Proactively Use Financing to Help Survive a Medicare Audit

Posted on in Business Operations

By Chad Hamann, National Account Manager, VGM Financial Services

During a Medicare audit, HME providers can experience uncertain cash flow issues that could eventually put them out of business. If a cash flow shortage occurs, businesses may find themselves in the uncomfortable situation of not being able to obtain needed equipment and/or pay open invoices. Not only that, limited cash flow could prohibit a business owner from pursuing potential growth opportunities, such as:

  • Opening a new location
  • Offering niche products
  • Expanding via acquisitions

VGM Financial Services knows the industry and the uncertainties of audits. Establishing a line of credit with VGM Financial Services before cash flow is weak can help avoid shortfalls, maintain consistent cash flow, and, in turn, provide a way to pay accounts payable and even take advantage of “Net Term Discounts.” By planning ahead, those managing an HME business can establish a lease line of credit and use it to get the most out of the financial flexibility it provides. For example, by locking in a fixed monthly payment, cash and bank lines can be preserved for other operating or short-term needs.

Example Scenario

XYZ Home Medical is presently working through an uncertain Medicare audit with The van Halem Group, a division of VGM Group, Inc., one of the nation’s most respected health care audit and consulting firms. Fortunately, the owner of XYZ Home Medical was proactive and established lines of credit with VGM Financial Services, which were used to pay vendors on time and keep the business running smoothly throughout the audit process. The owner of XYZ Home Medical is confident that they will come out of the audit fine; however, if for some reason XYZ has to repay the government, the business is in a much better position to do so because the business used financing instead of cash reserves to pay for equipment and open invoices. 

President of The van Halem Group, Wayne H. van Halem, reiterates the uncertainties that can accompany audits and the importance of planning ahead, "Often times, our clients who have undergone an audit and had to repay funds are able to recover them in the administrative appeal process. Unfortunately, that process can sometimes take years and despite getting refunded with interest, it still can cause cash flow issues as they are navigating through the process."

Why Finance Versus Pay Cash?

Think of a new equipment acquisition as one of your employees. Rather than pay an employee’s salary up front, payments are spread over time as the salary is earned. Likewise, you can structure an equipment lease to match the reimbursement period. Allow your equipment to work for you, and generate revenue that will cover the lease payment, and it will pay for itself over time. 

What You Need to Know

Whether your company is experiencing growth or challenges, don’t wait until it is too late. Now is the time to explore equipment finance options to help maintain flexibility during periods of change.

VGM Financial Services provides business-to-business equipment financing solutions to home care providers and manufacturers with industry-specific programs that help increase sales and market share. Contact Chad Hamann, national account manager, at 800-532-4656 or [email protected]

The perspective offered by Chad Hamann is based on his expertise and is not necessarily the view of VGM Financial Services. This article does not constitute tax or accounting advice.