where HEALTHCARE meets FINTECH
because health is priceless until we have to pay for it
JULY 2022
by Himanshu Sharma
Not just clinical workflows are being tested nowadays — the way money moves in our healthcare industry is also evolving. There has been a shift in dynamics between patients, payers, and providers. Understanding payments and related electronic health records is becoming paramount for healthcare players in today’s data-driven world.
We wanted to share with you four trends that we are watching closely. The first three are intertwined — a drop in one will inevitably cause some ripples in the other two; investing in these trends is extremely timely. The fourth one is intriguing and binds our interest and enthusiasm here at Nina Capital in a very unique way; investing in this trend is high on our priority list.
trend #1
- the inconvenience of payments is moving from providers to patients because of the rise of high deductible health plans;
- need: providers want to shift to new billing and engagement models in order to reduce payment friction for patients.
trend # 2
- pricing is a black box as each provider sets their own prices due to autonomy, negotiating power, and competition, exacerbating pricing disparity.
- need: patients are demanding price transparency in order to inform their decision-making.
trends #3
- income divide and rise in healthcare costs have increased the inequality of access to healthcare
- need: patients need financing solutions in order to access healthcare services.
trend #4
- clinical trials are becoming getting more complex: decentralized, distributed, adaptive.
- need: trial sponsors are looking for new ways to increase operational efficiencies, financial compliance, and collaborative decision-making in this new reality.
A common theme orthogonal to these trends is the centrality of data. Data has become crucial to understand patients’ payment data along with the EHR data to have a longitudinal view of the patient.
We are trying to map out the healthcare and fintech space as we see it. With our core thesis on need-driven innovation and our focus on technology and data, we are zeroing in on the areas of need that are fueled by these trends.
need area #1: tackling the inconvenience of payments (ideally frictionless)
As more healthcare transactions move to the private sector, healthcare payments will start to play a more important role in the near future.
The existing medical billing system just isn’t working–for anyone. Paying medical bills is time-consuming, poorly incentivized, and rarely tailored to each patient’s situation
Yet, the market still lacks scalable and patient-centric solutions for saving, financing, and paying. The market opportunity isn’t lost on investors and industry players, as seen in the entry of giants like JPMorgan with its more than $500 million acquisition of InstaMed, a legacy payment platform, in 2018. Other recent healthcare payments exits include Global Payments’ $700 million acquisition of AdvancedMD in 2018, UnitedHealth’s $3.2 billion acquisition of Equian in 2019, and Change Healthcare’s $888 million IPO in 2018.
Hi.Health
- Hi.health has developed a user-centric platform to accelerate and smooth reimbursement and payment processes for patients. The hi.health platform can be subdivided into two products, one dedicated to integrating reimbursement and online payments for merchants and the other for clearinghouses and some stationary merchants like clinics. Overall, it works as a middleman that integrates different private insurance companies under the same umbrella and allows patients to seamlessly submit their medical claims.
Cedar
- Cedar provides cloud-based payment solutions for the healthcare industry. It provides patient-oriented billing solutions for practices and hospitals to start billing patients and processing electronic payments. It also offers analytics solutions to provide insights and enable healthcare providers to optimize revenue cycle operations. It uses a cloud-based billing platform that enables patients to easily resolve common billing issues. Cedar was founded in 2016 and has raised $620M in venture capital funding since then.
Payground
- PayGround makes paying and tracking bills online painless. Their web-based system lets users use one login to access multiple profiles and providers for their entire family. Sparing users from having to deal with numerous accounts with various providers, making payments by mail, or paying by phone. PayGround is an Arizona-based startup that has so far raised $4M in funding since its inception in 2018.
need area #2: giving patients the information to make decisions
Healthcare pricing has long been a black box. Patients do not know how much they need to pay for the care until they receive the actual bill and there is no way for them to ensure this is the best price they could get in the area. Some facts that highlight this issue are below
- 85% of US adults said they hadn’t researched the price of hospital treatment before receiving it, per a 2021 Peterson-KFF Health System Tracker brief.
- 42% of consumers want to see increased transparency around expected out-of-pocket costs, per Cedar’s 2021 Healthcare Consumer study.
- access to transparent pricing also improves access to healthcare: 59% of patients said they avoided doctor visits during the pandemic to dodge surprise medical bills, per a 2021 OnePoll-Bend Financial survey.
Hospital Price Transparency rule, enforced in January 2021 mandates healthcare providers to disclose the rates for all the services that they negotiated with insurers.
Turqouise Health
- Turquoise Health’s platform lets consumers compare costs of care and insurance rates to help them shop around for the most affordable healthcare services in their area. To help patients know prices up front, Turquoise Health has curated over 175 million records of previously unavailable healthcare rates. The Turquoise website gives consumers free access to explore hospital pricing and understand medical costs, according to the company.
