Private Equity in Healthcare

By | Blog

Private equity interest in healthcare is on the rise. According to Bain & Company, healthcare private equity activity in 2019 posted a very strong performance relative to the prior year. The total disclosed deal value reached $78.9 billion, the highest on record. And, interest is only continuing to mount, especially in a post-COVID-19 market.

Oftentimes, the private equity strategy in healthcare is to either combine multiple practices of the same type in order to dominate an entire market, or to create a large multi-specialty practice. Investors in the healthcare space are typically looking to get their money back within 3-5 years (Medical Economics).

The stakes are high, and any one poor financial decision could make or break a private equity firm’s strategy and results.

A Partner to Private Equity-Backed Medical Practices: Gain Servicing

Gain servicing, a Cherokee Legal Holdings company, is an AI-driven servicing and financing company specializing in letter of protection (LOP) solutions for healthcare providers and investors.

Unbeknownst to investors, LOPs can account for a significant amount of a medical practice’s outstanding accounts receivables.

Here is how LOPs work and how they end up as an aged accounts receivable:

  • For personal injury victims in need of medical care as a result of the accident they were involved in, and who do not have adequate healthcare coverage for the care they need, their bills can be covered by a letter of protection.
  • For medical providers providing care to personal injury victims, LOPs are essentially an assurance of payment. They are to encourage providers to give care without having to assume the risk of not being paid. LOPs also serve to protect the victim of personal injury cases from being sent to collections while their case is ongoing.
  • Backed in-house by the medical provider, by the law firm representing the victim, or a third party like gain servicing, an LOP simply states that upon resolution of the personal injury case, the remaining balance of the medical bill(s) will be paid when the case finalizes.
  • Because LOPs are backed by a personal injury case, traditional billing, accounts receivable and collections departments do not always know how best to handle these files. Simply put, medical practices are not equipped inhouse to successfully collect on letters of protection. No electronic health record system exists that appropriately captures personal injury case statuses or liens, and none have the third-party liability concept built into them. There is also no workflow or status option fit for personal injury cases, so a medical practice’s results are only as good as their manual follow-ups and what they are able to track in Excel.

Gain servicing manages LOPs on behalf of healthcare practices. It is a service built on a mix of technology, people and processes, and it is proven to deliver higher reimbursements, at a lower cost, without impacting referrals to the practice.

Here are some of gain servicing’s biggest deliverables to healthcare practices and their investors:

  • More LOP payouts: Gain servicing’s LOP Servicing results in fewer write-offs and greater paid-in-full accounts.
  • Eliminates avoidable losses: Gain servicing follows the lifecycle of unpaid LOPs by tracking the status of the lawsuit underlying each LOP and taking corrective action, if needed.
  • Access to the most advanced LOP platform in the world: Built on Salesforce, every gain servicing customer gets the advantages of the most advanced LOP servicing platform in the world.
  • Better attorney relationships and referrals: Attorneys prefer when providers use gain servicing because of the automated process, time savings and efficiency, yielding more referrals for the practice and thus revenue and earning opportunity.
  • Actionable business intelligence: Full reporting and analytics provide direct insight into how LOPs are performing and enable a better understanding of the overall revenue generated from LOPs.
  • Referral source analysis: gain servicing’s platform tracks every LOP from every referral source. This provides powerful insights into how each referral source reimburses LOPs over time and allows comparison across all referral sources.
  • System agnostic plug-in optionality: Providers who use gain servicing can continue using their existing practice management software while still gaining critical access to gain servicing’s LOP processing capabilities. Gain servicing has experience working with a variety of systems, including AdvancedMD, Allscripts, Athena Health, Azalea Health, Carecloud, Cerner, eClinicalWorks, eMDs, EMA Dermatology (Modernizing Medicine), OmniMD, Practice Expert and many others.
  • Private label options: Gain servicing offers private label options where all communications are performed under the provider’s name. The default option is: “Gain servicing on behalf of [Provider Name].”

Gain servicing provides servicing to both independent and private equity-backed healthcare practices. Private equity investors rarely want to tell providers how to manage their practice. Instead, they want to support business growth and profitability while enabling providers to do what they do best, provide quality care. Gain servicing enables the predictable cash flow, business intelligence and reporting capabilities both providers and private equity investors both enjoy.

How to Increase Cash Flow from Letters of Protection – cont’d

By | Blog

How to Increase Cash Flow from Letters of Protection

Physicians and medical practice executives can find it difficult to manage cash flow, especially amidst the ongoing concerns surrounding COVID-19 and as elective surgeries and other lucrative procedures continue to be put on hold. Cash flow difficulties compound when medical services are provided to personal injury patients on a Letter of Protection (LOP) – when payment from settlement can take years to receive.

