Hello all - welcome back from backyard BBQs, boats, beaches, beverages, and whatever else your 4th of July involved. We were fortunate to have a nice break - hope you all did too.
Since summer is the time for catching up on reading, and some of you are newer to our newsletter, you can use this link to find past issues.
Some of you have teased us about the anonymity of the FinMed Partners team. We appreciate the good natured ribbing and fear not - we'll be revealing our team shortly! Stay tuned for more in an August/ September issue, and check in to our website for bios coming soon. In the meantime if you'd like to meet us, click here to arrange time.
In this issue we give you access to some healthcare payments resources we've been developing, look at new entrants, dig into how payers have entered the patient collections game, bring you our latest CEO Chat, cover trends in employer assistance to patients, AI in healthcare and more. Thanks for coming along!
RESOURCES
Healthcare Payments Deal Tracker and Conference Schedule
FinMed Partners is compiling a list of healthcare payments-related deals as we find them, starting in November 2023. This will include larger companies that do a lot of business within healthcare (e.g., Worldpay, recently separated from FIS), diversified companies with rev cycle operations (e.g., 16% of 3M spinoff Solventum's revenue is from health IT), M&A (e.g., Med-Metrix's recent purchase of HBCS), and many capital raises by private companies.
Click here to tell us about transactions we missed.
Source: FinMed Partners
We're also keeping an updated list of healthcare payments-related conferences. This looks out twelve months, and is updated monthly. We have made the list easy to access and download.
The patient payments company formerly known as Walnut has rebranded and relaunched as Arrow. The Arrow press release caught our attention since it mentioned a $110 million Series A, which - while it is true that healthcare payments companies are raising money today - seemed extra impressive for a Series A, especially in the current environment. So we did a little digging and found that Arrow has emerged from what was Walnut. We knew Walnut as a newcomer to patient collections/ financing a few years back, after emerging from Plaid's start up accelerator focused on BNPL for healthcare.
The new Arrow is launching as enabling "fast and accurate healthcare payments for both healthcare providers and health plans". No mention of patients, just claims acceleration, precision payments, payment integrity, and predictive analytics.
It turns out that the $110 million Series A was raised in 2022 and combined $10 million of equity capital (led by Gradient Ventures) with $100 million in debt financing (led by Clear Haven Capital Management). We'll be watching Arrow's progress (and we didn't include it in our deal tracker since the last financing was two years ago).
Rainforest raises $20 million Series A for embedded payments
Joshua Silver, founder of Patientco (acquired by Waystar in 2021), has just raised another round of funding for his newest company. He founded Rainforest in 2022, bringing along his VP of Payments, VP of Engineering and VP of Finance from Patientco. Rainforest focuses on helping software platforms embed payments into their products. It is a registered PayFac, is targeting software companies processing $50 million - $2 billion in annual payments, and is serving trucking and logistics, specialty retail, and professional services among other verticals in addition to healthcare.
The round was led by Matrix Partners (Matt Brown, Dana Stalder), and included Accel, Infinity Ventures, BoxGroup, The Fintech Fund, Tech Square Ventures, and Ardent Venture Partners.
Inflation Reduction Act turning payers into lenders?
The Inflation Reduction Act passed by Congress in August 2022 contained a little known provision that requires all Medicare prescription drug plans (“Part D sponsors”, including standalone Medicare prescription drug plans, Medicare Advantage and others) to offer their Part D enrollees the option to pay their out-of-pocket (OOP) Part D drug costs through monthly payments over the course of the plan year instead of as an upfront payment at the pharmacy point of sale (POS), starting January 1, 2025.
So the pharmacy receives $0 from the patient for a covered Part D drug. Instead, the Part D sponsor pays the pharmacy, and then bills the patient each month for the patient’s OOP cost sharing/ co-pay. (A drug with a $900 patient cost would be $75/ month instead of $900 cash at POS.)
This is formally called the Maximum Monthly Cap on Cost-Sharing Payments Program, and for short was sometimes called the “OOP Smoothing Program”. In draft guidance issued in August 2023, CMS asked for this to be referred to as the “Medicare Prescription Payment Plan”. Whatever one calls it, there is no question that Part D sponsors (payers) are now essentially in the lending business since they are required to offer patients, upon request, a zero-interest monthly payment plan for any drug whose cost exceeds $600. And then of course they are on the hook to collect those monthly payments - most of which are likely to be from members who would not sign up for the program without the need for financial flexibility! There are many other intricacies to solve for and understand about this new rule, but that's the basic gist (read final Part 1 guidance issued by CMS in February 2024 here).
We are mentioning this because it is creating a new market opportunity for companies that - heretofore - only helped providers collect patient balances. Now, payers will likely be looking for the same help, especially since they have steadfastly steered very clear of collecting any patient OOP balances.
RevSpring is a great example of a company with a new offering. From CEO Scott MacKenzie, announcing that the same capabilities it sells to providers will now be made available to payers:
"We’re delighted that our industry leading engagement and payment solutions can assist Medicare Part D sponsors as they prepare for this new CMS mandated program. We look forward to helping members manage co-pay costs, and ensuring that health plans receive maximum compensation while saving on their member communication and collection expense."
