Cash flow unlocked: Supply chain finance comes to healthcare

A proven tool used by financial leaders in the consumer and retail sector — supply chain finance (SCF) — is gaining momentum in healthcare.

For hospitals, SCF offers a strategic way to strengthen liquidity and working capital. It frees up trapped cash while giving suppliers access to early payments, creating mutual benefits and fostering more resilient partnerships.

“Healthcare supply chain finance creates a win-win for hospitals and suppliers,” explains Lisa Spano, senior vice president of working capital and supply chain finance at U.S. Bank. “Hospitals are realizing they can extend their payables, optimize their cash position, and at the same time offer suppliers access to financing at far better rates than they could get on their own.”

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. Delays in reimbursement from Medicare, commercial insurers and patients are also tightening margins, pushing finance leaders to seek new ways to manage working capital.

The healthcare supply chain landscape adds complexity. Health systems rely on a wide range of vendors, including smaller or less highly rated ones that often struggle to access affordable capital. SCF helps bridge that gap. It allows hospitals with strong credit ratings to extend payment terms, while enabling suppliers to receive early payments from a bank partner at a modest discount.

With this healthcare supply chain strategy, hospitals preserve liquidity while suppliers avoid the cash flow pressures of waiting for payments. “We’re having more conversations with CFOs and treasurers who see this as a practical lever to manage their working capital cycle,” Spano says.

How SCF 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 reimbursement, 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 cash conversion cycle (CCC) — a key metric measuring how quickly an organization converts its investments into cash.

Another advantage: When rolling out supply chain finance programs, hospitals can renegotiate supplier contracts. “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 consistently.”

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 an SCF program

Hospitals and hospital systems interested in launching SCF should take these key steps:

1. 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.
2. 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.
3. Engage Procurement early. Procurement teams manage supplier relationships and play a crucial role in supplier education.
4. Address legal requirements. Work with your bank partner to establish agreements and documentation, since the bank serves as the paying agent.

Hurdles worth overcoming

Resource limitations and complex ERP or purchasing structures can slow SCF program implementation, but these challenges are manageable with the right planning and support.

“The bottom line is that supply chain finance offers a way to unlock liquidity while strengthening supplier partnerships, and in today’s healthcare environment, it’s coming at just the right time,” Spano says.

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