Some Call for Medical Billing Act

Medical billing is a complex process, and like anything that involves money and credit it is sometimes controversial. While no one likes getting a medical bill, but sometimes it is even worse than that and customers are left with ruined credit over procedures and charges they don’t even remember incurring. Credit advocate Call 12 for Action is currently investigating medical billing issues, and are pursuing legislation that would treat medical billing the same as credit card billing. Credit card billing has the The Fair Credit and Billing Act, a strong consumer protection law that gives customers rights when disputing bills.

A big problem with current medical billing is that unpaid bills are sometimes reported to credit agencies before they have a chance to be paid or while being processed by insurance. Therefore, a current bill that Call 12 for Action is backing is the Debt Responsibility Act, introduced by Senator Jeff Merkley, D-Ore, which would prohibit credit-reporting agencies from using paid or settled debts to determine credit ratings.

A reformed billing process might cause cash flow issues for medical providers, and that’s where factoring comes in. Medical factors solve cash flow issues for facilities that need it, and if the bill passes then medical providers might just need it.

For the full article, see Credit Advocates Calls for Medical-Billing Act

Navigating Client Relationships

In our last post, we talked about some ways to deal with problematic payers. In this one, we will be discussing how factors can keep their clients happy before it comes to that. The accounts receivable team at a factoring company is responsible for almost all the interaction with customers, including resolving issues and collecting payments from customers. They must strike a delicate balance between keeping customers happy and collecting on debts, or risk 1) getting walked over or 2) losing clients because of bad experiences. In an article on The Press Enterprise, author Sarah Cullins offers a few tips on how to achieve this balance.

Contact Person: From the onset of the business relationship, make sure the client knows exactly who to contact should problems arise. Have the account manager give them a quick introductory call to make sure everything is in order, too- a personal touch can go a long way.

Thank Yous: Simple thank you cards or emails for prompt payments can also be a nice touch. Don’t hesitate to call your clients and tell them how much you appreciate their business, or give them some free social media press. Great relationships are good business.

Phone Etiquette: It is crucial to be friendly on the phone, even when frustrated. Cooler heads always prevail so make sure your account managers keep this in mind. When it is necessary to collect past due payments or the like, the key is to be understanding and proactive rather than accusatory.

These tips can help a factoring company strike a balance between sales-y and firm, and keep great client relationships that could lead to coveted referrals.

Combatting Non-Payment

In a business like factoring where everything depends on invoices being paid, non- or slow-paying clients can have a big negative effect on operations. In an article on Inc.com, Margaret Heffernan, CEO of InfoMation, offers a few tips on how to deal with customers  who won’t pay.

Schedule Payments: One way to make payment easier is to break the project up into small segments and have the customer pay along the way. Problems that arise early are easier to fix than those that arise later, and customers will feel more in control of their incurred costs.

Upfront Payment: If you are committing resources, then so should your customer. Don’t be afraid to ask for payment up front, and be honest about your company’s needs. Heffernan suggests putting money into an escrow account, but says it depends on the business and what they think would best suit their needs.

Discount for Upfront Payment: This option has the advantage of giving customers a reason to pay upfront where otherwise they may not. This may entice your customers to pay first, which could eliminate trouble down the road.

Conduct Research: While you can run credit checks, Heffernan suggests doing some primary research and asking about the client in and around their networks. A previous connection is bound to have an opinion one way or another about the potential client.

These are just a few ways to address payment problems before they happen, which of course is the best way to address any problem. The policies you put in place beforehand can save you headaches down the road.

Global Economy Fuels More Optimism than U.S. Economy

It’s good to hope for the best, as long as you don’t forget to expect the worst. According to the ABF Journal, the results of the Business Council Survey of CEOs indicate that top executives are more optimistic about the future of the global economy than that of the U.S economy. The vast majority of them believe that the global economy will grow at the same pace as 2012, while 60% expect that growth will quicken. Most expect conditions to improve the most in China, at 57% of respondents compared to 30% on the last survey.

The U.S. economy results showed that confidence is down because of factors such as the fiscal cliff deal, sequestration, and the long-term deficit issue. The article states that “only 14.5% of those surveyed believe that the fiscal cliff deal did anything to solve long-term problems. Eighty% of those surveyed do not believe that the agreement was a meaningful step to resolving the deficit issue, and 84% believe it relied too much on taxes and too little on spending reform.”

While it is good that CEOs are optimistic about global prospects, improving confidence and optimism at home is extremely important for moving the economy forward.

Factoring Increasing Overseas

The process of invoice factoring is becoming more and more popular around the globe as more people become aware of the potential benefits. According to an International Factoring Association article, demand for factoring is sky high in the country of Kazakhstan, the largest economy in Central Asia. It grew by nearly 200% in 2012 with transaction volumes estimated at $30 million USD.

