Medicare's anti-assignment rules generally prohibit Medicare from paying amounts due to a provider to anyone other than that provider. A provider cannot simply sell its Medicare receivables to a factor and have Medicare send payments to the factor.
How it works in factoring
Under the Social Security Act and CMS regulations, payment for services to Medicare beneficiaries goes to the provider or supplier, with narrow exceptions such as payment to a government agency, under a court order, or to an agent who meets specific conditions. Similar rules apply in Medicaid.
Because of these rules, financing of Medicare receivables is usually structured differently from ordinary factoring:
- Medicare continues to pay into a deposit account in the provider's own name
- The financier obtains a security interest in that account, often with a deposit account control agreement
- Funds are swept from the provider's account to the financier under a standing instruction
CMS guidance indicates that such sweep instructions must remain revocable by the provider, so the arrangement depends on the provider honoring its agreement. Financiers manage that risk with contract terms, reporting and guarantees.
Commercial insurance receivables are not covered by Medicare's rule, though individual payer contracts may restrict assignment.
What to check
- How a proposed structure keeps Medicare payments flowing to an account in your name
- What controls and fees attach to that account
- How commercial and government receivables are treated separately
Healthcare receivables financing has specific legal requirements, so involve healthcare counsel before signing.