, plus the fees) is repaid in full you will receive the remaining payments made by the insurance companies towards the amount of receivables you pledged. You can continue to put your monthly billing cycle through the financing to receive immediate payment each month. You generate working capital (from your own money which is due for services you rendered).  

Here are 7 points about MARs

1. The types of medical providers MARs usually fund

o    physician practices
o    orthopedic practices
o    nursing homes
o    hospitals
o    home healthcare companies
o    rehab clinics
o    durable medical equipment providers
o    MRI and imaging centers
o    Chiropractic offices
o    clinical laboratories, dialysis centers and others

2. Bill types to submit

•    Any receivables which are billed by:
o    Medicare
o    Medicaid
o    HMOs
o    private health insurance
o    workers compensation receivables

3. Cost to sell receivables
It will cost a small percentage of your net revenue (from claims submitted) to accelerate your cash flow. Generally you will pay somewhere between 1-1.5 percent per month paid out of the revenue collected.

4. Bad credit
Your approval is dependent upon the creditworthiness of your payors, not your credit. Your payors are government agencies and private health insurers so their credit worthiness is strong and you should be approved.   

5. Benefits of MAR funding
a)    A MAR program transforms accounts receivable into a cash flow solution for generating working capital rather than an obstacle to growth and profitability.
b)    Gives you immediate and dependable access to large amounts of
working capital.
c)    Provides the only debt-free funding source that grows with your
patient volume.
d)    Boosts liquidity by maximizing the utilization of current available assets.
e)    Provides immediate cash infusion for growth and expansion while maintaining debt capacity. Since accounts receivable funding is not a loan, “no debt” is incurred.
f)    Increases your purchasing power and provides cash for marketing
and expansion.
g)    Can be effectively utilized in conjunction with professionally structured asset protection strategies.

6. Getting started

You will usually receive your funding advance within 48 hours of submission of claim. Most MARs have flexible programs in which you choose which claims you submit for funding, how often you want to fund and which payor's claims you want to fund. You can fund Medicare claims, but MARs programs don't fund self-pay receivables.

Most MAR funders do have a monthly minimum volume. Usually they want to see at least $75,000.00 in monthly billing. Medical accounts receivable funding is not a loan — it's the sale and purchase of an asset at a discount. You incur no debt on your balance sheet, and the net result of each transaction will be the conversion of your accounts receivable into cash.

7. Why it is a better solution

Medical Accounts Receivable Funding is clearly a more effective solution than the first solution of Line of Credit. With Medical Accounts Receivable Funding, you get paid quickly. There is no funding ceiling that will limit your growth.  The process is fast and simple. Your credit worthiness is determined by that of your third-party payer, not yours. You turn a non performing asset into a performing asset. Your cash flow becomes a solution for generating working capital rather than an obstacle to growth and profitability.  

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