Home healthcare guide
Home Healthcare Business Financing: Payroll Before Reimbursement
Your nurses, therapists and aides are paid every pay period. Medicare, Medicaid and insurers pay later, on their own rules. Here is how to finance the gap and which receivables a provider can actually buy.
Share your payroll schedule and payer mix so an advisor can review which options providers may offer your agency.
By Correia Financial
Figures as published in the cited federal regulation and statute. Medicaid, managed care and commercial payer timing differs.
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The short answer
Home health agencies usually finance the payroll gap with a business line of credit or working capital repaid from incoming payments, and sometimes by factoring receivables that are eligible for sale. Medicare and Medicaid claims generally are not: federal law bars paying amounts due to a provider to anyone else under an assignment or power of attorney, with narrow exceptions, and Medicaid rules prohibit payment to or through a factor.
That makes payer mix the starting point. The larger your Medicare and Medicaid share, the more your options depend on financing repaid from your own account rather than on selling claims. Each provider sets its own eligibility rules, and some restrict healthcare receivables.
Why home health payroll comes due before the payments do
A home health agency pays for care as it is delivered. Nurses, therapists and aides are paid every pay period, along with mileage, supplies and payroll taxes. Payment for that care arrives only after the documentation is complete, a claim is filed and the payer processes it.
Medicare’s home health rules make that lag part of the payment design. Medicare pays a national, standardized amount for each 30-day period of care, as a single payment after the final claim for the period. Once a contractor receives an electronic claim, Medicare’s Part A prompt payment rules bar paying it within 13 days, and require at least 95 percent of clean claims to be paid within 30 calendar days.
One new Medicare admission, in order
- Day 1
Start of care
The first visit happens, and the hours your clinicians log start flowing into the next payroll.
- By day 5
Notice of Admission
The agency must file the Notice of Admission within 5 calendar days after the start of care. If it is late, the period’s payment is reduced by 1/30th for each day until it is filed.
- Day 30
The period of care ends
Visits for the period are complete. Several payrolls covering this patient’s visits may already have gone out.
- After day 30
Final claim
With documentation complete, the agency submits the final claim for the 30-day period.
- After receipt
Payment window
An electronic claim cannot be paid in its first 13 days after receipt, and at least 95 percent of clean claims must be paid within 30 calendar days.
For care delivered early in a period, that adds up to more than six weeks before payment, even when everything is filed promptly and the claim is clean. Growth widens the gap: every new admission adds labor cost now and revenue later, which is why a growing agency can be short of cash in a strong month.
Why Medicare and Medicaid receivables cannot be sold like ordinary invoices
Factoring works by selling an invoice: the factor advances cash and then collects from your customer. Government health programs do not allow that. Under the Medicare statute, no payment that may be made to a provider of services for a service furnished to an individual may be made to any other person under an assignment or power of attorney. The Part B provisions contain a parallel rule and direct that payment for home health services furnished under an agency’s plan of care be made to the agency.
CMS regulations repeat the prohibition for providers and suppliers and extend it to a power of attorney or any other direct payment arrangement. Medicaid is explicit about factoring. A state may not make payment for a provider’s services to or through a factor, defined as an individual or organization that advances money on receivables the provider has transferred to it, in exchange for a fee or a deduction from those receivables.
The exceptions are narrow. Medicare may pay under an assignment to a government agency or under a court order, and may pay a billing agent only if the agent’s compensation is unrelated to the amounts billed or collected and does not depend on collection, the agent follows payment instructions you can change or revoke at any time, and the payment is made in your agency’s name. Medicaid has parallel exceptions for government agencies, court orders and business agents. None of them is a way to sell receivables.
In practice, Medicare and Medicaid keep paying your agency directly, and any financing is repaid from your own account after the money arrives. This guide describes the statute and regulations as written; have your counsel review any agreement that touches government program payments. For a different set of rules on federal contract invoices, see factoring government contract invoices.
How payer mix decides which receivables may be eligible
Because eligibility follows the payer, sort your receivables by payer before you compare products. Medicare and Medicaid fee for service claims fall under the rules above. Medicare Advantage and Medicaid managed care plans are organizations that contract with Medicare or a state Medicaid program to pay claims, and providers differ on how they treat those receivables, so ask each one directly.
Commercial insurance claims, private pay accounts and invoices to business customers, such as a facility or hospice that contracts for your staff, may be eligible depending on the provider and the terms of your payer contracts.
