What are the differences between the factoring of commercial invoices as opposed to medical insurance claims?
In the medical industry there are those unfortunate items called “contractual allowances” which we all know will reduce the amount of the charge that has been billed to the insurance carrier by whatever amount the contract between the provider and the insurance company calls for. Therefore it is necessary for the funding source to first determine from an historical payment review what is the amount or “net collectible” that each different insurance company will pay for each individual charge or procedure submitted for payment. The funding source will then make their initial 80% advance based upon the net received amount. In commercial factoring there are no allowances and therefore the factor will pay the 80% advance based upon the face value of the invoice submitted.
