Preparation is the tried and tested way to prevent poor performance. With proposed Medicaid funding cuts on the horizon, now is the time for providers to strengthen their financial foundation. Providers need to prioritize meticulous bookkeeping to track revenue against expenses and gain full visibility into where money is going, what’s driving profitability, and where there is room to adapt without compromising care.
Flychain helps providers do exactly that. By combining healthcare-specialized bookkeeping with real-time financial analytics, Flychain gives you a clear understanding of your margins and surfaces actionable insights so you can optimize spending, manage cash flow, and plan confidently in times of uncertainty.
Track Revenue vs. Cost of Care
Even before any Medicaid changes take effect, it is critical for providers to have a clear understanding of how much it costs to deliver care - not just how much revenue is coming in.
This is especially important for home health, personal care, and HCBS providers, whose services are funded by Medicaid but are not part of Medicaid’s core set of federally mandated services. Unlike nursing facility services, these are optional services that states can scale back more easily, particularly when faced with reduced federal funding or tighter state budgets. That makes them especially vulnerable if Medicaid cuts occur.
To prepare, providers should focus on understanding their true cost of care. Before diving into more advanced financial reporting, every provider should start by building this critical foundation:
- Break down your expenses by function: Specifically separating clinical (direct care) payroll from administrative (overhead) payroll.
- Clinical payroll includes wages for staff providing direct patient care
- Administrative payroll covers non-clinical roles like billing, scheduling, and HR
- Calculate your Cost of Goods Sold (COGS) vs. Operating Expenses
- COGS captures the direct costs tied to delivering care, such as clinician salaries and care-related supplies
- Operating Expenses include broader business costs like administrative salaries, marketing, and rent
- Analyze your margins - Understanding these expense categories allows you accurately calculate:
- Gross Profit Margin: How efficiently you are delivering care (Revenue - COGS) / Revenue
- Net Profit Margin: How sustainable your business is overall (Revenue - Total Expenses) / Revenue
- Assess financial viability under different reimbursement scenarios
- With clarity on your gross and net margins, you can better determine whether your services are financially sustainable at today’s Medicaid rates - and model adjustments if funding declines.
This level of financial tracking is the necessary first step. It lays the groundwork for eventually conducting more advanced analytics, such as service-line profitability and payer-specific margin analysis. Without this foundation, more detailed insights simply aren’t possible.
Flychain provides these insights by combining healthcare bookkeeping with clear, real-time financial reporting. With Flychain, you can quickly track key financial metrics like net profit and gross profit margins. You can quickly identify inefficiencies and make timely, informed decisions - ensuring you’re financially prepared before any potential Medicaid changes take effect.
Diversify Payer Mix (Where Possible)
Medicaid remains the main payer for ~70% of home care services. This leaves many providers heavily reliant on a single, state-controlled funding source. As proposed federal Medicaid cuts create future uncertainty, diversifying your payer mix is a critical strategy for long-term financial stability.
To start diversifying your payer mix, consider exploring alternative revenue streams outside of traditional Medicaid reimbursement:
- Private-pay clients: Offer services directly to individuals who can pay out of pocket, particularly those seeking high-touch or non-covered care.
- Partnerships with Medicare Advantage (MA) plans: MA plans are increasingly covering HCBS-like services. Partnering with these plans gives providers access to a growing, non-Medicaid segment.
- Commercial insurance contracts: Some private insurers offer long-term care benefits or community-based services, especially as demand grows for aging-in-place options.
Diversifying your revenue sources not only mitigates dependency on Medicaid, but also strengthens your business model in the face of changing reimbursement landscapes.
Choosing the right commercial partners can make a significant difference in your margins. Flychain’s contracted rate analysis offering helps you evaluate commercial payer rates across your region - or areas you’re looking to expand into - so you can identify the most favorable reimbursement opportunities. By arming you with this data, we help you contract smarter and build a stronger, more profitable payer mix.
