Hospitals are turning to supply chain finance to stretch working capital, stabilize suppliers, and ease mounting cost pressures
Cash flow has become one of the toughest balancing acts for hospital finance leaders—and traditional levers don’t always go far enough. That’s why supply chain finance (SCF), a valuable but underused strategy in healthcare, is drawing new attention as a way to modernize how hospitals manage working capital. SCF helps hospitals free up trapped capital while giving suppliers the option of early payments, creating stronger and more resilient partnerships.
“Supply chain finance creates a win-win for hospitals and suppliers,” says 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,” she says. Spano adds that while supply chain finance has long been common in the consumer & retail space, it’s only now gaining traction in the healthcare space.
In this interview, Spano explains why the model is now resonating with hospitals, how it works in practice, and the key steps finance teams should consider before implementation.
Q1: What challenges in hospital finance make supply chain finance an attractive solution today?
Spano: Hospitals are facing rising costs, flat or declining revenue, structural shifts and limited access to liquidity resulting in strained operating margins. They’re not getting paid as quickly—or as much—from sources like Medicare, commercial insurers, and patients. That puts pressure on finance leaders to find new ways to fund operations and manage working capital.
At the same time, the supplier base presents its own challenges. Hospitals work with a wide range of vendors, including strategic ones that need financing but are not as highly rated or don’t have the same access to capital as a well-rated health system. That’s where supply chain finance becomes attractive—it gives highly rated hospital systems the ability to extend payment terms, while also giving those suppliers the option to be paid early by the bank at a slight discount.
The hospital preserves liquidity and suppliers avoid carrying the financing burden themselves for a longer period. We’re having more conversations with CFOs and treasurers who see this as a practical lever to manage their working capital cycle.
Q2: Can you walk us through how supply chain finance works for payables in a hospital setting?
Spano: The biggest impact of supply chain finance for hospitals is on the payable side. Once a hospital approves an invoice from a supplier, that invoice becomes eligible for early payment. Instead of waiting 60 days for the hospital’s payment, the supplier can opt to be paid immediately by the bank. The bank then collects from the hospital at the extended maturity date.
This structure allows hospitals to improve their cash conversion cycle, while suppliers benefit from more affordable access to capital. For example, a smaller vendor that might otherwise face higher borrowing costs can receive early payment at a more favorable rate, because the bank bases their financing on the stronger credit profile.
Also, when rolling out supply chain finance programs, hospitals have an opportunity to 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. That centralization gives them more leverage to standardize payment terms across the system and apply supply chain finance consistently.
Q3: How does U.S. Bank tailor SCF programs to meet the unique needs of hospital systems?
Spano: We take a consultative approach. Our team has deep experience in supply chain finance. We start by analyzing a hospital’s spend file, using proprietary information and predictive analytics to customize a program based on the organization’s working capital objectives and supplier profile.
If a system says, “We want to free up $30 million in cash flow,” we’ll look at the most strategic suppliers and how the hospital would benefit by extending its payables, which affects the cash conversion cycle and days payable outstanding. We review the organization’s entire working capital cycle.
Our programs are also built to be flexible and low-tech. Hospitals don’t need a heavy ERP integration to get started. Our platform can work from something as simple as an Excel file. That agility makes it easier for both the hospital and its suppliers to participate.
Q4: What are the key steps and considerations for a hospital finance team looking to implement a supply chain finance program?
Spano: The first step is sponsorship—you need an executive sponsor at the top, often the CFO, who will drive alignment across stakeholders, including finance, procurement, and legal. Without that leadership, the process can derail. Second, set clear goals and strategic metrics that everyone will buy into.
Third, be prepared for some legal work. There are agreements between the bank and the hospital since the bank is acting as the paying agent. Procurement plays a big role, too, because they own the supplier relationships. We partner closely with procurement to educate them on the program, while also working directly with suppliers to provide education and get them onboarded.
The biggest hurdles we see are resource constraints and, in some systems, multiple ERPs or purchasing entities. But with the right planning and support, hospitals can overcome those challenges. The bottom line is that supply chain finance offers a way to unlock liquidity while strengthening supplier partnerships, and in today’s environment, it’s coming at just the right time.
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