Q&A: Alleon Capital Partners’ Ben Rutkevitz Checks the Medical Sector’s Pulse in 2023
Ben Rutkevitz, vice president of business development at Alleon Capital Partners, sat down with Commercial Factor for a Q&A exploring factoring as it pertains to the healthcare industry. From the exponential growth in demand for factoring in the sector to how artificial intelligence is being leveraged in healthcare to simplify billing and other departments, Rutkevitz shares his thoughts on these topics and more.
For most medical companies looking to grow, factoring can be an essential form of financing. To compete in this growing area of opportunity, factors need to be experts within the medical regulatory environment and be familiar with healthcare revenue cycle management. Ben Rutkevitz, vice president of business development at Alleon Capital Partners, is one such expert and shared his knowledge in the following Q&A with Commercial Factor.
How has the healthcare/medical sector fared so far in 2023?
Ben Rutkevitz: The healthcare industry is the third largest industry in the U.S. The sector continues to experience above average growth when compared to the economy as a whole. This does not mean it doesn’t have its challenges. As an industry whole, labor shortages and increases in interest rates have been the largest issues. That being said, the expectation is that the sector will continue to grow and add jobs at a clip greater than the average industry.
How would you describe the demand for factoring in the healthcare/medical sector this year? Do you expect a change in the next few months? Why or why not?
Rutkevitz: We have seen demand in medical factoring increase significantly from 2022. This is likely due to government stimulus programs drying up, traditional banks tightening their credit requirements and the rise in interest rates reducing the delta between alternative and traditional finance company rates.
How have interest rate hikes over the last 12-18 months impacted the healthcare/medical sector specifically?
Rutkevitz: There have been several impacts. The rise in interest rates coupled with tightening credit requirements have caused companies which were surviving on cheap capital to reorganize or falter. As mentioned earlier, the rise in interest rates have made some alternative finance companies more competitive with traditional financial institutions.
Has the supply chain improved, stayed the same or gotten worse for healthcare providers and facilities this year? Why?
Rutkevitz: COVID-19 caused significant supply chain issues for the healthcare industry. In 2023, those issues have remained; however, it has improved over previous years. Medical organizations are looking to leverage technology to assist with automating processing to deal with these issues.
What could a recession mean for this sector and the factors that serve it?
Rutkevitz: If previous recessions are any indication, then a recession would greatly increase demand for medical factoring. Traditional banks would likely reduce loan activity and perhaps even kick out borderline credits, which would drive healthcare organizations to alternative financing sources – like factoring. I would still expect the healthcare industry to fair better than most industries in a recession given the inelastic demand for its services.
Given the rapid increase in interest in artificial intelligence, how might AI influence the future of healthcare? Has the last year sparked any developments already?
Rutkevitz: We are seeing a number of companies looking to leverage AI in healthcare. The companies we have encountered are focused on updating and adding efficiency to a part of healthcare that is outdated and disjointed: the medical billing sector. Currently, there are hundreds of billing softwares trying to bill hundreds of different insurance plans through different clearing houses. An average medical provider spends significant resources on billing and collection, as insurance carriers constantly deny claims for various reasons, requiring follow up from the provider. If leveraged correctly, AI could significantly improve the billing and collection process, increasing reimbursements and decreasing the time to get paid.
How would you advise factors who either already work with healthcare clients or those that may be looking to when it comes to traversing the current environment?
Rutkevitz: A factor needs to be on top of the medical regulatory environment and be familiar with healthcare revenue cycle management if they want to work in the space. The same risks that have always existed in medical factoring continue today, which are the audit, valuation and assignment risks.
Medical claims are not assignable like invoices in traditional factoring. A medical provider will often bill at a higher rate than it will get paid, so a factor must advance against the collectible value of a claim instead of the gross billed charge. And finally, a medical factor must perform mini audits throughout the year on its providers to ensure the provider is compliant and following regulatory guidelines so as to avoid getting audited by insurance carriers.
What are the benefits of utilizing factoring as a financing source for clients in the healthcare/medical sector?
Rutkevitz: For most medical companies looking to grow, some sort of factoring or financing is essential. The delay in payment from insurance carriers causes working capital challenges for all companies, but especially [for] those on a growth trajectory. Factoring allows a company to take advantage of growth opportunities and not have to worry about meeting its working capital needs, such as payroll or supplies.
What is your outlook for the healthcare and healthcare factoring sectors for the rest of this year and early 2024?
Rutkevitz: I anticipate demand for medical factoring to continue to increase throughout the rest of 2023 and 2024. It seems likely that the trend of traditional banks tightening underwriting standards will continue and this will lead to significant opportunities for the medical factoring industry.