← Terms.Law Demand Letters

Protecting healthcare staffing vendor receivables when MSPs wind down, claim secured lender priority, or fail to pay—coordinating with trade credit insurance and factoring

🏥 Healthcare Staffing MSP Receivables Protection

When your MSP (Managed Service Provider) partner announces it's winding down operations or claims receivables are "pledged to a secured lender," time is critical. Healthcare staffing vendors often have significant receivables tied up in MSP relationships, and a wind-down can put millions at risk. This guide shows you how to protect your payment rights immediately.

🚨 Time-Sensitive: Act Within 48-72 Hours

MSP wind-down notices are often the first sign that assets are disappearing. Every day you delay reduces your recovery. Send a formal demand letter immediately, notify your trade credit insurer, and coordinate with your factor (if applicable). Do NOT wait to "see what happens."

🔗 Understanding the Healthcare Staffing Payment Chain

Typical structure:

  • Hospital/Facility (end client) → pays the MSP (Managed Service Provider)
  • MSP → contracts with multiple Staffing Vendors (you)
  • Staffing Vendor → provides nurses, clinicians, allied health staff to facilities

When the MSP fails to pay you, it's often because: (1) the MSP has cash flow problems, (2) the MSP is winding down operations, or (3) the MSP claims its receivables are pledged to a secured lender (like a bank line of credit).

Critical point: The MSP's financial problems or secured lender obligations do not eliminate its debt to you. You performed services, you're owed money, and you have collection rights.

Secured Lender Claims: What They Mean for You
📜 UCC Article 9 and Secured Transactions

When an MSP tells you "receivables are pledged to a secured lender," they're referencing UCC Article 9 security interests. Here's what this actually means:

  • The MSP still owes you money. A security interest doesn't eliminate the debt—it only affects priority if the MSP goes bankrupt.
  • The secured lender has priority over MSP assets in a bankruptcy or liquidation scenario—meaning they get paid first from whatever assets exist.
  • But you're not collecting from MSP assets—you're collecting a debt owed to you. Different thing.
  • If the MSP is still operating (even in wind-down), they have an obligation to pay creditors in the ordinary course of business.
⚠️ "Pledged Receivables" Is Often a Stall Tactic

Some MSPs use "our receivables are pledged" language to delay payment while they sort out their finances. Don't accept this at face value. Demand:

  • A copy of the security agreement
  • The lender's name and contact information
  • Proof that your specific invoices fall under the security interest
  • A concrete payment timeline

If they can't provide this documentation, the "secured lender" excuse is likely a delay tactic.

When to Send a Demand Letter
🚨
MSP Announces Wind-Down You receive formal notice that the MSP is ceasing operations, transitioning clients, or entering "orderly dissolution." Act immediately.
🏦
"Secured Lender" Language Appears The MSP claims it cannot pay you because receivables are pledged to a bank or lender. Challenge this and preserve your rights.
⏰
Payment Terms Significantly Exceeded Standard payment is 30-60 days. If you're at 90+ days with no concrete timeline, the MSP may be in financial distress.
📉
Industry Rumors of Financial Trouble If you hear from other vendors that the MSP is slow-paying or there are executive departures, send a demand before the situation worsens.
🔄
MSP Proposes Discounted Settlement If the MSP offers to pay 50-70 cents on the dollar "to resolve things quickly," this signals they expect to pay less than full value. Reject and send a formal demand.
📎 Related: General Agency & Subcontractor Nonpayment

For general agency/subcontractor nonpayment issues (not specific to healthcare staffing or MSPs), including pay-if-paid vs. pay-when-paid clauses and platform disputes (Upwork, Fiverr), see our companion guide:

Agency & Subcontractor Nonpayment Demand Letters →

Coordinating with Trade Credit Insurance & Factoring
📋 Trade Credit Insurance (Euler Hermes, Coface, Atradius, etc.)