Trusty.care
- Trusty.care taps into rich data the government makes available and feeds it into their AI-driven system to create a “diagnostic” tool for users. The platform helps users maximize the financial benefits available to them while taking into consideration their individual health needs. Think TurboTax for choosing government-sponsored health insurance. Within six weeks of launching the platform, the company had 15,000 intents to purchase.
need area #3: affordability and improved access
Healthcare payments are the largest financial burden Americans face today. Each year, US households now directly spend more money on healthcare than for any other single expense, including mortgages.
It’s a lose-lose system and a much bigger problem than most realize. One in six Americans have past-due medical bills on their credit report, a debt totaling $81 billion.
Payers have been shifting the responsibility to providers and patients for collections and providers need to optimize for patient responsibility collections.
- total revenue attributable to patient balances after insurance rose 88 percent from 2012 to 2017.
- 87 percent of providers reported relying on manual and paper-based transactions to collect patient financial responsibility.
- a 2018 report showed nearly three in ten insured Americans had unpaid medical debt sent to a collections agency. The survey found that of those, 24 percent didn’t realize the bill was owed and 13 percent said they never received the bill in the first place.
Walnut
- Walnut uses a “buy now, pay later” model, popularized by Affirm and Klarna, to help patients pay for healthcare over a period of time. Walnut works with healthcare providers so that a patient’s bill can be paid back through $100-a-month increments for 30 months, instead of one aggressive credit card swipe. The company uses “extensive underwriting models” to figure out if a patient should qualify for a loan. The startup goes beyond using credit score, which he describes as an “outdated metric”, and instead looks at thousands of data points from different providers, from side hustle income to spending habits on things like groceries and bills. If a provider’s collection rate for an out-of-pocket is 50%, Walnut would go to them and say “give us a 40% discount, and we’ll guarantee the cash for you upfront.” The startup will take the risk, and then the provider is able to make 60% of the collection rate. Now, ideally, a provider would want to get 100% of the payments they are owed, but that is wishful thinking. A large number of bills go unpaid due to bankruptcies or a default on payments (the average collections rate for hospitals out of pocket is less than 20%). Because of this, a company like Walnut has room to offer at least some stable upfront cash to hospitals, even if it ends up being 60% of overall bills versus 100%.
Payzen
- Payzen is essentially building affirm for healthcare. All patients can conveniently pay their bills over time without interest while providers collect more, accelerate cash collection, and reduce administrative complexity. Payzen uses data and AI to create personalized payment options affordable for families. They also offer a frictionless and streamlined integration with hospital RCM’s making it easier for both patients and providers
Peachy Pay
- Peachy takes the headache out of bill payment for patients while helping healthcare professionals get paid faster. Peachy believes that paying medical bills should be frictionless, so Peachy utilizes SMS & email to escape the junk mail-filled physical mailbox and enter the constantly monitored digital inboxes. Peachy makes healthcare accessible by providing a happy medium between payment-in-full and non-payment. Peachy’s flexible, payment-plan-enabled collection process builds goodwill between providers and patients. Peachy Pay Later combines Peachy Pay’s easy-to-use payment experience with short-term, interest-free financing in just a few extra clicks — and without a credit check — making healthcare more accessible than ever.
need area #4: financing clinical trials
Clinical Trials (CTs) are becoming more complex as we are moving trials away from traditional sites to homes. They are also becoming very dynamic as adaptive trials are becoming the new norm. Clinical Trial Financial Management is an issue that still exists today and is exacerbated as trials are becoming more complex. There is a need for an end-to-end solution that manages everything from budgets, and site payments, to patient payments. With the data explosion, solutions need to offer operational efficiencies, financial compliance, and collaborative data-driven decision-making.
With data coming from many sources, and most financial compliance tasks managed manually through excel spreadsheets and access databases, it is easy for mistakes to happen and to be exposed to compliance risks. By unifying the data collected from many sources, then using automated workflows, calculations, and real-time reporting, solutions must enable Sponsors, Sites, and CROs to not only increase operational efficiencies but also meet regulatory and accounting standards for increased compliance.
There are some bespoke solutions and internal teams at hospitals and sponsors that are manually working on these problems but we believe there is a need for an integrated solution focusing on supporting small to big clinical trials with increasing complexities.
Greenphire
- Greenphire is the leading provider of global financial lifecycle management solutions for clinical trials, delivering the most complete data and workflow automation from budgeting through analysis to drive unprecedented business insight and smarter trials. Greenphire was acquired by Thoma Bravo for $1.1B in July 2021.
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If you are a founder working on building something that alleviates any of these pain points please reach out to us at Nina Capital. We are looking forward to meeting you.
Himanshu
