A strategic working capital lever – without added debt
At its core, supply chain finance allows hospitals to unlock liquidity trapped in accounts payable while preserving – and often strengthening – supplier relationships. Once a hospital approves a supplier invoice, the supplier can choose to receive early payment from a bank partner at a competitive rate. The hospital then pays the bank at the extended due date.
“Healthcare supply chain finance creates a true win-win for hospitals and suppliers,” explains Lisa Spano, Senior Vice President of Working Capital and Supply Chain Finance at U.S. Bank. “Hospitals can improve their cash position and extend payables responsibly, while suppliers gain access to financing at rates that are often far better than what they could secure on their own.”
For hospitals with strong credit profiles, SCF can unlock tens of millions of dollars in liquidity – without taking on incremental debt – while improving the cash conversion cycle (CCC) and optimizing days payable outstanding (DPO).
Addressing financial pressures
Hospitals today face mounting financial strain – from rising costs and constrained revenues to shifts in payer mix and limited access to liquidity.
Reimbursement delays from Medicare, commercial payers, and patients continue to strain cash flow, increasing borrowing costs and administrative complexity. At the same time, healthcare supply chains depend on a broad ecosystem of vendors, including smaller or specialized suppliers that may face limited access to affordable capital.
SCF helps bridge this gap and strengthens healthcare supply chain management. By leveraging the hospital’s credit strength, suppliers can receive faster access to cash, while hospitals preserve liquidity and improve working capital efficiency.
“We’re seeing increased interest from CFOs and treasurers who view SCF as a practical, disciplined way to manage working capital in today’s environment,” Spano explains. “It’s not just about extending payment terms. It’s about doing so in a way that supports suppliers and protects the supply chain."
How healthcare supply chain finance works for hospitals
The primary impact of SCF lies on the payable side. Once a hospital approves a supplier invoice, it becomes eligible for early payment. Instead of waiting 60 days or more for payment, suppliers can opt to receive payment immediately from the bank, which later collects from the hospital at the extended due date.
This approach improves a hospital’s CCC – a core working capital metric that measures how quickly an organization converts its investments into cash.
Another advantage of utilizing supply chain finance as a key component of healthcare supply chain management: Rolling out an SCF program can also serve as a catalyst for greater standardization. As organizations centralize purchasing and harmonize supplier contracts, SCF helps enable consistent payment terms.
“In practice, many large health systems that once had multiple purchasing units and dozens of separate terms with the same supplier have now consolidated purchasing,” Spano notes. “That centralization gives them more leverage to standardize payment terms across the system and apply supply chain finance in a disciplined, system-wide way.”
On the supplier side, the benefits are equally clear. Smaller vendors gain access to capital at rates linked to the hospital’s stronger credit profile, helping them improve cash flow and invest in their operations.
Steps to implement a supply chain finance program successfully
Hospitals and hospital systems interested in launching SCF as part of a healthcare supply chain strategy should take these key steps:
- Secure executive sponsorship. Identify a senior leader — ideally the CFO — to champion the healthcare supply chain finance program. “Without that leadership, the process can derail,” Spano says.
- Define goals and success metrics. For example, set targets for improving the cash conversion cycle. “It’s important that all stakeholders buy into the goals and metrics,” Spano says.
- Engage procurement early. Procurement teams manage supplier relationships and play a crucial role in supplier education.
- Address legal requirements. Work with your bank partner to establish agreements and documentation. The bank serves as the paying agent and onboards suppliers onto the program.
Importantly, SCF programs can often launch with minimal technology requirements – sometimes beginning with something as simple as an Excel‑based process.
Hurdles worth overcoming
While implementation can be complex in decentralized or ERP heavy environments, these challenges are manageable with the right planning and partner support.
“The bottom line is that supply chain finance offers a way to unlock liquidity while strengthening supplier partnerships, and in today’s healthcare supply chain management environment, it’s coming at just the right time,” Spano says.
Our industry experts work closely with healthcare organizations to analyze supplier spend, identify high impact opportunities and design supply chain finance programs aligned with each organization’s working capital goals. Request a call to learn how we can help you achieve your business goals and deliver a better patient experience.
