Hello all - hope all is well as we get into Q2! Q1 is in the books and what remains to knock down for the rest of the year is in clearer view. Lots to get done before the summer.
Meanwhile for those investors tuning in here - especially those looking to bring companies public - the IPO market showed flickering signs of life in Q1. According to EY's summary of 1Q 2024 IPO activity, "The median deal size of PE-backed IPOs in Q1 2024 surpassed those listed in Q1 2023 by 26%. Meanwhile, the median post-IPO valuation for PE-backed IPOs outpaced the valuations of both VC-backed and non-financial-backed IPOs by a substantial 2.5 times and a staggering 31 times, respectively. This outperformance, coupled with a projected rise of IPO exit activity by PE firms, indicates that the momentum for PE firms to capitalize on the IPO market is rapidly gaining traction in the early months of 2024." Let's hope this momentum builds.
This issue covers news on some new entrants and transactions, data on growth of digital wallets in healthcare, and Mastercard's new healthcare benefit for cardholders. As always, reach us at info@finmedpartners.com with any topics or questions you'd like us to cover.
PAYMENT NETWORKS
Mastercard rolls out new healthcare benefit to all cardholders
We had heard of HealthLock before from contacts at Mastercard. Mastercard was in an early partnership with HealthLock. It sounded like a useful service, basically helping patients who are cardholders look for errors on medical bills, and recover overcharges. However it was in pilot mode and not available to most cardholders.
We just learned that Mastercard has now expanded access to all cardholders. Mastercard is positioning HealthLock as a benefit for both issuers and consumers.
HealthLock synchronizes healthcare claim data between cardholders’ insurance providers. The HealthLock technology reviews medical claims and flags potential issues like overbilling and fraud, and privacy intrusions. If overcharges are found, HealthLock helps consumers get their money back. Cardholders can organize and track healthcare claims, providers, and other information in one place.
Mastercard's HealthLock partnership is an excellent example of how large non-vertically focused players - banks, payment networks, processors and others - will eventually find opportunities to play directly in healthcare. With patients spending upwards of $750 billion on non-group insurance premiums and out of pocket costs each year, healthcare is simply too big to ignore.
Synchrony Financial, owner of the CareCredit private label card, has been looking to add an installment loan product to diversify consumer financing options beyond revolving credit cards. To augment internal product development, in 2021 Synchrony acquired Allegro Credit to introduce an installment loan option within markets served by its Health & Wellness business (Vet, Dental, Cosmetic, Optical, Audiology and medical specialties).
In Q1 2024, Synchrony further bolstered its installment loan business by acquiring Ally's point of sale financing business. The deal included $2.2 billion of loan receivables. Synchrony inherited relationships with 2,500 merchant locations and 450,000 active borrowers. While the healthcare portfolio was smaller than home improvement services, Synchrony added cosmetic, audiology, dentistry and IVF locations from the former Health Credit Services which Ally acquired in 2019.
Sunbit moving more aggressively into dental market
Speaking of dental financing, there's a significant new competitor looming on the horizon for Synchrony/ CareCredit. Sunbit, known as a BNPL lender, has also launched the Sunbit Card that has gained 110,000 customers who charged $340 million in 12 months. Sunbit announced a $310 million debt warehouse facility from Citi and Ares Management Corp. in January 2024. It will use these funds to expand the footprint of the Sunbit Card and continue pushing into the dental market. Sunbit touts a very high approval rate (85-90%) and a streamlined 30 second digital application process that avoids a hard credit check.
Beanstalk Benefits recently emerged from Redesign Health's incubator with $7.5 million of initial funding. The company describes itself as "the first benefits platform to give individual employees the access and control to build their own portfolios of 'everyday' benefits". These cover a variety of needs including mind, body, lifestyle, family and money. Fierce Healthcare listed some of the current benefit offerings as BeME for teen well-being, Upswing Health’s on-demand joint and muscle pain services, parenting resource Vitalxchange and sobriety app and community Sober Sidekick. According to Beanstalk's website, "Todays' diverse workforces demand a new approach. We built Beanstalk so employers can offer many more benefits options to address a greater variety of needs, and so employees can find and use the ones that fit them best." Congrats to CEO Matthew Sydney and his team on the launch!
