Inside Healthcare Underwriting: How Receivable Behavior Shapes Funding Decisions

Healthcare providers operate in an environment where the delivery of services and the receipt of payment rarely occur in the same cycle. Expenses such as payroll, supplies, and clinical operations are immediate, while reimbursements from insurance carriers often follow weeks or months later. This timing gap is one of the primary drivers of liquidity pressure across the healthcare sector, and understanding it is central to underwriting healthcare receivables.

Understanding the Working Capital Gap

In healthcare, timing mismatches are routine. Providers deliver care daily, but payment is delayed by payer processes, documentation requirements, and periodic audits. Even well-run organizations experience unpredictable reimbursement timelines. Underwriting begins with acknowledging this structural gap and assessing how a funding solution can convert receivables into reliable liquidity without increasing leverage.

Factoring aligns with this need because it evaluates the asset itself. Rather than relying on traditional credit metrics, the structure focuses on the strength, behavior, and collectability of receivables. This positions factoring as a working capital tool designed to stabilize cash flow during periods when operating expenses outpace incoming reimbursements.

How the Structure Functions in Practice

The operational model is straightforward. A provider sells its receivables at a small discount in exchange for accelerated access to working capital. Funds are advanced upfront, and the factor collects from the payer. Any remaining amount, less applicable fees, is returned once payment is received. There is no interest and no long-term repayment cycle. The solution simply brings forward liquidity that the business has already earned.

To ensure payments flow correctly, healthcare funding arrangements typically include a Deposit Account Control Agreement (DACA), which directs reimbursement proceeds into a controlled account. This provides transparency, supports accurate payment application, and protects both the provider and the funder throughout the lifecycle of the transaction.

Clear understanding of this structure enables stakeholders to evaluate transactions with accuracy. The focus is not on borrower debt capacity but on claim characteristics and reimbursement behavior.

What Makes Healthcare Underwriting Distinct

Healthcare receivables exist within a regulated and complex framework. Claims sit within a regulated ecosystem shaped by HIPAA, payer policies, documentation standards, coding requirements, and audit protocols. These reviews can delay payments or create temporary interruptions in cash flow. Underwriting must assess how these factors influence timing, predictability, and expected recovery.

A key component of DML’s approach is evaluating receivables based on Net Realizable Value. Historical data helps confirm reimbursement patterns, validate assumptions, and ensure accuracy in assessing the strength of each portfolio. This data-driven evaluation is particularly important because many traditional funders avoid healthcare due to regulatory oversight and operational complexity.

Specialized underwriting provides clarity in an industry where the variability of payer behavior can materially impact liquidity.

Identifying Providers Who Benefit Most

Healthcare businesses often demonstrate strong operations but slow-paying receivables. Factoring supports their ability to meet payroll, purchase supplies, and continue expanding services while awaiting reimbursement. It stabilizes day-to-day operations without increasing balance-sheet leverage and provides a level of working capital that traditional banks may not be positioned to offer during periods of rapid growth.

Because the underwriting process reflects an understanding of healthcare operations and reimbursement cycles, it allows for a more informed and patient approach when short-term challenges arise. Our familiarity with the operational realities of healthcare organizations also supports a measured response when timing disruptions occur, helping preserve stability throughout the funding relationship.

A Predictable Framework for Long-Term Stability

A consistent and transparent underwriting process benefits all parties involved in a transaction. Early feedback on deal viability, clear communication on requirements, and structured evaluation criteria help ensure predictable outcomes. Commission reporting and residual structures remain straightforward and reliable for partners who introduce opportunities.

Well-underwritten transactions contribute to long-term stability for providers and create a clearer path for organizations to operate confidently while navigating reimbursement fluctuations.

DML Capital Group provides healthcare finance solutions supported by disciplined underwriting and a transparent funding process. To learn more about how our approach supports providers with consistent working capital, connect with our team.