Immediate notification is critical. Most trade credit policies require you to report payment defaults within a specific window (often 30-60 days past due). Failure to notify timely can void your coverage.

  • Contact your trade credit insurer the same day you receive wind-down notice
  • Provide copies of all invoices, your vendor agreement, and the MSP's communication
  • Ask about policy limits and any required collection steps before claim submission
  • Coordinate demand letter strategy with insurer—they may have preferred language or timing
  • Do NOT settle claims without insurer approval—it may void your coverage
💳 Factoring Companies (Rev Capital, Porter Capital, etc.)

If you factor your healthcare staffing receivables, your factor may have contractual rights that affect your recovery options:

  • Recourse vs. Non-Recourse: In recourse factoring, you may be liable if the MSP doesn't pay. Coordinate with your factor immediately.
  • Factor may have lien on receivables: Your factor may have filed UCC-1 financing statements and have priority claims.
  • Joint collection strategy: Factor and vendor should coordinate—sending conflicting demands weakens both positions.
  • Settlement authority: Your factoring agreement may require factor approval before accepting discounted settlements.
💡 Can I Contact Facilities Directly?

This is the critical question: if the MSP can't pay, can you ask the hospital or facility to pay you directly?

Generally, no—unless your contract permits it. Most MSP vendor agreements include non-circumvention clauses prohibiting direct facility contact. Violating these can:

  • Give the MSP grounds to offset claims against you
  • Damage your relationships with facilities for future business
  • Create legal liability for tortious interference

However, you may be able to:

  • Request the MSP assign specific facility receivables to you (with facility consent)
  • Negotiate a tri-party agreement where the facility pays you directly with proper releases
  • Ask facilities to interplead disputed funds if the MSP is winding down

Have an attorney review your contract before any facility contact.

Structuring Your MSP Receivables Demand Letter
📝 Essential Components
  1. Relationship Summary: Describe your vendor relationship with the MSP, facilities served, and services provided.
  2. Outstanding Receivables Detail: List all unpaid invoices by date, facility, amount, and service description.
  3. Challenge Secured Lender Excuse: State that secured lender claims do not eliminate MSP's obligation to pay you for services rendered.
  4. Demand Documentation: Request copies of security agreements and proof that your invoices are covered by any lien.
  5. Trade Credit Insurance Notice: Note that you've notified your trade credit insurer and are preserving all claim rights.
  6. Factoring Coordination: If applicable, note that you're coordinating with your factor and any settlement must be approved.
  7. Concrete Demand: Specify exact amount due and 10-day payment deadline.
  8. Next Steps: Litigation, UCC lien filings, facility notification (if permitted), and regulatory complaints.
📨 You're an MSP Facing Vendor Receivables Claims

If you're an MSP in wind-down mode receiving demand letters from healthcare staffing vendors, here's how to assess your obligations and respond professionally—even in difficult financial circumstances.

🔍 Immediate Assessment Questions
  1. What is your actual secured debt? Review your credit facilities and determine exactly which receivables are pledged and to whom.
  2. Are vendor invoices legitimate? Verify that services were rendered and invoices match facility work records.
  3. What facilities owe you money? Your accounts receivable from hospitals may be the source of funds to pay vendors.
  4. Do you have D&O insurance? Directors and officers may have personal liability for preferential or fraudulent transfers during wind-down.
  5. Is bankruptcy inevitable? If so, informal wind-down may expose principals to liability; formal bankruptcy provides orderly process.
Response Strategy Options
✅
Pay Valid Claims If Possible If you have receivables coming in from facilities and secured lender allows ordinary course payments, pay vendors to preserve relationships and reduce litigation.
🔗
Assign Facility Receivables If you can't pay cash, consider assigning your receivables from specific facilities directly to vendors (with lender consent). This transfers the collection burden but satisfies your obligation.
📋
Negotiate Discounted Settlements If cash is insufficient, propose good-faith settlements at 70-90% with structured payment terms. Document that this is arm's-length negotiation, not preferential treatment.
🏛️
Consider Formal Bankruptcy If debts significantly exceed assets and secured lender is demanding all proceeds, Chapter 11 or Chapter 7 may be more orderly than informal wind-down and protects principals from personal liability.
🚫 What NOT to Do
  • Don't hide behind "secured lender" without documentation: Vendors will challenge this, and failure to substantiate creates bad faith appearance.
  • Don't prefer some vendors over others: Paying friendly vendors while ignoring others can be fraudulent transfer in bankruptcy.
  • Don't distribute assets to principals: Dividends, bonuses, or asset transfers to owners during insolvency are clawback targets.
  • Don't ignore demand letters: Silence accelerates litigation and regulatory complaints.
  • Don't make false statements about financial status: Fraud during wind-down pierces corporate veil.
💡 Orderly Wind-Down Best Practices