Factoring in Kazakhstan

Factoring is relatively new to the Kazakhstan financial market, as it entered after the economic crisis there in 2009. Since then, the country has had one of the fastest growing economies in the world, and the factoring industry is growing at a rapid rate. Experts say that factoring is popular because commodity buyers and sellers and small-to-medium businesses can receive immediate payments from shipped goods, when normally they would have to wait. Because factoring is still in its infancy there, a main niche has not yet emerged. Six main factoring companies exist at the moment, and banks are starting to show more interest in the process.

Implications

Factoring is increasing throughout the world as more countries catch on. Factoring is now a trillion dollar industry and appears almost everywhere, and transactions have increased by the following amounts on the main continents since 2009:

Americas: 21%

Africa: 5%

Asia: 57%

Australia: 5%

Europe: 11%

It is clear that factoring is increasing on a global level, and that more markets are opening up worldwide. Now is a good time to be in the international factoring business, as there are untapped markets all over the world.

The Effects of Sequestration

With just days until March 1st, sequestration is on the forefront of most working people’s minds. Due to the failure of the government to come to a workable agreement on spending cuts, automatic across-the-board cuts are scheduled to come into effect two days from now. Many government programs and jobs will be impacted, as well as the businesses that work directly and indirectly with them. While exemptions from the cuts do exist, sequestration will have far reaching implications for industries like healthcare as well as business in general.

Sequestration and Healthcare

The healthcare industry has a lot to potentially lose from the $85 billion spending reduction due on March 1st. While Medicare cuts have been restricted to no more than 2% of the budget (unlike most programs at 4% or more), healthcare experts say that the cuts will cost the industry over 200,000 jobs. Government officials say that coverage for those under Medicare will not change, but providers like hospitals are facing a potential 27.4% reduction in Medicare reimbursement. This puts them in a tough financial position– hence the job losses. The largest share of provider cuts goes to hospital inpatient care, at 32%, while group plans, outpatient care, home health agencies and skilled nursing facilities make up the brunt of the rest.

Certain portions of Medicare are exempt from cuts, such as the Part D low income subsidies, catastrophic subsidies, and Qualified Individual premiums. Medicaid and Social Security are exempt completely.

Sequestration and Business

While healthcare looks to be impacted greatly, business in general will be hurting even more so. George Mason University economist Dr. Stephen Fuller estimates that in 2013 alone, sequestration will put 2.14 million jobs at risk. This includes over 950,000 small business jobs from government supplier companies as well as mom-and-pop stores that deal indirectly with government contracts. Companies with 500 employees or less are facing up to 45% of job losses in the coming year. He also predicts a decrease in personal earnings of $109.4 billion as well as a GDP reduction of $215 billion. In an already struggling economy, this bodes ill for the coming months and years.

Specific Effects

Here are some examples of how sequestration will affect specific industries:

Defense: The active military remains untouched, however, civilian Defense Department pay is expected to decrease by around 20%. 46,000 temporary and term workers will be laid off, and furloughs will affect the rest. Defense Secretary Leon Panetta has said that national security could be harmed as a result.

Education: Special Education grants and Head Start funding will be reduced, as well as federal child care assistance. Thousands of teachers, aides, and speech therapists will be affected, and low income children are expected to suffer the most damage. For higher education, federal financial aid programs such as work-study will be cut by about 8.2%.

Air Travel: Federal Aviation Administration employees would be furloughed by 11 days, hampering air travel around the country as less air traffic controllers and technicians will be on duty. Security will also be affected, and wait times could increase dramatically.

Housing: Low-income families could potentially lose 125,000 housing choice vouchers, and about 100,000 formerly homeless people will lose their current housing and go to the streets once again. Foreclosure prevention advice will also decrease as HUD counseling grants will be reduced by 75,000 families.

Conclusion

Without some sort of bipartisan miracle in the next couple of days, sequestration will soon become a reality. The meat cleaver approach seems like an inefficient way to reduce spending, but hopefully it will serve as a wakeup call for the government to put aside differences in order to do what’s best for the country. Businesses should do what they always do in tough times- prepare for the worst while hoping for the best. After all, one thing that can never be “cut” is the indomitable American spirit of enterprise.

UCC Article 9 Amendments: What Factors Need to Know

According to a Commercial Factor article, a bevvy of amendments to the Secured Transactions portion of the UCC code will become effective on July 1st, 2013, and will directly affect the factoring business.  While the changes are not drastic and are intended mostly for clarification, factors should be aware of the coming changes and how they will have to alter their operations to conform to the standards.

Debtor Name on Financing Statement: The rule as it is right now is that an “individual name” must be used on a Financing Statement, with no other guidelines. The 2013 amendment attempts to avoid confusion and improper filing by requiring that the name be as it appears on an unexpired driver’s license issued in the state the statement is in, or if they don’t have a driver’s license then it should the last name and first surname.

Perfection Rules: The existing law says that if there is a change of state for a debtor, there is a four month grace period to file a new Financing Statement in the new state. However, it does not apply to property bought between the move and the new filing. The amendment will change this exception.

Financing Statement Forms: The Financing Statement form has been modified in a few ways, including a removal for the field for social security numbers. Factors must be aware that some states might not accept the new forms without the SSN.