- Medicare fee for service$200,000, cannot be sold
- Medicaid fee for service$80,000, cannot be sold
- Medicare Advantage and Medicaid plans$60,000, ask each provider
- Commercial insurers$40,000, provider dependent
- Facility contracts and private pay$20,000, provider dependent
Hypothetical figures for illustration only. In this example, at most $120,000 of $400,000 might be considered for factoring, and only if a provider accepts those payers.
For an agency like this one, factoring could address only part of the gap at most, and a line of credit or working capital repaid from incoming deposits would carry most of it. The reverse can be true for an agency that mainly serves commercially insured or private pay clients, or that bills facilities under staffing contracts. If your model looks more like the second, compare the cash flow patterns in staffing agency financing.
Financing options that work within the payer rules
Each option below leaves government program payments flowing to your agency. Which one fits depends on your payer mix, how regular the gap is and what a provider will accept.
A line of credit for the repeating gap
A business line of credit lets you draw before payroll and repay as payments arrive, with interest generally charged only on what is drawn. Lines can be secured by business assets, so ask how the lender treats government program receivables and deposits, what reporting it requires and how renewal works.
Factoring for eligible receivables only
Invoice factoring is a sale of invoices, not a loan. It can work for commercial insurance, facility or private pay receivables a provider accepts. Ask about the advance, fees, how the payer is notified and whether you must buy back invoices that go unpaid.
Working capital for a defined bridge
Working capital includes revenue based financing, in which a provider buys a share of future receivables. It is not a loan and has no interest rate. Given the payer rules, ask exactly how the agreement treats Medicare and Medicaid payments before you sign.
Billing support, which is not financing
A billing agent may receive Medicare payment for you only under the conditions above, with payment in your name. Better billing can shorten the gap, but it does not advance cash.
What providers may review for a home health agency
Requirements are provider dependent, and some providers do not work with healthcare receivables at all. Expect the review to focus on whether your collections reliably cover payroll plus a new payment, and on how much of the gap comes from timing rather than margin.
Payer mix
The share of collections from Medicare, Medicaid, managed care plans, commercial insurers and private pay.
Receivables aging by payer
How long each payer takes to pay, and how much is past due, denied or under review.
Payroll schedule and size
How often you pay staff, what each payroll costs and how it moves with your census.
Admissions and census trend
Whether admissions are rising, steady or falling, which drives both payroll and future collections.
Licensure and program standing
Your state license, Medicare certification and enrollment, and any payment holds or audits under way.
Existing obligations
Current loans, lines and advances, and any liens already filed against receivables or deposits.
Recent business bank statements are usually the starting point. Depending on the product, providers may also ask for a receivables aging by payer, payroll registers, payer contracts, a profit and loss statement, tax returns and your license. Our guide to business loan requirements explains what each document shows.
Shortening the gap before you finance it
Every week you take out of the billing cycle is a week of payroll you do not have to finance. These steps follow the rules that set your timing.
- 1
Confirm coverage at referral
Verify eligibility, the responsible payer and any authorization before the first visit, so the care you deliver is billable to the right plan.
- 2
File the Notice of Admission on time
For Medicare patients, file within 5 calendar days after the start of care. Each late day costs 1/30th of that period’s payment.
- 3
Close each period promptly
Complete visit notes and required signatures so the final claim can go out as soon as the 30-day period ends.
- 4
Send clean, electronic claims
Medicare cannot pay an electronic claim within 13 days of receipt, or a paper claim within 28 days, and the 30-day payment standard applies only to clean claims.
- 5
Know your Medicaid timelines
Federal rules require providers to submit Medicaid claims within 12 months of service. The standard of paying 90 percent of clean claims within 30 days applies to practitioners in individual or group practice or shared health facilities, while other claims must be paid within 12 months of receipt. Managed care plans must meet the federal standards unless your contract sets a different schedule.
State Medicaid programs and plan contracts may set their own schedules, so track actual days to payment for each payer and use those numbers, not the federal outer limits, to size any financing.
What covering payroll with financing can cost
Compare offers on the funds you receive, the total repayment, the payment amount and frequency, the estimated APR, fees withheld at funding, any UCC filing on business assets or receivables, and any personal guarantee. A short example shows why the structure matters as much as the price.
Hypothetical example: a $60,000 payroll bridge
An agency needs $60,000 to make payroll while a batch of Medicare claims is processed, and expects the payments in about 45 days.