Explore Innovative & Value-Based Payment Models
In addition to payer mix diversification, providers can also explore more innovative payment arrangements that align with the healthcare industry’s shift toward value-based care:
- Bundling Payment Arrangements: These models provide a fixed payment for all care related to a specific episode, for example, 90 days of post-acute HCBS for a patient recovering from a hip replacement. This gives providers budgetary control while incentivizing coordination and cost-effectiveness.
- Value-Based Care (VBC) Contracts: These agreements tie reimbursement to outcomes, such as hospital readmission rates or client satisfaction.
- For example, an HCBS provider could enter a shared savings agreement with a Medicaid MCO and earn a portion of savings for reducing readmissions among clients with chronic conditions like diabetes.
- VBC models encourage providers to focus on preventive care, community integration, and maintaining client satisfaction, all of which help reduce long-term costs for payers. CMS actively promotes VBC through initiatives like the Medicare Shared Savings Program and supports broader adoption through state Medicaid value-based payment (VBP) requirements.
- Participate in PACE (Program of All-Inclusive Care for the Elderly): PACE provides capitated payments covering all medical and social needs for frail, community-dwelling seniors. For eligible populations, this model offers stable, predictable funding.
Stability starts with diversification. By expanding the payer base, engaging in alternative payment models, and participating in broader programs like PACE and value-based programs, providers can take back control over their financial health - regardless of how federal Medicaid policy evolves.
Preparing for Slower Reimbursement Cycles
Planning for a slower than usual Medicaid reimbursement cycle is crucial for providers to maintain healthy cash flow. While proposed cuts have not yet taken effect, states under budget pressure may choose to delay payments to manage shortfalls. This can create significant financial strain for providers who rely heavily on Medicaid.
To put it simply, it’s a juggling act to properly prepare for a slowing cycle. In order to continue running smoothly, we recommend that providers adhere to the following golden rules:
- Strengthen financial reserves by maintaining a buffer of at least 3 payroll cycles. This will give you at least 6 weeks of operating runway for biweekly pay periods.
- Secure a line of credit: Having access to flexible capital allows providers to cover critical costs, such as hiring staff, upgrading systems, or marketing to new clients — without disrupting operations. A revolving line of credit can be used as needed, helping smooth out cash flow during periods of payment lag.
- When applying, be prepared to share basic financials such as recent tax returns, bank statements, and accounts receivable data.
- It also helps significantly if you already have an established relationship with your bank or credit union. A lender that knows your business and understands healthcare cash flow patterns will be more likely to offer favorable terms and faster approval.
- Explore Flychain's Advanced Payment on Claims: Exclusively available to Flychain customers, this is one of the most provider-friendly working capital solutions on the market.
- Flychain offers a healthcare-specific line of credit that gives you upfront access to working capital based on your outstanding insurance claims. This is designed to help providers continue operations even when reimbursement is delayed.
- Flychain securely pulls data directly from your EMR or RCM system to assess your accounts receivable, identifying how many claims are still unpaid and their total value.
- There are no unused line fees, no origination fees, no prepayment penalties, and no personal guarantees required.
- Streamline billing operations: If you’re not fully confident in your current billing setup, now is the time to reassess. Switching later - after Medicaid cuts hit - will be far more disruptive. New automated billing solutions are emerging rapidly, and it is worth exploring alternatives if your system is not delivering fast, accurate reimbursements. Talk to Flychain if you’d like recommendations.
- Negotiate payment timelines: Where possible, work with state Medicaid programs or Managed Medicaid plans to gain clarity on expected processing windows and establish predictable timelines.
We’re Here to Help you Through This
Navigating Medicaid uncertainty is tough, but you don’t have to do it alone. Schedule a free consultation with Flychain - no strings attached! Let our team of financial experts walk you through how we support healthcare providers just like you.
We’ll show you how our platform surfaces key financial KPIs, helps you track your margins, and prepares your business to stay resilient - even as the reimbursement landscape shifts. Our dedicated healthcare bookkeepers are here to answer your questions and give you clarity and confidence through every step of the journey.