For many healthcare organizations, managing cash flow is a regular challenge. While insurance carriers demand more and reimburse less, the time between the date of treatment to when a carrier issues payment continues to increase. This time-lapse adds to the difficulty of managing cash flow for medical practices, and this, of course, is just speaking to the cases where patients have insurance and have met their deductible.
Cash flow challenges increase substantially for practices that treat uninsured and underinsured personal injury patients on liens, or Letters of Protection (LOPs). The payments awarded in these cases can take anywhere from six months to seven years, and there is no way to predict when settlements will occur and when payment will be issued.
Thus, LOP account receivables (AR) build up over time, as do delays in payment. Most practice management systems are not set up to handle these types of claims with relative ease.
Furthermore, when LOP account balances are paid, the vast majority are not paid in full. Almost all payments come with reduction requests. Not only do healthcare practices not have comparative data to understand what reduction amounts are equitable, but most do not have an attorney or paralegal on staff to assess reductions or underwrite cases prior to seeing personal injury patients.
When personal injury patients are treated on LOPs, ongoing communication with attorneys is required to avoid instances where cases settle without the practice being reimbursed. Properly tracking cases requires a significant amount of time and resources from practice staff.
Adding to this challenge is the fact that most practice management systems do not provide even the most basic tools for staff to manage LOP account balances, affecting cash flow in the medical revenue cycle. These systems are built to help providers submit electronic claims to payers like Medicare and Blue Cross, where electronic payment is received shortly thereafter.
The fields, workflow, error handling, and reporting capabilities do not account for the nuances of LOPs. This leads staff to create manual workarounds that are labor intensive, not to mention prone to error.
Partnering with an LOP Financing Company
Many practices that treat letter of protection medical liens will periodically sell their LOP AR to third-party lien financing companies, also referred to as medical funding companies. This approach has two primary advantages.
First, practices are paid promptly and can maintain more stable cash flow predictions. Second, medical practices are able to avoid all of the work that goes into managing each balance for the months or years it takes for these cases to settle and for payment to be received.
Choosing an LOP Financing Company
LOP financing is a viable and attractive option, but medical providers should be selective when choosing which LOP financing company to work with. All LOP financing companies are the same in that they offer your practice cash for LOP AR; the business terms and services, however, vary greatly.
There are obvious factors to consider, like cost and reputation, and some less obvious criteria, like the technology platform and internal efficiency of the financing company. There are many LOP financing companies, but few are established, well-capitalized, and expertly managed.
We recommend using a simple decision matrix, an example of which is provided below. A comparative matrix like this allows you to cross-reference companies and rank them to ensure you select the best fit for your practice. For subjective criteria, like reputation, we suggest using a 1-10 scale to help rank each company.
- What terms are they offering?
- How quickly will you receive funds?
- How long has the company been in business?
- Do they know your geographic market?
- Are you confident in their servicing and collection methods?
- What is their competitive advantage?
Do not underestimate the value of an LOP financing company’s competitive advantage. Gain, for instance, has an AI-powered platform that creates efficiencies for the healthcare practices that have chosen to partner with us.
Take the time to ask prospective financing companies about their current capabilities and services as well as their future plans. In essence, they will be serving as an extension of your business or, at the very least, an extension of your AR team, so make sure you land on a financing partner that you can see yourself working well with, and that will deliver the most value to your practice.
Gain specializes in letters of protection for personal injury patients. Gain experts handle day-to-day, transactional accounts receivables functions on behalf of medical practices while office staff and providers focus on delivering exceptional care and services to patients.
Gain’s technology platform is powered by artificial intelligence and is built to track, manage, and optimize returns from Letter of Protection (LOP) account balances. Financial solutions from Gain can provide immediate cash flow and the highest returns on a healthcare practice’s assets. Our services are proven to provide higher returns, at a lower cost, than in-house or other third-party LOP financing options.