These are just a few changes to the rules, but will probably be the most pertinent to factors. It’s important to be up on new laws, no matter how insignificant, to avoid confusion and misfiling.

The Home Health Care Labor Law Debate

PRN Funding’s founder and president Phil Cohen recently published an article on the Factoring Investor detailing the current debate over home health care labor law. Despite the fact that PRN works with home care companies every day, the NPR article “Home Care Aides Await Decision on New Labor Rules” that describes the controversy came as a surprise.

The Current Law

Currently, 2.5 million home health care aides in the US are not required to receive minimum wage or overtime due to an amendment in labor law from 1974.

Instead, home care givers are treated legally like “adult babysitters” even though they provide an important and valuable service and typically work 12 hours a day or more and on weekends. Almost every other employee in the US receives minimum wage and overtime pay under the Fair Labor Standards Act (FLSA)– including nursing home workers, who perform the same kinds of tasks.

Changes in the Works

According to the article, the Obama Administration announced in 2011 that the law would be revised but has yet to make a formal approval for the changes. The new rule would ensure that home health care aides are guaranteed both minimum wage and overtime as prescribed by the FLSA.

The changes to the regulations are being proposed now because while the law has stayed the same for decades, the home health care industry has grown and transformed. 80 million baby boomers are aging fast and the home health care industry has more than doubled in the last eight years.

The Controversy

Just like with any issue, certain nuances make enacting the change less straightforward than it appears. While it seems logical that home care workers be treated like the rest of us, certain groups don’t want to see the law change because of unintended consequences.

Certain home care companies and trade groups like the National Association for Home Care and Hospice support paying employees at least minimum wage, but not overtime or weekends. The reasoning is that home care profits are mostly fixed by Medicaid, and the cost of overtime couldn’t be offset by a raise in price.

Another association that is concerned about the possible change is the disability rights group ADAPT. While they want workers to be adequately compensated, they cannot support the changes because the higher price tag means that people with disabilities most likely will have to find several attendants. This is disruptive and potentially dangerous for the residents who need consistency.

Implications For Factoring Companies and Brokers

For a factoring company or broker that deals with home care or staffing companies, a change in labor law has implications for business.

If the law is revised by the Obama administration, then home care aids will have to be compensated more by their companies. To counteract this, the companies will most likely restrict the number of hours that the employees can work, and look for more part-time workers—especially with Obamacare coming into full effect in 2014. Home care companies will have to change their business somehow to deal with the change in law, and change usually requires cash flow.

Factoring companies and brokers should be prepared to handle the changes to home care and staffing, and for brokers especially this requires having within your network a company that specializes in healthcare.

Health Data Going Digital, Industry Capitalizing

As hospitals slowly figure out how to make new digital health records work, companies that sell the systems are raking in the profits. Since the passage of the economic stimulus bill in 2009 that included health records legislation, large companies that lobbied for the provision have been hugely successful.

Opinion on the records systems themselves is split. Fans of the digitization argue that the system makes it easier to prescribe medications electronically and will end up saving hospitals money and improving care. Detractors, however, say that the systems are difficult to use, do not share information with other systems, and can increase the time doctors spend doing documentation that could otherwise be used with patients.

Factoring companies or brokers who deal with the medical industry should take notice of this new trend, as change in any industry has cash flow implications across the board.

For the full article, see  A Digital Shift on Health Data Swells Profits in an Industry

Options for Funding Working Capital Needs

Working capital is defined as current liabilities subtracted from current assets- aka, the current assets remaining after debts are taken into account. According to an Entrepreneur article called How to Determine Your Working Capital Needs, though, calculating what it means to your business is a little more complicated. They recommend using the operating cycle, or the time is takes for a sale to be paid. When companies have credit terms, this can be anywhere from 30-90 days and sometimes even longer when customers do not pay on time.

Financing the company in the interim can be a challenge, and most small businesses don’t have enough excess funds to do so. There are several options for getting short-term working capital, including but not limited to the following:

Factoring

In this form of financing, a factoring company buys their client’s accounts receivable and advances 80-90% of the value up front. When the remainder is paid, they give back the rest less an agreed upon fee. Advantages of factoring are flexibility, speed of delivery, and reduced overhead by outsourcing the collections process. The main disadvantage is that it is relatively expensive compared to bank loans.

Line of credit

If the business is well financed and has good collateral, they may qualify for a line of credit that allows them to borrow funds when needed. The money must be repaid to the bank once the accounts receivable are paid in full. Advantages to having a line of credit are financing when you need it and that it is relatively cheap. A major disadvantage is that they have strict policies and not many small businesses qualify.

Short-term bank loan

For businesses that don’t quite qualify for a line of credit, it might be possible to get a small bank loan instead. The terms are usually less than a year, and can be provided for a large order or a seasonal inventory buildup. The advantage to a short-term loan is the low cost of financing, while the disadvantage is a lengthy and difficult approval process.

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