Hospitals, clinics and healthcare organizations have become a preferred hacker target because of the sheer amount of PHI, PII and payment data being processed. Atlanta, GA-based Bluefin is a payments security company founded in 2007 on the core belief that a brand’s value is ultimately tied to its ability to deliver a secure, yet frictionless, customer experience. Click here to read CEO John Perry's commentary on Bluefin's approach to their market and goals for 2024.
EMPLOYER ROLE IN PAYMENTS
As of March 2023, there are 165 million Americans covered by an employer-sponsored group health insurance plan. For a few years now, employers have pretty much tried everything available to help manage their workers' healthcare costs. Mostly, as medical and dental costs have increased steadily, they simply put more of the cost to their employees through high deductible health plans (lower premiums, higher out of pocket, and access to an HSA), and increased premiums and employee co-pays for all types of plans. They have encouraged the use of tax advantaged FSAs and HSAs and contributed additional funds via HRAs.
Employers have tried and often abandoned all sorts of additional programs to encourage healthy living and condition management, including gym memberships, massage therapy, well-being coaches, telehealth offerings, medical apps, and onsite clinics. Political stalemate in Washington makes it unlikely that big changes are coming anytime soon to how we pay for healthcare. While employers are pretty tired of evaluating every new PEPM-type benefit that is pitched to them, they are still looking for ideas, and innovators continue to offer new ways to help employees pay for healthcare and related costs. We thought it might be useful to review some we've come across.
Helping employees optimize their FSA/ HSA benefit
Zenda (acquired by InComm Payments). HSA card designed for all purchases. Determines instantly which items are HSA-eligible, then pays for eligible items from consumer’s HSA account, and the rest from a connected bank account.
Silver. Collects consumer's receipts from online accounts at retailers such as Amazon, Costco, Target and pharmacies. Then it identifies FSA/ HSA-eligible charges, and submits them on consumer's behalf. Charges 4% of claim value.
Binkey. B-B technology to assist consumers in identifying FSA/ HSA-eligible purchases, and process FSA/ HSA payments including split tender or reimburseable credit card. Binkey Rewind analyzes customer’s historical purchases for FIs, automates claim filing, and deposits funds directly into their bank account.
TrueMed. Connects patient with an independent licensed provider to determine whether healthy interventions (e.g., supplements, exercise classes/ equipment, gym memberships) can help prevent or reverse specific ailments for the patient. This can allow the patient to spend or reimburse from their FSA/ HSA.
Expanding the type of benefits offered
care.com. The new Care Spending Account enables employers to make a monthly or annual lump sum contribution to each employee’s care expenses, with flexibility to determine which categories of care are covered (including child care, adult care, pet care, and self-care). Powered by First Dollar.
Offering a better benefits platform
Beanstalk. Brings together suite of high-quality benefits services and solutions that cover Mind, Body, Family, Lifestyle and Money needs. Employees create their own Benefits Portfolios from multiple options within each category.
Helping employees pay for out of pocket costs
Paytient. Employer-sponsored, interest-free line of credit enabling employees to pay the out-of-pocket cost of care for their family and pets. After each transaction, the employee chooses a payment plan to fit their budget.
medZERO. Gives employees on-demand access to funds to pay for out-of-pocket healthcare expenses over time at 0% interest and no fees. HSA users gain access to pre-tax funds, creating savings of up to 30% vs. using after-tax cash.
PayMedix. Employers enroll all employees, who get one simplified bill summarizing all charges, flexible 0% interest payment options for their portion of medical bills, and guaranteed credit up to out of pocket maximum.
AI IN HEALTHCARE PAYMENTS
Denials prediction, prior authorizations, and responsible use
It seems that the revenue cycle back end, that is claim processing and related operations, is seeing the most AI-related activity for now. Solventum (NYSE: SOLV), formerly 3M Health Care, recently announced a payment integrity solution to predict and reduce denials. It is offering the Solventum Revenue Integrity System in collaboration with Sift Healthcare. Read more.
Improving the prior authorization (PA) experience is a slam dunk AI use case, if it works. Waystar (NYSE: WAY), working with Google Cloud, did an experiment to "automate the extraction of prior authorization requirements from complex payer data sets". Waystar says this test "reduced the time to generate an authoritative report of procedural preauthorization by 99.93% while increasing accuracy by 13%." Read more.
Thanks to HISTalk for highlighting the draft framework published by The Coalition for Health AI (CHAI) for "responsible use of AI in healthcare", for which CHAI is soliciting public comments. Republicans in Congress have criticized the involvement of several senior government regulators on the CHAI board, since CHAI includes Google, Microsoft and other major technology companies and health systems that develop AI businesses. This recently caused senior HHS and FDA officials to resign from their non-voting board seats to avoid appearance of conflict of interest. Read more.
Why I Chose to Invest in LoanPro. Why Carl Pascarella, CEO of Visa from 1993 - 2005, thinks that LoanPro's platform is the future of finance. (Fintech Nexus)
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
