Revenue-Based Financing for Home Health Agencies
Revenue-based financing gives a home health agency a lump sum repaid as a set share of monthly revenue, so a slow Medicaid or insurance payment cycle means a smaller payment. Agencies use it to hire caregivers for new referrals, open a service area or start a private-pay program, not to patch a payroll that's already short.
What do home health agencies use revenue-based financing for?
Hiring ahead of new referrals
Caregivers are paid every week or two, while payers reimburse on their own cycle. Hiring for a new referral source means carrying payroll for weeks before the claims pay.
Opening a new service area
A new county or city means recruiting, licensing work and marketing to discharge planners before the first visit is billed.
Adding private-pay services
Companion care and private-pay programs bring revenue outside payer rates, and they take marketing and staff training first.
Revenue share math for a slow month
Here a home health agency averages $250,000 a month, takes $112,000 and owes $148,960 in total, remitted at 5% of revenue.
| Month | Revenue | Remittance at 5% | Remittance as a share |
|---|---|---|---|
| An average month | $250,000 | $12,500 | 5.0% |
| A slow month, 23% under average | $192,500 | $9,620 | 5.0% |
About $9,620 leaves in a slow month. Roughly 12 months of average sales repay it. BLS headcount for home health care services (NAICS 621610) moves just 4.2 points over the year, so use your own thinnest month here.
Why does a percentage payment suit payer batch timing?
Medicaid, Medicare and insurance payments arrive in batches, and a delayed batch can push a month's revenue down even when visits are steady. A fixed daily debit keeps coming out anyway. A percentage of revenue moves with what actually lands, which makes the payment easier to carry in a slow claims month.
What providers look at
Monthly revenue by payer, payroll as a share of revenue, how steady the census runs and how long claims take to pay.
Which billing terms matter in the agreement?
- Whether revenue means billed claims or deposits received.
- The cap on total repayment, and whether a monthly minimum applies during a slow claims cycle.
- How a payer audit or a recoupment affects the revenue figure.
Quick answers
Is revenue-based financing a good fit for home health?
Agencies growing into a new referral source or county get the most from it, since the payment tracks monthly revenue instead of a fixed daily debit. Using it to cover a short payroll costs more than the problem deserves. Agencies with a steady census and clean billing get the best terms.
Do Medicaid payments count as revenue for this financing?
Yes. Medicaid, Medicare and insurance reimbursements are revenue once they're deposited. Read the agreement's revenue definition, because some count billed claims and some count deposits received. A definition based on deposits keeps the payment tied to cash that has actually arrived, which matters when a payer batch runs late.
How does a payer delay affect revenue-based financing?
The payment shrinks for that month, because it's a share of revenue received. That's the main advantage over a fixed advance payment. Look for a monthly minimum in the agreement, because a floor charges a set amount even when a payer batch slips into the next month.
More for home health agencies
- Same-day merchant cash advance for home health agencies
- Second position MCA for home health agencies
- MCA consolidation for home health agencies
- Business line of credit for home health agencies
- How funders read home health agencies
- Revenue-based financing: how it works
Run your own numbers with the factor rate calculator.
Want to see what fits a home health agency like yours?
Tell us your slow months and your open advances, and we'll shop the file with funders whose programs fit. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.