Healthcare Lending: Just What the Doctor Ordered?
Secured Lender, The › Vol. 65 Nbr. 4, May 2009
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Summary
Some have characterized the healthcare industry as "uncyclical"; that is, based on the demographic and societal factors that drive growth in demand, it is not subject to normal business cycles. According to the Centers for Medicare & Medicaid Services, the healthcare market is projected to grow from $1.2 trillion in 2000 to $2.7 trillion in 2010, resulting in an average annual growth rate of more than 7.5%. Many companies operate in the healthcare industry, but not all of them utilize commercial-lending services, including ABL. Nonetheless, the most active users of commercial lending are healthcare service providers. Healthcare service providers are defined as any person or organization that furnishes, bills, or is paid for healthcare in the normal course of business. Another concept unique to healthcare asset-based lending is that of lending against services that have been provided to the patient but not yet billed.
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Healthcare Lending: Just What the Doctor Ordered?
As I thought about writing this article, I wondered how to convince a skeptical audience that providing asset-based loans to healthcare companies is a creditworthy business niche. Generalist asset-based lenders seem to have two main concerns with healthcare lending: (i) the high dilution rate and long cashconversion cycle of healthcare receivables, and (ii) the high concentration of government payment sources. This article describes aspects of healthcare asset-based lending (ABL) that, over ten years in this niche, have convinced me that it is a great place to lend
Industry OverviewSome have characterized the healthcare industry as "uncyclical"; that is, ...See the full content of this document
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