Home care factoring guide

How home care agencies factor Medicare and Medicaid claims

Your caregivers get paid every week. Medicare, Medicaid and insurers pay in weeks or months. Factoring can close that gap, but healthcare works differently from other industries, and only some funders are set up for it.

The short answer

Yes, agencies can factor Medicare, Medicaid and insurance claims, usually for a fee of about 1% to 5% for each 30 days a claim is open. The catch is how the money moves. Federal rules don't let Medicare or Medicaid pay a factoring company directly, so funders that work with agencies use a different setup.

Why Medicare and Medicaid are different

Medicare and Medicaid have what's called an anti-assignment rule: they pay the provider, not a third party. So a healthcare funder doesn't ask Medicare to send payments to it. Instead:

Payments keep going to a bank account in your agency's name. Nothing changes on the payer's side.
That account is set up so the deposits sweep to the funder on a schedule, under an agreement between you, your bank and the funder.
You keep the right to change those instructions, which is part of what keeps the setup within the rules.

This is why many factoring companies simply don't do healthcare. The ones that do know the paperwork, the payers and how claims get denied.

Which of your receivables usually qualify

Medicaid, including waiver programsUsually yes, through the account setup above

MedicareUsually yes, same setup

Commercial insurance and managed careUsually yes, closer to normal factoring

VA and other government payersOften, depending on the funder

Private pay from familiesUsually not: these are consumer bills

What funders look at

Your payer mix. It decides which funders will even look, so it's the first question.
Denial and rework rates. Funders advance on claims they expect to be paid.
How long payers take. Slower payers mean more days on the fee.
Licenses, enrollment and any payer audits. Have them handy.
Existing loans or cash advances that claim your receivables. They usually need to be paid off or agree to step back.

What it might cost: an example

Say your agency bills $50,000 of Medicaid claims, the funder advances 90% and charges 2% for each 30 days, and the state pays in 45 days. You get $45,000 upfront. If the fee is counted by the day after the first 30, you pay about $1,500 on that batch. If it's counted by the month, day 31 starts a second 2% and you pay $2,000. Same rate, $500 apart. See how fees are counted.

What to have ready

An aging report of open claims by payer
A few recent remittances showing how fast each payer pays
Your Medicare and Medicaid provider numbers and licenses
Any current loan, line of credit or cash advance agreements

General information, not legal, tax or accounting advice. Every funder and contract is different. Examples use made-up numbers.

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