Why home health and home care agencies run short of cash
A home health or home care agency is a payroll business. Nurses, therapists, aides and caregivers are paid weekly or biweekly. Payers pay later, after visits are documented, claims are submitted and claims are processed.
Medicare home health billing has its own rhythm. For periods beginning on or after January 1, 2020, Medicare pays home health agencies a standardized amount for each 30-day period of care. Since 2022, agencies submit a one-time Notice of Admission within five calendar days of the start of care, and that notice carries no upfront payment, according to CMS guidance in MLN Matters MM12256. The agency gets paid after it bills each period. A late notice also reduces payment for each day it is late.
Once a clean Medicare claim is in, federal law sets both a ceiling and a floor on timing. Under 42 U.S.C. 1395h(c), Medicare contractors must pay at least 95 percent of clean claims within 30 days, and may not pay electronic claims before 13 days or other claims before 28 days. Claims that are not clean take longer.
Payroll costs are fixed and rising with growth. Under the Department of Labor's 2013 rule, third-party employers such as home care agencies generally cannot claim the companionship or live-in exemptions, so minimum wage and overtime rules apply to their caregivers. The DOL's direct care page notes that the Department proposed in 2025 to return to its earlier regulations, so check the current status. Payroll tax deposits also follow fixed schedules under IRS Publication 15.
Medicare and Medicaid anti-assignment rules
This is the most important point for any agency considering factoring. Government health program payments cannot simply be sold to a factor and redirected.
- Medicare. Under 42 CFR 424.73, Medicare does not pay amounts due to a provider to anyone else under an assignment, power of attorney or other direct-payment arrangement. There are narrow exceptions: payment to a government agency, payment under a qualifying court order, and payment to a billing agent whose fee is not tied in any way to the amounts billed or collected, does not depend on collection, and who acts only for the provider under instructions the provider can revoke. Payment to an agent is always made in the provider's name.
- Medicaid. Under 42 CFR 447.10, state Medicaid agencies may not pay a provider's claims to or through a factor, whether directly or through a power of attorney. Billing services may receive payment in the provider's name only if their pay is tied to the cost of processing, not a percentage of what is billed or collected, and does not depend on collection.
In practice, this means a traditional factoring arrangement, where the payer receives a notice of assignment and pays the factor, does not work for Medicare or Medicaid claims. Lenders that work with these receivables use other structures. Before you sign anything, ask the lender to explain in writing how its structure keeps government payments flowing to the agency as these rules require, and have a healthcare attorney confirm it.
How a financing cycle works for home health
Because of the rules above, the flow is different for government and commercial payers.
- Caregivers complete visits and document them in your clinical or electronic visit verification system.
- You bill each payer: Medicare or Medicaid through their claims systems, managed care plans under their contracts, and businesses or facilities by invoice.
- For eligible commercial receivables, such as invoices to facilities, hospitals or other businesses, a factor can buy the invoice and advance an agreed share.
- For Medicare and Medicaid receivables, a lender may advance against the claims through a structure that complies with the anti-assignment rules.
- As payers pay, the advance is repaid and the remaining balance, minus fees, is released.
What lenders and factors look at
- Payer mix. The share of Medicare, Medicaid, managed care, facility contracts and private pay shapes what can be financed and how.
- Clean claim rate and denials. Frequent rejections or denials slow cash and reduce what a lender will advance.
- Documentation. Visit notes, physician or practitioner orders, and authorizations must support each claim.
- Licensing and enrollment. Active state licensure and Medicare or Medicaid enrollment are basic requirements.
- Payroll taxes. Lenders check that payroll tax deposits are current before funding.
- Audit exposure. Open audits or overpayment demands can reduce future payments.
Costs and how they're quoted
Healthcare receivables financing is quoted per agency. Pricing depends on your monthly billing volume, your payer mix, your history of denials, and how long each payer actually takes to pay. Government receivables financed through compliant structures are often priced differently from simple commercial factoring.
Ask for a full fee schedule, including any setup, account, collateral monitoring, wire and minimum fees. Then calculate the total cost of a typical month of billing at your real days-to-pay for each payer.
Pitfalls specific to home healthcare
Arrangements that redirect government payments
Any setup that sends Medicare or Medicaid payments straight to a third party, or pays a billing company a percentage of collections, can conflict with 42 CFR 424.73 or 42 CFR 447.10. Get legal advice before signing.
Private-pay clients
Many home care clients pay out of pocket. Those are bills to individuals, not commercial invoices, and most factors will not buy them.
Managed care contracts
Managed care plans pay under their own provider contracts, which may have their own terms on assignment and payment. Read the contract and ask the plan before assuming those receivables can be financed.
Overpayments and recoupments
If a payer later finds it overpaid, it may take the money back from future payments. That can leave financed claims short and create a repayment obligation to the lender.
Notice of Admission timing
Under CMS rules, a late Notice of Admission reduces Medicare payment for the period, as described in MM12256. Weak intake processes shrink the receivables a lender can rely on.
When to look at other financing
- A healthcare-focused line of credit. Banks and asset-based lenders may lend against the full receivables pool under compliant structures.
- SBA-backed lines. The SBA's 7(a) Working Capital Pilot provides monitored lines of credit through participating lenders.
- Better billing operations. Cutting denials and resubmissions can shorten the cycle more than any financing product.
Financing is a poor fit if the cash shortfall comes from denied claims, audit repayments or losses rather than normal billing delays.
Frequently asked questions
Can I factor Medicare claims?
Not in the traditional sense. Federal rules bar Medicare from paying a provider's claims to someone else under an assignment, with narrow exceptions. Some lenders finance these receivables through structures that keep payment going to the agency. Have a healthcare attorney confirm any structure.
Can I factor Medicaid claims?
Medicaid rules specifically prohibit payment to or through a factor. Any financing against Medicaid receivables must be structured so the state continues paying the agency.
Which home health receivables are easiest to factor?
Invoices to businesses, such as hospitals, facilities or other agencies that contract for your services. These are commercial receivables and can usually be assigned.
How fast does Medicare pay home health claims?
Under federal law, Medicare contractors must pay at least 95 percent of clean claims within 30 days, and cannot pay electronic claims before day 13.