Many practices attempt to handle LOP account balances in-house but LOPs are challenging for staff as practice management systems are not equipped to handle the complexities surrounding LOPs, including necessary and proactive follow-up measures with attorneys.

The downside, of course, is that cash flow takes a hit when LOPs are not managed properly and go unpaid. Since an LOP states that you, the medical provider, are agreeing to await payment from future settlements awarded to the patient/attorney, you can expect anywhere from six months to seven years before the practice realizes this revenue. Also, at the time of payment there may be reduction requests if the financial outcome of the legal case was not as expected. This can pose a serious risk to your payment. In response, some medical offices retain a paralegal or develop an underwriting department to screen the personal injury cases prior to seeing patients, all of which can be time consuming, costly and still result in unpaid LOP account balances.


LOP Financing Options: Third-Party, Inhouse, Gain Servicing

Many practices sell their LOP account balances at a discount to lien financing, or medical funding, companies. This provides the practice with immediate cash flow and offloads the work of tracking, managing and collecting on LOPs – but it comes with a tradeoff. Not only does the practice give up control of the process but having a third-party manage your LOP accounts receivables (AR) can come at a severe cut in profit depending on the bid amount of the financing company on your AR balances.

But, if managed inhouse, medical providers lack options to increase revenue and decrease time between service and payment for personal injury treatments.

A viable alternative is to consider a data-driven financing partner, like Gain Servicing. Our technology platform is backed by artificial intelligence and data from thousands of personal injury cases – intelligence we are able to pass along to our medical partners, resulting in fewer write-offs and more paid-in-full LOP balances.

Additional, unique benefits of Gain Servicing:

  • Automated LOP tracking – no more manual processes or workarounds
  • Optimized revenues – our AI-powered platform enables us to compare balances and case data points to help you get a better return
  • Business intelligence – detailed reporting and analytics show you how well our system is doing for you
  • Referral source analysis – know exactly how patients are choosing your practice through the identification and tagging of attorney referrals
  • White label options – our team can act as badged resources for your practice while collecting on LOPs, creating a consistent patient and attorney experience with your practice

In the Gain Servicing model, you benefit from our tools and technology, experience, expertise and optimization of LOPs without the risk you had previously been assuming by treating personal injury patients on LOPs and not having the right systems, processes, procedures and people in place.


A Newfound, Viable Source of Revenue: LOPs

With a financing partner like Gain Servicing, practices can open their doors even wider to personal injury and workers’ compensation patients.

Marketing for these ‘types’ of patients is relatively simple. Begin first by letting physicians know that they can bring their personal injury and workers’ compensation patients who are uninsured or underinsured to your facility. Many orthopedic surgeons and pain management physicians are already treating or being approached by attorneys to treat these injured patients. You can also notify your local personal injury attorney offices or local litigation groups who legally represent potential patients of your willingness to accept their clients on a lien or LOP.


In Closing

Communication with patients and attorneys is an ongoing requirement when dealing with LOPs; otherwise, it is possible they may settle the case without paying your medical bill. A technology-driven, experienced financing company, like Gain Servicing, takes on the role of an entire collections department while additionally providing LOP-specific tools, expertise and processes. Namely, LOP receivables do accumulate and age well beyond 120 days, and if not working with a medical-legal funding company, like Gain Servicing, you will need to allocate valuable resources to keep up to date and track your LOP accounts.

When evaluating alternatives to expand your reimbursement portfolio, accepting personal injury and workers’ compensation patients on LOPs is a sound business decision and requires minimal investment to significantly increase patient volume. You can reasonably expect that by opening communication with local attorneys, you will see consistent patient referrals – especially if you partner with an expert like Gain Servicing and have an efficient process surrounding LOPs.

If your practice has already been treating patients on LOPs and you need to increase your cash flow now, seek an experienced partner to monetize that patient volume through lien purchasing or servicing. Gain Servicing has several different options available, and we can customize a solution that will result in the greatest return on investment for your practice.


More About Gain Servicing

Gain Servicing specializes in the financing and servicing of personal injury and workers’ compensation patient receivables.

Gain Servicing is a wholly owned subsidiary of Cherokee Legal Holdings, a medical-legal funding company headquartered in Atlanta, Georgia. For over 10 years, we have financed existing third-party liability accounts from patient care that has been provided at healthcare facilities and medical practices across the U.S. We provide the underwriting and up-front screening, as well as process the paperwork and conduct the necessary follow-ups with attorneys after procedures are complete. We pay medical providers for their patient care, assuming the risk while providing immediate cash flow to the practice. Our goal is to increase healthcare organizations’ cash flow now while seamlessly allowing providers to do what they do best – provide care to those in need.

Gain Servicing is the go-to solution for medical practices providing quality care to the injured, underinsured and uninsured.