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Home Healthcare Providers are faced with a challenging working capital environment caused by slow reimbursements from government and commercial payers. This difficult financial situation leads to agencies finding their company’s cash flow stretched thin. Typically, homecare and senior living providers look to managing accounts receivables, payables, inventory as well as financing options to maximize short-term cash availability.
Before we share more details on the method that we employ to improve working capital for senior living and homecare providers, you must better understand working capital.
Working capital is defined as a company’s current assets minus its current liabilities. Current assets include cash and cash equivalents, short-term investments, inventories and accounts receivable. For homecare providers, the largest current asset is typically the company’s accounts receivable of payments owed from Medicare, Medicaid, private insurers or patients. As for current liabilities, these include accounts payable, the current portion of long-term debt and unearned revenues. The net of the current assets and liabilities make up a business’s working capital.
Healthcare Advantage Consulting tends to focus on improving the liability side by maximizing the use of your accounts payable. In simplistic terms, delay paying your suppliers until the latest possible date. What we have found is that some insurance carriers supplying the workers compensation insurance to homecare and senior living providers on a 10 pay format may be willing to transition to 12 equal payments.
Larger homecare and senior living providers are also able to reduce the liability side by negotiating the financial terms with insurers. This is especially true as homecare and senior living providers are already investing in improving their communication infrastructure and analytics that will have a positive impact on caregivers and patients. The push for employee and patient safety by CMS and future payment models, exemplify that risks could be further controlled for improved profitability in risk sharing arrangements.
By negotiating the financial terms with insurance carriers, you may find that the upside potential is greater than the overall risk. We provide alternative risk sharing models that may be right for your risk tolerance.
Working Capital
Last Updated: by · Leave a Comment
Home Healthcare Providers are faced with a challenging working capital environment caused by slow reimbursements from government and commercial payers. This difficult financial situation leads to agencies finding their company’s cash flow stretched thin. Typically, homecare and senior living providers look to managing accounts receivables, payables, inventory as well as financing options to maximize short-term cash availability.
Before we share more details on the method that we employ to improve working capital for senior living and homecare providers, you must better understand working capital.
Working capital is defined as a company’s current assets minus its current liabilities. Current assets include cash and cash equivalents, short-term investments, inventories and accounts receivable. For homecare providers, the largest current asset is typically the company’s accounts receivable of payments owed from Medicare, Medicaid, private insurers or patients. As for current liabilities, these include accounts payable, the current portion of long-term debt and unearned revenues. The net of the current assets and liabilities make up a business’s working capital.
Healthcare Advantage Consulting tends to focus on improving the liability side by maximizing the use of your accounts payable. In simplistic terms, delay paying your suppliers until the latest possible date. What we have found is that some insurance carriers supplying the workers compensation insurance to homecare and senior living providers on a 10 pay format may be willing to transition to 12 equal payments.
Larger homecare and senior living providers are also able to reduce the liability side by negotiating the financial terms with insurers. This is especially true as homecare and senior living providers are already investing in improving their communication infrastructure and analytics that will have a positive impact on caregivers and patients. The push for employee and patient safety by CMS and future payment models, exemplify that risks could be further controlled for improved profitability in risk sharing arrangements.
By negotiating the financial terms with insurance carriers, you may find that the upside potential is greater than the overall risk. We provide alternative risk sharing models that may be right for your risk tolerance.
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