The short answer
Healthcare receivables financing is typically priced per 30 days and costs more than most commercial factoring: quotes commonly run from about 2% to 5% per period. Advances usually run from 70% to 85%, and they are calculated on the expected collectible amount of your claims, not on your billed charges.
That second point is what surprises most providers. If you bill $50,000 and payers are expected to allow $30,000, the factor advances against $30,000. At 80% and 3% per 30 days, paid in 45 days with partial periods counted in full, you receive $24,000 up front and pay $1,800 in fees.
Government payers add structure. Federal law bars a provider from assigning Medicare payments to a factor, and Medicaid has similar rules, so deals involving those payers are built around deposit accounts the provider controls rather than a simple sale of the claim.
What healthcare factoring costs, line by line
| Cost item | Typical range | How it works |
|---|---|---|
| Rate | about 2% to 5% per 30 days | Charged on the amount financed for each period unpaid |
| Advance rate | 70% to 85% | Of the expected collectible amount, not billed charges |
| Reserve | 15% to 30% | Covers denials, adjustments and the fee |
| Setup and due diligence | one-time, often higher than other industries | Includes billing and payer-mix review |
| Lockbox or account control | monthly or per-transaction | For structures involving government payers |
| Minimums and term | varies | Longer contracts are common |
These are typical ranges, not offers. Pricing depends heavily on your payer mix, your billing quality and how predictable your collections are.
Why healthcare costs more
The amount owed is an estimate. A claim's billed amount is not what the payer will pay. Contractual allowances, denials, coding errors and patient responsibility all reduce collections. The factor has to estimate the collectible amount and holds a larger reserve against that uncertainty.
Government payers cannot be paid to a factor directly. The Social Security Act's anti-assignment provisions generally bar Medicare from paying a provider's claims to anyone else, with narrow exceptions, and Medicaid rules are similar. Lenders work around this with a deposit account in the provider's name that sweeps to the lender, which the provider must legally be able to revoke. That arrangement is more work and more risk for the factor, so it costs more.
Payment timing varies by payer. Clean claims to Medicare are paid on a statutory timetable, while commercial insurers, workers' compensation carriers and managed-care plans each run on their own. Longer and less predictable timing means more periods and a bigger reserve.
Compliance review. Factors check licensing, billing practices and any history of audits or overpayment demands, because a recoupment can reduce future payments.
A worked example
A physical therapy group bills $50,000 in claims for the month. Based on its payer contracts and history, the expected collectible amount is $30,000. The factor advances 80% of the collectible amount at 3% per 30 days, and any part of a period counts as a full period. Payers pay, on average, in 45 days.
| Step | Amount |
|---|---|
| Billed charges | $50,000 |
| Expected collectible amount | $30,000 |
| Advance (80% of collectible) | $24,000 |
| Reserve held back | $6,000 |
| Fee (3% × 2 periods) | $1,800 |
| Reserve released after collections | $4,200 |
| Total received | $28,200 |
If collections come in below the estimate, the shortfall comes out of the reserve first. That is why providers with high denial rates see lower advances and higher rates: the factor is protecting itself against the gap between billed and paid.
Run your own numbers
The calculator below starts with the example above, using the expected collectible amount as the invoice. Enter your own collectible estimate, the advance and rate from your quote, and your average days to payment.
Your results
- Cash today (advance)
- $24,000.00
- Reserve held back
- $6,000.00
- Total cost (factoring fee)
- $1,800.00 (6% of invoice)
- Rebate when your customer pays
- $4,200.00
Fee periods charged: 2.
Estimates only. Actual rates and advances are set by each factoring company.
What drives your rate
Payer mix. Commercial insurers and workers' compensation carriers are often easier to finance than Medicare and Medicaid, which require account-control structures. Self-pay patient balances are rarely financed at all.
Denial and adjustment rates. Clean billing with low denials earns higher advances and lower rates. A history of rejected claims does the opposite.
Days to payment. Each additional 30 days adds a period to the fee. Practices with fast, electronic claim submission pay less.
Volume and stability. Larger, steady monthly collections price better than small or seasonal ones.
Billing operations. Factors look closely at who does your billing and how. An experienced billing team or service is a strong positive.
Specialty and setting. Home health, labs, durable medical equipment and ambulance services each have their own payer rules and risks. Home health agencies can see the home healthcare hub for that market.
When financing is not the right fit
Receivables financing helps when claims are clean and payment is simply slow. It does not fix problems further up the revenue cycle. If a large share of claims are denied or underpaid, financing them only accelerates cash you may have to give back. Fixing coding, eligibility checks and claim submission usually does more for cash flow than any financing.
It is also a poor fit for practices whose revenue is mostly patient self-pay, which lenders rarely finance, or for providers facing an open audit or overpayment demand, since a recoupment can sweep future payments. In those cases, a conventional line of credit or a payment plan with the payer may cost less.
For providers with steady commercial claims and predictable payment times, financing can be a reasonable way to fund payroll and growth, as long as the collectible estimate and fees are clear up front.
How to compare quotes
- Ask each lender how it calculates the collectible amount and what advance it applies.
- Get the rate per period and confirm how partial periods are counted.
- Ask how Medicare and Medicaid receivables are handled and what the account structure costs.
- List every setup, lockbox and minimum fee.
- Check how shortfalls and recoupments are charged back against the reserve.
The healthcare factoring hub explains anti-assignment rules and lockbox structures in more depth. For the general picture, see what invoice factoring costs.
Frequently asked questions
What does medical receivables factoring cost?
Quotes commonly run from about 2% to 5% per 30 days, higher than most commercial factoring. The total depends on how long payers take and how accurate your collectible estimate is.
Why is the advance based on collectible amounts instead of billed charges?
Because payers rarely pay billed charges. Contractual allowances and denials reduce what is actually collected, so the factor advances against what it expects payers to pay.
Can Medicare and Medicaid receivables be factored?
Not by a simple sale. Federal anti-assignment rules generally bar Medicare from paying a factor directly, and Medicaid has similar limits. Lenders use deposit accounts in the provider's name that sweep to the lender, which costs more to set up and run.
How much will a healthcare factor advance?
Usually 70% to 85% of the expected collectible amount. Practices with clean billing and commercial payers get the higher end.
Is healthcare factoring a loan?
It can be structured either way. Commercial claims may be purchased outright, while government receivables are usually financed as a loan secured by the deposit account. Read the agreement to see which you are signing.