Line of credit. It draws $60,000 at a hypothetical 12% annual interest rate and repays the draw when the payments arrive. Interest is about $890 for 45 days ($60,000 × 12% × 45/365), plus any draw or maintenance fees. If the claims take 60 days, interest rises to about $1,180.
Revenue based financing. A provider advances $60,000 in exchange for $69,000 of future receipts, collected through daily debits. The $9,000 difference is the cost, or 15 cents per dollar received, whether repayment takes two months or six. The faster it is repaid, the higher the equivalent APR. Any fees withheld at funding add to the cost.
Hypothetical figures, not quotes or offers. Real pricing, fees and terms vary by provider and agreement. Ask each provider for the total repayment and an estimated APR.
Whatever the product, test the payment against your payroll calendar. Daily or weekly debits that land in a payroll week can create the very shortfall they were meant to cover. See how payment frequency affects cash flow and how to compare working capital costs.
When financing is not the right fix
If payroll has to be financed every cycle and the balance never comes down, the problem is probably not timing. Reimbursement may not be covering the labor cost of the visits you deliver. Review visit productivity, payer rates and staffing mix before adding a payment.
Financing also does not solve a denial pattern, a payment hold or a backlog of unbilled periods; it only postpones the shortfall. Fix the claim process first. And if admissions are growing faster than your cash can carry, pacing intake to your working capital may be safer than borrowing to keep up.
Frequently asked questions
Can I factor my Medicare receivables?
Generally no. The Medicare statute and CMS regulations bar paying amounts due to a provider to anyone else under an assignment, power of attorney or other direct arrangement. The exceptions cover government agencies, court orders and billing agents paid in the provider’s name whose compensation does not depend on what is billed or collected.
Can a factoring company buy my Medicaid claims?
Not in a way Medicaid will honor. Federal Medicaid rules state that payment for a provider’s services may not be made to or through a factor, either directly or by power of attorney. A billing service can receive payment on your behalf only if its compensation is not a share of amounts billed or collected and does not depend on collection.
What about Medicare Advantage and Medicaid managed care claims?
These plans contract with Medicare or a state Medicaid program to pay claims, and financing providers differ on whether and how they consider those receivables. Ask each provider directly and review your plan contracts, which may also limit assignment.
How long does Medicare take to pay a home health claim?
Medicare pays each 30-day period of care as one payment after the final claim for that period. Under the Part A prompt payment rules, an electronic claim cannot be paid within 13 days of receipt, and at least 95 percent of clean claims must be paid within 30 calendar days. Late notices of admission, missing documentation or claims needing more information take longer.
Is a line of credit or working capital better for payroll?
A line of credit often fits a gap that repeats every cycle, because you draw before payroll and repay when payments arrive. Working capital such as revenue based financing can bridge a defined shortfall, but compare its total repayment and payment frequency carefully, and ask how it treats Medicare and Medicaid payments.
Can a billing company receive my Medicare payments?
Only as an agent under specific conditions. Its compensation must be unrelated to the amounts billed or collected and not dependent on collection, it must follow payment instructions you can change or revoke at any time, and payment is made in your agency’s name.
Is Correia Financial the lender?
No. Correia Financial is a business financing brokerage. It reviews your business and explores options with third party providers, and those providers make the credit decisions and set the terms.
Sources
- 42 U.S.C. 1395g: Payments to providers of servicesLegal Information Institute, Cornell Law School
- 42 U.S.C. 1395u: Provisions relating to the administration of part BLegal Information Institute, Cornell Law School
- 42 U.S.C. 1395h: Provisions relating to the administration of part ALegal Information Institute, Cornell Law School
- 42 CFR 424.73: Prohibition of assignment of claims by providersElectronic Code of Federal Regulations
- 42 CFR 424.80: Prohibition of reassignment of claims by suppliersElectronic Code of Federal Regulations
- 42 CFR 447.10: Prohibition against reassignment of provider claimsElectronic Code of Federal Regulations
- 42 CFR 447.45: Timely claims paymentElectronic Code of Federal Regulations
- 42 CFR 447.46: Timely claims payment by MCOsElectronic Code of Federal Regulations
- 42 CFR 484.205: Basis of paymentElectronic Code of Federal Regulations
Sources reviewed October 12, 2026.
Related reading
Industry GuidesStaffing agency financing: making payroll before clients pay
Costs & ComparisonsWorking capital financing: how to compare costs and payments