Factoring NEMT invoices: the Medicaid anti-assignment rule and what lenders offer instead

A factor will buy an unpaid invoice and wire most of its value within days. For a NEMT company, whether that is allowed depends entirely on who owes the money. Sort your receivables into three piles before you talk to anyone: claims the state pays, which cannot be sold; broker payments, which need the broker’s sign-off; and facility and private invoices, which usually can be sold. Then price the deal against simply borrowing.

A factoring deal in five steps

A factor pays you now for the right to collect an invoice later, and keeps a fee out of what it collects. Here is a hypothetical deal on a $10,000 hospital invoice:

1. The factor advances 80 percent, $8,000, within two days.
2. It keeps the remaining $2,000 as a reserve.
3. The hospital pays the factor the full $10,000 on day 45.
4. The fee is 2 percent for the first 30 days plus 1 percent for each additional 10 days or part of 10 days. At day 45 that comes to 4 percent, or $400.
5. The factor returns the reserve less its fee, $1,600.

Three more terms decide how the deal behaves when something goes wrong:

• Recourse. In a recourse deal, you buy back any invoice the customer fails to pay. In a non-recourse deal, the factor carries that loss, within limits its contract defines.
• Notice. The factor may write to your customer telling it to pay the factor from now on.
• Minimums and exit fees. Some contracts charge you if monthly volume falls short or if you leave early.

Federal Medicaid rules describe a factor the same way. 42 CFR 447.10 defines one as a person or organization, such as a collection agency or service bureau, that advances money for receivables a provider has assigned, sold, or transferred, in return for an added fee or a cut of those receivables.

The three piles

Pile one: claims the state Medicaid agency pays

These cannot be sold, and the ban comes from Congress. Section 1902(a)(32) of the Social Security Act, codified at 42 U.S.C. 1396a(a)(32), limits state plan payments to the person who received the care or to the person or institution that provided it. Paying anyone else under an assignment, a power of attorney, or any other arrangement is prohibited, apart from a few listed exceptions.

The federal regulation then names factors outright. Paragraph (h) of 42 CFR 447.10 says a provider’s Medicaid payment may never be routed to a factor or through one, whether directly or by way of a power of attorney, and paragraph (c) makes every state plan adopt that condition. New York’s general policy manual for all Medicaid providers repeats the ban and spells out that a power of attorney given to a factor makes no difference.

The rule reaches more than an outright sale. It also catches a power of attorney that lets a factor collect or bank your Medicaid checks and transfers, a change to the payment details Medicaid holds for you that sends the money to an account a factor controls, and a percentage fee paid to a billing company that receives your Medicaid payments.

The exceptions are narrow, and none of them helps a private finance company:

• Government agencies and courts. Paragraph (e) permits a transfer of claims to a government agency, or one a court orders.
• Billing agents. Paragraph (f) lets a billing company or accounting firm send your statements and accept payments under your name. Its fee has to track what the billing work costs, with no link to the dollars billed or collected and no dependence on whether the money comes in. Outsourcing NEMT billing covers the contract terms to check.
• Individual practitioners. Paragraph (g) lets an employer, a facility, or an organized health care delivery system receive payment for an individual practitioner who works for it or bills through it. It was written for physicians, dentists, and similar practitioners, not transportation companies.

Pile two: broker payments

A broker pays you under a private contract, and each contract handles assignment in its own way. Two published agreements show the range:

• MTM. The standard agreement dated January 1, 2023, which Pennsylvania’s human services department publishes, forbids handing the agreement itself to another party unless MTM consents in writing (section 12.A). Your right to be paid is treated differently. You may assign it, but MTM has to hear about it in writing first, with proof that the assignment exists. Section 12.C requires at least 30 calendar days of lead time before any payment goes to the assignee.
• WellTrans, Indiana. Under the version revised October 16, 2025, you may transfer your rights only with WellTrans’s express written consent, WellTrans may refuse at its sole discretion, and an unapproved assignment is null and void. Its privacy terms add a separate step: before a factor gets your trip logs, manifests, or WellTrans billing papers, it must put a business associate agreement in place with you.