If you're genuinely insolvent but not filing bankruptcy, communicate transparently:

  • Send written notice to all vendors explaining the situation honestly
  • Provide timeline for asset distribution
  • Offer pro-rata settlements if full payment is impossible
  • Document that you're treating all creditors fairly and equally
  • Consult insolvency counsel before making any distributions
📋 Evidence Checklist for MSP Receivables Claims
For Healthcare Staffing Vendors (Claimants)
📄
Vendor/Supplier Agreement with MSP Your master services agreement, including payment terms, non-circumvention clauses, and any provisions about secured interests or subordination.
📋
Purchase Orders & Work Confirmations All POs, staffing requests, and confirmations for each placement or shift worked.
🧾
Invoices with Facility Details Complete invoice history showing facility names, service dates, staff provided, and amounts billed.
✅
Proof of Services Rendered Timesheets signed by facility supervisors, badge-in/badge-out records, facility verification emails, credentialing documentation.
💰
MSP Payment History All prior payments received from MSP, showing payment patterns and establishing the relationship.
📧
Communications About Payment Delays All emails, letters, or calls where MSP discussed payment timing, secured lender issues, or wind-down plans.
📜
Wind-Down or Secured Lender Notices The formal communication from MSP about cessation of operations or secured creditor claims.
🛡️
Trade Credit Insurance Policy Your policy documents, coverage limits, notice requirements, and any communications with your insurer about this claim.
💳
Factoring Agreement If you factor receivables, your agreement with the factor showing their rights and any recourse provisions.
🔍
UCC Search Results Run a UCC search on the MSP to identify all secured creditors and their filing dates—this establishes priority.
For MSPs (Respondents)
🏦
Credit Facility Documents Loan agreements, security agreements, and UCC-1 filings showing what assets are pledged to secured lenders.
📊
Accounts Receivable Aging Current AR aging report showing what facilities owe you and collection status.
📋
Vendor Invoice Verification Documentation confirming or disputing that services were rendered as invoiced.
⚖️
Lender Communications Correspondence with your secured lender about vendor payment authority and wind-down procedures.
💰 Recovery Dynamics in MSP Wind-Down Situations

Healthcare staffing MSP receivables recovery depends heavily on timing, coordination, and whether formal bankruptcy is filed. Here's what to expect:

📊 Typical Recovery Scenarios
Scenario Typical Recovery Timeline
Wind-down with assets
MSP has receivables from facilities; lender allows ordinary course payments		 70-95% 30-90 days
Secured lender sweeping all proceeds
Bank takes all incoming facility payments		 20-50% 90-180 days (negotiation with lender)
Chapter 11 bankruptcy
Orderly reorganization or sale		 40-70% of claim value 6-18 months
Chapter 7 liquidation
Assets sold, proceeds distributed by priority		 10-40% 12-24 months
Trade credit insurance claim
If you have coverage and complied with policy terms		 80-95% of covered amount 60-120 days from claim filing
Creditor Priority in MSP Wind-Down
📋 Typical Payment Priority Order
  1. Secured creditors (banks, lenders with UCC filings) — paid first from pledged assets
  2. Administrative claims (wind-down professionals, lawyers, accountants)
  3. Priority unsecured (employee wages up to $15,150, certain taxes)
  4. General unsecured creditors (this is typically where you fall as a vendor)
  5. Equity holders (shareholders get nothing unless all creditors paid in full)

Your strategy: Act quickly to either (1) get paid before formal bankruptcy is filed, (2) secure an assignment of specific receivables, or (3) leverage trade credit insurance.

