FDIC only covers $250,000, but most practices hold far more. Here's how to calculate your uninsured exposure and extend FDIC coverage to $10M per entity.
Practices often hold cash far beyond FDIC limits: risk hidden until a crisis hits. This guide explains coverage gaps and shows how to extend protection from $250K to $10M+.
Most medical and dental practices hold more operating cash than the FDIC standardly insures. That gap is usually invisible until a bank stress event. SVB in 2023 was the big one, and smaller regional stress events happen regularly. This guide walks through exactly how FDIC coverage works for a healthcare practice, why the standard $250,000 limit almost certainly doesn't cover your operating cash, how to calculate the exposure in about 30 seconds, and the two compliant paths that take coverage to $10M per entity and beyond.
The short version: FDIC insures $250,000 per depositor, per insured bank, per ownership category. Sweep networks and specialty banking products can lift that ceiling (opens in a new tab), but you have to set them up deliberately.
The Federal Deposit Insurance Corporation (FDIC) insures deposits at member banks up to $250,000 per depositor, per bank, per ownership category. Three things matter in that definition:
If your PC holds $300,000 at one bank in a single operating account, $250,000 is insured and $50,000 is not. If the bank fails, that uninsured amount is a general claim on the bank's assets, eventually recoverable in most cases, but not immediately.
Most independent medical and dental practices carry $200,000 to $5,000,000+ in operating cash, depending on size and specialty. Quick benchmarks:
| Practice Profile | Typical Operating Cash | Coverage Gap at Standard FDIC |
|---|---|---|
| Solo dental practice | $150K-$400K | Partial gap |
| Small medical group (3-5 chairs) | $300K-$1.2M | Meaningful gap |
| Multi-location group / DSO | $1M-$5M+ | Majority of cash uninsured |
| MSO-PC with 5+ PCs | $2M-$10M+ | Almost entirely uninsured at one bank |
For any practice past the solo stage, the $250K limit covers a sliver of operating cash. Historically, many practice owners accepted the gap because bank failures felt abstract. 2023 made the risk concrete.
Before choosing a fix, get the number. This takes 30 seconds:
Two details trip people up. The limit applies per entity per bank, not per account, so five accounts at one bank under one PC still share a single $250,000 cap. And the limit applies per ownership category, so an operating account and a trust account at the same bank are counted separately.
Whatever number comes out of that arithmetic is the amount frozen in a bank stress event. Most practices are surprised by it, because the exposure usually sits in balances nobody thinks of as risky:
None of those are reckless. They are all standard. They are also all uninsured above $250,000.
There are exactly two durable ways past $250,000. Most multi-location practices end up using both.
A sweep network splits your deposit into slices under $250,000 and places each slice at a different FDIC-member bank. Every slice stays insured, and you keep one balance, one statement, and one login.
This is the faster fix. Ask whether your bank offers IntraFi Cash Service or an equivalent. Plenty of generalist banks support one but never advertise it, so ask explicitly before concluding you have to switch banks.
Each legal entity is a separate depositor with its own ceiling, so coverage stacks:
Stacking is not a reason to create entities you don't otherwise need. It's a side effect of the MSO-PC structure you already have, and once a sweep is in place the extra coverage is free.
Everything outside these two paths is a workaround. Splitting balances manually across 40 banks technically works and is an operational nightmare. Opening more accounts at the same bank does nothing at all.
What a sweep network actually is (opens in a new tab) (also called a deposit placement network or reciprocal deposit program) comes down to solving the FDIC gap by spreading a single account balance across many FDIC-member banks behind the scenes. From the practice's view, it's one account at one bank with one statement. Under the hood, funds are distributed across dozens of FDIC-member banks so that each bank holds less than $250,000 per depositor.
The two major programs:
Sweep network coverage is operationally identical to standard FDIC coverage. Payments clear, ACH works, the ledger looks normal. The only difference is that the ceiling moves dramatically.
When a practice holds, say, $3M in an account at an IntraFi-enabled bank, ICS automatically distributes that $3M across 12+ participating FDIC-member banks, each holding under $250,000. If any one of those banks fails, FDIC pays out the standard $250,000 to that practice from that bank, and the other deposits are unaffected.
Importantly, the practice never interacts with the underlying banks. All activity happens through the primary banking relationship. Statements, tax documents, and reconciliation all look as if the funds sit in one place.