Healthcare lags other industries but seeing early adoption
Source: TrustCommerce. Data represents digital wallet authorizations as percent of all authorizations on TrustCommerce platform.
Healthcare is notorious for lagging behind other industries in adopting new technologies. Digital wallets and BNPL are no exception. However, usage of these and other newer payment approaches will grow as patients expect healthcare payments to be similar to what they experience in other retail settings.
Data from TrustCommerce, a leading healthcare gateway and merchant processing provider in healthcare, shows the growth of digital wallets. TrustCommerce’s platform saw 8x more Apple Pay authorizations in December 2023 than in January 2023. This is being driven by availability of ApplePay beginning in 2022 (e.g., in Epic MyChart), providers beginning to implement the digital wallet option, and more consumers choosing it.
A recent report from Worldpay indicates that digital wallets already dominate e-commerce transactions across all industries, and that digital wallet use in the U.S. is projected to exceed debit cards in transaction value for in-store payments by 2027. Of course credit and debit cards are still involved in the transactions, since they are stored in the digital wallet, but this speaks to the shift that is occurring in consumer use of the smartphone to make payments.
J.P. Morgan vertical strategy has targeted healthcare
Payments Dive recently had an interesting take on J.P. Morgan's approach to building verticals in embedded payments, including healthcare. According to Lia Cao, J.P. Morgan's first ever head of Embedded Finance and Solutions, “The technology, and also the consumer demand, really dramatically changed or heightened the expectation that experiences need to be smooth and frictionless and within the ecosystem." J.P. Morgan made an early move in the healthcare vertical with the acquisition of InstaMed in 2019. InstaMed was apparently added based on customer demand for support in moving away from paper-based systems.
Speaking of InstaMed, the annual study formerly known as the "InstaMed Trends in Healthcare Payments Report" has now been rebranded as the "Trends in Healthcare Payments Report from J.P. Morgan Healthcare Payments". It remains to be seen whether J.P. Morgan is sunsetting the InstaMed brand, or rather simply expanding the prominence of the J.P. Morgan Payments brand. We suspect it is the latter, since InstaMed continues to have a strong brand identity and positioning within healthcare. J.P. Morgan has also kept the Chase Paymentech brand years after it dissolved the First Data joint venture and despite also having Chase Merchant Services.
One data point in particular caught our attention in the Trends in Healthcare Payments report. 38% of consumers said if given a choice they would like to pay medical bills online through their provider's website. However 31% said they would prefer to pay through their health plan website (19%) or bank website (12%). The health plan number is very interesting, since despite clear consumer preference - expressed in the new report and in our own research - payers have shown zero interest in giving patients a place to pay their out of pocket balances.
Ambar Bhattacharyya, Managing Director at Maverick Ventures, just published a "granular breakdown and analysis of where generative AI is starting to change care today, and predictions for where it will be changed next". The report is super detailed, and both diagnostic and predictive.
He and his contributors (Nicholas Chedid, M.D. and Justin Norden, MD, MBA, MPhil) developed two dimensions to plot the various areas of Gen AI development:
Technology - simplicity vs. complexity
Stage - visionary vs. signs of early adoption
Of the areas they defined, three cut directly across healthcare payments: Revenue Cycle Operations, Coding and Contact Center. (Many others will touch on payments via operational enhancements e.g., Robotics/ Automation, Decision Support and AI-Enabled Services).
Revenue Cycle Operations and Coding are both lit up Green for a "High" level of Current Generative AI Venture Investment and Customer Spend. Well worth a read.
FinMed Partners is a management consulting and advisory business focusing at the intersection of payments/ fintech and healthcare. Our founders have developed deep expertise from decades of experience with health IT companies, healthcare providers and many players within the payments ecosystem. Investors, boards and executive teams work with us to maximize business value through strategic input and tactical execution.
FinMed Partners, an affiliate of PayGility Advisors, 100 Theodore Fremd Ave., #b1c, Rye, NY 10580-2875, United States