A factored broker invoice can also be paid short. Under MTM’s agreement, liquidated damages can be deducted from what MTM owes you, and overpayments can be recovered out of later payments. WellTrans may net duplicate payments and overpayments against later ones, and may delay paying you while its own client is behind. Under a recourse contract, every one of those shortfalls comes back to you.

Brokers pay with Medicaid program money, even though they pay you under a contract. Before any broker receivable moves, get the broker’s consent or give the notice its contract requires. Then get a written answer from your state Medicaid agency on whether the factor ban reaches broker payments.

Pile three: facility and private-pay invoices

Hospital, nursing facility, dialysis center, and private rider invoices are the receivables a NEMT company can usually factor, because the customer pays you directly and no Medicaid payment is involved.

• Anti-assignment clauses. Under section 9-406(d) of the model Uniform Commercial Code, a contract term that prohibits, restricts, or requires consent to assigning an account is generally ineffective. States adopt their own versions, so have a lawyer confirm yours.
• The notice letter. Under section 9-406(a), paying you settles the facility’s bill only until an authenticated notice of the assignment reaches it. From then on, a payment to you does not count, and the facility could end up paying twice. Tell your contacts before the factor’s letter arrives.
• Rider information. Facility invoices name riders and trips. Give the factor only what it needs, and put privacy terms in writing, as WellTrans requires of factors that see its records. See HIPAA for NEMT.
• Private riders. Small balances cost less to collect by charging a card at booking or after the ride. See charging private-pay riders by card.

Turning a factoring quote into a yearly rate

Factors quote fees per period, which makes them look small. Convert every quote to a yearly rate before comparing it with anything:

Simple yearly rate = fee percentage × 365 ÷ days the invoice stays unpaid

Those rates use the full invoice as the base, but you only had the advance to spend. A $300 fee on a $10,000 invoice, with $8,000 advanced for 30 days, is 3.75 percent of the cash you received, about 45.6 percent a year. Monthly minimums, early termination fees, transfer charges, and recourse buybacks come on top.

Two states make finance companies put the full cost in writing:

California’s definitions also cover deals where you forward a share of the cash you collect during a set period. If a funder proposes that structure, check whether it would pull in your Medicaid deposits. In other states, ask for the same figures in writing anyway.

Borrowing without breaking the Medicaid rule

A loan keeps you inside the rule as long as the lender never takes your Medicaid receivables and the payments keep landing in an account you alone direct. Medicare’s claims manual shows one way to build that. Under section 30.2.5 of its first chapter, a provider’s lender can also be the bank where Medicare deposits land, on three conditions: the loan agreement gives up the bank’s offset rights in writing, only the provider’s name is on the account, and only the provider can instruct the bank. The same section adds that whoever finances the provider may not buy its Medicare receivables. That guidance covers Medicare. For the account that receives Medicaid deposits, get your state’s view before signing.

The SBA backs several lines that banks and other lenders make:

The price difference is large. For example, a line charging 12 percent a year would cost about $79 in interest to carry $8,000 for 30 days, before any fees, against the $300 factoring fee above. Borrowing only makes sense for timing gaps, though. Managing NEMT cash flow shows how to size the need with a 13-week forecast, and NEMT business funding covers the wider loan options.

Red flags in a funding contract

Look for these terms in any factoring or loan agreement. If the deal touches Medicaid money in any way, a health care attorney should read it before you sign.

Collecting faster before you finance

In HealthRide, invoices are created from finished trips and priced at each payer’s rates. Facilities and private riders can pay you by card, through a pay link or a saved card, handled by our secure card processor. Checks, broker payments, and insurance payments are recorded next to card payments, so late balances stand out before you think about selling them. See payments and invoicing.