Leverage Points for Vendors
⏰
Speed Vendors who demand payment immediately often recover more than those who wait. Send your demand letter within 48 hours of wind-down notice.
🤝
Facility Relationships If you have strong relationships with the facilities you staffed, you may be able to negotiate direct payment arrangements (with proper releases).
🛡️
Trade Credit Insurance If you have coverage, your insurer becomes a powerful ally. They have resources and expertise to maximize recovery.
📢
Regulatory Complaints Healthcare staffing is regulated. Complaints to state staffing licensing boards or DOL can create pressure.
⚖️
Personal Liability Threats If MSP principals are engaging in fraudulent transfers or preferential payments, they may have personal liability—significant leverage.
⚠️ Don't Accept Lowball Settlements Without Analysis

MSPs in wind-down often offer 50-60 cents on the dollar to "close things out quickly." Before accepting:

  • Verify the MSP's actual financial position
  • Check what assets exist and who else is claiming them
  • Confirm with your trade credit insurer (they may require you to reject discounts below a threshold)
  • Get factor approval if you've sold receivables
  • Consider whether litigation or waiting for bankruptcy distribution might yield more
✍️ Healthcare Staffing MSP Demand Letter Snippets
Opening – Relationship Summary
This letter constitutes formal demand for immediate payment of $[AMOUNT] owed to [YOUR COMPANY] for healthcare staffing services provided under our Vendor Services Agreement dated [DATE]. Since [START DATE], we have provided qualified nursing and clinical staff to the following facilities through your MSP program: • [FACILITY 1] - [CITY, STATE] • [FACILITY 2] - [CITY, STATE] • [Additional facilities as applicable] All services were performed in accordance with our agreement, staff were properly credentialed, and facilities accepted our services without objection.
Challenging "Secured Lender" Defense
Your letter of [DATE] states that [MSP NAME]'s receivables are "pledged to a secured lender" and that you therefore cannot pay vendors at this time. This position is legally insufficient for the following reasons: 1. A security interest in your receivables does not eliminate your contractual obligation to pay us for services already rendered. 2. Your obligation to [YOUR COMPANY] arose when we provided staffing services and you accepted them—not when you collect from facilities. 3. We have not subordinated our claims to any secured creditor, and our Vendor Agreement contains no such subordination language. 4. If you intend to rely on a secured creditor defense, please provide within five (5) business days: (a) A copy of the relevant security agreement (b) The secured lender's name and contact information (c) UCC filing references (d) Proof that our specific invoices are covered by the security interest Absent this documentation, we will proceed on the assumption that the "secured lender" claim is a delay tactic.
Trade Credit Insurance Notice
Please be advised that [YOUR COMPANY] maintains trade credit insurance through [INSURER NAME] for receivables from MSP partners. We have notified our insurer of your payment default and are preserving all rights under our policy. Any settlement of this claim will require coordination with our insurer. We are not authorized to accept discounted settlements without insurer approval. Your prompt payment in full is the most efficient resolution for all parties.
Factoring Coordination Notice
Certain receivables from [MSP NAME] have been factored through [FACTOR NAME]. As such: 1. [FACTOR NAME] has a security interest in these receivables and may have independent collection rights. 2. Any payment or settlement must be coordinated with [FACTOR NAME]. 3. We are working jointly with our factor to recover all amounts due. Please direct all payment and settlement discussions to [YOUR COMPANY] and [FACTOR NAME] jointly.
Facility Direct Payment Request (If Contract Permits)
Given [MSP NAME]'s announced wind-down and stated inability to pay vendors, we request that you assign to [YOUR COMPANY] your receivables from the following facilities for which we provided staffing: • [FACILITY 1]: $[AMOUNT] outstanding • [FACILITY 2]: $[AMOUNT] outstanding Upon assignment, we will collect directly from facilities and provide appropriate releases to [MSP NAME]. Alternatively, if you are willing to authorize direct payment arrangements with facilities, please provide written consent so we can coordinate with facility accounts payable departments. This approach ensures vendors are paid for services rendered without requiring [MSP NAME] to divert cash that may be subject to secured creditor claims.
Closing Demand with Deadline
DEMAND: [YOUR COMPANY] demands payment of $[AMOUNT] no later than [DATE] (ten business days from this letter). If payment is not received by that date, we will: 1. File suit in [JURISDICTION] for breach of contract and account stated 2. Seek prejudgment attachment of [MSP NAME] assets, including facility receivables 3. Notify our trade credit insurer and pursue policy claims 4. Report this matter to [RELEVANT REGULATORY BODY] 5. File proof of claim in any bankruptcy proceeding Time is of the essence. Please confirm receipt of this letter and your payment intentions within 48 hours. [SIGNATURE BLOCK]
⚖️ How I Handle Healthcare Staffing MSP Receivables