MSO-PC groups get a structural advantage: each entity (the MSO and each PC) is a separate depositor. That means a 5-PC group plus an MSO has 6 separate $250K base limits at a single bank, which is $1.5M of coverage without any sweep mechanism. Layer an IntraFi sweep on top and each entity can carry $10M in insured cash, for a theoretical $60M ceiling across the structure.
The practical upshot is that a group with 5 PCs plus an MSO can design treasury so all operating cash stays insured with no ongoing effort. The bank handles the sweep mechanics and the CFO sees consolidated cash positions on a single dashboard. That's the difference between knowing your cash is safe and guessing. For practices scaling through acquisition or opening new locations, designing the treasury stack around coverage from day one is dramatically easier than retrofitting it later.
This is one of several ways MSO-PC structures naturally favor purpose-built MSO-PC banking (opens in a new tab). Generalist banks can replicate the entity structure but rarely coordinate sweep coverage cleanly across related entities.
Most groups don't think about coverage until a balance spikes:
Coverage is straightforward to arrange before one of these and stressful to arrange during. If any of them are on the calendar, set it up first.
Ask for the answers in writing. A bank that can't put them in an email isn't a bank to leave $10M with. Practices carrying more than $400K in operating cash should have these answers on file, ideally documented alongside the account opening paperwork.
Most practices find that closing the coverage gap is a 1-2 hour project if the bank offers sweep networks natively, or a multi-week project if they have to restructure accounts. Lemma's sweep coverage runs up to $10M per entity and is automatic from account opening, with no separate setup and no manual allocation.
Healthcare practices operate on margins that can't absorb a sudden loss of working capital. A 60-day freeze on uninsured deposits during a bank resolution, which is the typical timeline for recovering them, is enough to cripple payroll, vendor payments, and day-to-day operations for most mid-size groups. Extended FDIC coverage isn't paranoia; it's the cheapest insurance a practice can carry.
Understanding the mechanics of bank failure helps clarify why FDIC coverage matters even during stable periods. The FDIC typically resolves a failing bank over a weekend: deposits are transferred to an acquiring bank, and customers generally have access to their full balance Monday morning, up to the insured limit. Uninsured deposits are different. They're frozen during resolution and eventually paid out as a pro-rata share of the failed bank's liquidation proceeds, which can take months and often recovers 80-95 cents on the dollar.
For a practice, any delay in accessing cash is operationally catastrophic. Payroll runs, rent is due, vendors expect payment, and payers still deposit, but you can't move the money. Sweep networks solve exactly this problem by keeping every dollar inside the insured ceiling.
Lemma operates in partnership with an FDIC-member bank. Every dollar deposited into a Lemma account is eligible for standard FDIC coverage at the partner bank, and IntraFi sweep extends that to $10M per entity automatically. There's no separate sign-up for coverage, no manual allocation between accounts, and no difference in day-to-day operations. The practice sees one account and one balance; coverage handles itself in the background.
The partnership model matters. It lets Lemma layer healthcare-native features (AI-powered lockbox, automated 835 matching, MSO-PC onboarding, virtual accounts) on top of a regulated, FDIC-insured banking foundation. Practices get specialty functionality and deposit safety in the same account.
What Lemma doesn't do is restructure your accounts for you, run payer EFT enrollment with your insurers, or replace your CPA's treasury policy. It provides the infrastructure and gets out of the way.
One reason practices skip sweep programs is an assumption that they're expensive. They typically aren't. At Lemma, sweep coverage is included at no additional cost on every account. At other banks, sweep can cost 10-25 basis points against the deposit balance, or in some cases be tied to maintaining a minimum primary deposit. For a practice holding $2M in operating cash, even a 20bp sweep fee costs $4,000/year, still a tiny insurance premium relative to the risk of a 60-day cash freeze during a bank resolution.
The economics tip further when you factor in APY. Many sweep programs pay a competitive interest rate on the swept portion. Lemma pays 1.75% APY across the full balance, in line with what a medical practice should expect to earn on operating cash in 2026 (opens in a new tab), which on $2M is $35,000/year in yield. That dwarfs any reasonable sweep fee and turns the FDIC gap into a source of working capital efficiency rather than a risk.