Don’t let the term medical receivable fool you. The rapid growth in home health care is creating opportunity in the factoring industry similar to traditional staffing.
According to a (not surprising) 2010 AARP survey, 9 out of 10 older Americans said they’d rather be cared for in their homes than in a nursing home. As the baby boomer generation ages, Medicaid had to evolve to meet the needs of this large demographic. The Affordable Care Act (ACA) introduced a number of new incentives that made it possible for seniors and the developmentally disabled to receive care in the comfort of their homes, rather than moving into nursing home facilities.
The ACA created new options and incentives to encourage states to provide home and community-based support. New programs designed to increase the use of in-home care include:
- Home and Community-Based Services State Plan Option: Enables states to target home and community-based services to particular groups of people.
- Community First Choice: Provides enhanced federal funding to states that choose to provide person-centered home and community-based care services.
- Balancing Incentive Payments Program: Authorizes grants to states to increase access to non-institutional long-term services and support.
- Money Follows the Person: Provides individuals with long-term services and support to enable them to move out of institutions and into their own-homes or into a community-based setting.
Despite the increasing elderly population, the use of nursing homes has declined in recent years thanks to Medicaid waivers and new incentives. As of April 2016, each state has least one long-term care waiver in place to help keep the elderly and developmentally disabled living in their homes. These Medicaid waivers typically cover medical care, as well as other in-home support such as cooking, cleaning, transportation, etc.
Understanding Medicaid
Medicaid as a whole is broken into three parts:
- Each state has a Medicaid State Plan (or Regular Medicaid). In a number of states, the Medicaid State Plans will pay for home healthcare only in the form of Personal Care Services or Personal Attendant Services.
- Institutional Medicaid which does not offer home healthcare can also be found in each state. Institutional Medicaid only covers long term care in a facility.
- Medical waivers blanket in-home healthcare. The waivers covers medical help as well as other in home support such as cooking, cleaning, transportation, or any other services that can help keep patients in their own homes.
The most popular Medicaid waivers across the state are the Home and Community Based Services (or 1915 waivers). These waivers cover but are not limited to: home healthcare, personal care, homemaker services, family and caregiver support, home and environmental accessibility modifications, medical equipment and supplies, nutrition services, personal emergency response services, transportation assistance, and hospice care.
What do Medicaid Waivers have to do with the Factoring Industry?
The need for medical staffing has dramatically increased since the Affordable Care Act came into existence. In states that expanded Medicaid, many low-income parents and other adults became eligible for coverage as income eligibility limits rose to 138% of the Federal Poverty Level for parents and childless adults. This catapulted the need for more in-home caregivers, and has continued to leave many home health agencies strapped for cash.
This growing demand equals more opportunity for home care agencies to increase staff and take on new business opportunities. With rapid growth, often comes a cash flow shortage since home health agencies may wait months to be paid by the state. It’s no secret that Medicaid payments trickle in rather slowly, which offers a great chance for factoring companies to fill the gap between payment cycles.
Don’t Let the Medical Receivables Fool You
These aren’t your typical medical deals. Home care agencies are not medical providers, they’re staffing providers. Factoring brokers should be open to exploring home health prospects because most are no different than a traditional staffing prospect. Treat home care prospects like any other service provider. Many of these deals are fairly easy to fund and are backed by a reliable (but obviously slow-paying) debtor.
If you come across a home health care deal, don’t assume it’s too complex to fund. The complexities associated with factoring Medicaid receivables vary from state to state, so it’s important to refer the prospect to a factoring company that understands the staffing industry, in addition to the intricacies that accompany Medicaid receivables factoring. A factor that has experience with both is your best chance to help the prospect obtain funding.
Healthcare staffing is booming and the need for funding will likely persist to accommodate expanding payrolls. Receivables factoring is an ideal solution for home care companies to bridge the gap between client payment and covering payroll. That being said, it’s a tremendous opportunity for factoring brokers and factoring companies.
Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the healthcare funding market place.
Through a process known as factoring, PRN Funding provides business owners who sell products or offer services to medical providers with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding provides health care service providers, including home health agencies, with flexible and immediate access to capital.