I represent healthcare staffing companies facing MSP payment disputes and wind-down situations. These matters are time-sensitive and require coordinated strategy with insurers, factors, and (sometimes) facilities.

For Healthcare Staffing Vendors

Immediate Assessment: I review your vendor agreement, MSP communications, and the wind-down notice to determine your rights and the most effective collection strategy.

Demand Letter Strategy: I draft a comprehensive demand that challenges secured lender defenses, preserves insurance claims, and creates maximum pressure for immediate payment.

Coordination: I work with your trade credit insurer and factor (if applicable) to ensure collection efforts are aligned and don't jeopardize coverage.

Litigation & Liens: If demand fails, I file suit quickly, seek prejudgment remedies, and pursue UCC liens to protect your position before assets disappear.

For MSPs in Wind-Down

Liability Assessment: I help you understand your obligations to vendors, secured creditors, and principals—and identify strategies to minimize personal liability.

Orderly Dissolution: I advise on proper wind-down procedures that treat creditors fairly and reduce fraudulent transfer exposure.

Vendor Negotiations: I negotiate settlements with vendors that are defensible if bankruptcy follows.

MSP Receivables Consultation

Whether you're a healthcare staffing vendor trying to recover from an MSP wind-down, or an MSP navigating vendor claims, I can help you understand your options and take effective action.

Use the Calendly link below or email me directly at owner@terms.law.

Schedule Strategy Call
Book a Consultation
Frequently Asked Questions

No—the secured lender's priority affects who gets paid first if the MSP goes bankrupt, but it doesn't eliminate the MSP's debt to you. The MSP owes you for services rendered, period. Challenge this defense aggressively and demand documentation of the security interest.

Generally no, unless your contract explicitly permits it. Most vendor agreements include non-circumvention clauses. However, you may be able to negotiate receivable assignments or tri-party payment arrangements. Have an attorney review your contract before any facility contact.

Wind-down is informal dissolution—you can pursue normal collection remedies immediately. Bankruptcy triggers an automatic stay and claims go through court process. Wind-downs are actually better for vendors because you can act quickly before assets disappear.

Notify them immediately—most policies require prompt notice of defaults. Provide all invoices and MSP communications. Coordinate demand strategy with them, and don't settle claims without insurer approval (it may void coverage).

Demand letter: $450 flat fee. Hourly rate: $240/hr for extended negotiation and litigation. Contingency: 25-33% for larger claims where appropriate. Given the time-sensitivity of MSP wind-downs, early attorney involvement often significantly increases recovery.