With summer right around the corner, we wanted to get some housekeeping out of the way. While we've been busy working with our clients to assess new markets, launch new products, and connect with each other, we also just relaunched our website. We've added more information about who we are and how we support our clients, created more healthcare payments content, and made the site easier to navigate. (If you'd like to meet with us to learn more about our founding Partners and our team, click here to schedule time.)
We have lots to get to in this issue, including more on Waystar's IPO and Veradigm's woes, banning medical debt from credit reports, the ongoing relevance of cash in our increasingly cashless economy, Epic River's CEO Chat, and reaction to last issue's question about whether Epic/ Judy Faulkner opposes interoperability. So let's dive in!
REGULATORY
CFPB proposes removing all medical debt from credit scores
The Biden Administration wants to make it easier for millions of U.S. consumers to get approved for and be able to afford home, auto and other types of loans. Last week, the CFPB proposed a new rule that would eliminate medical debt from credit reporting. According to the CFPB’s Director Rohit Chopra, “This is going to be an enormous relief to so many people…Our research shows that medical bills on your credit report aren't even predictive of whether you'll repay another type of loan. That means people's credit scores are being unjustly and inappropriately harmed by this practice.”
While some credit reporting agencies have already reduced or eliminated the impact of medical debt on their assessment of consumer credit worthiness, the new rule would extend to all medical debt and all consumer credit reporting. The CFPB says this will help the 15 million Americans who still have $49 billion of medical debt affecting their scores, and it estimates an additional 22,000 people will be approved for "safe" mortgages each year.
Healthcare providers would still have tools to pursue unpaid patient balances, including debt collection agencies and the legal system. And consumers who have loans which originated from medical or dental care but are now being serviced by banks or fintechs such as Synchrony Financial, Wells Fargo, AccessOne and others will still see that debt reflected in credit reports.
Waystar completes largest health tech IPO in several years
Waystar (NASDAQ: WAY) priced its IPO on June 6 at $21.50/ share, the mid-point of its expected range. The company raised $968 million based on the 45 million shares offered, which will be used to pay down debt. Based on current shares outstanding and the closing price of $21.00 on 6/18, Waystar's market cap is $3.5B.
Waystar is the first IPO of any size in the health IT space in several years, and gives hope to other companies looking to test the public markets (after 1,035 companies went public in the U.S. in 2021, last year saw only 154 including zero health IT companies). Based on the quick poll we did last week, Spring Health and athenahealth could be next up for an IPO in 2024. In January, Pitchbook also gave ZocDoc a 92% probability of completing an IPO this year.
Here are a few fun facts from Waystar's IPO prospectus:
In 2023, the company facilitated over five billion healthcare payments transactions representing $1.2 trillion in "gross claims volume" (net patient revenue is likely 40-50% of this amount) touching approximately 50% of U.S. patients.
Waystar has 30,000 clients, representing one million providers across "physician practices, clinics, surgery centers, laboratories, large hospitals and health systems". The company believes its addressable market is 7.5 million providers.
Waystar calculated its 2023 TAM as $15 billion, using its own prices and estimated number of target buyers for its solutions
This TAM is expected to grow to $20 billion in 2027 (5% CAGR), with key growth drivers being prior authorizations, patient payments, and revenue cycle management analytics
Read more here and click here for Waystar's IPO document
COMPANY NEWS
Veradigm (fka Allscripts) exploring sale
While some health IT companies (a la Waystar) are plotting a positive trajectory, others not so much. Veradigm, the company formerly known as Allscripts, has unloaded assets, failed to file required financial reports, been delisted from Nasdaq, and changed CEOs (again). Now it is looking at a sale or merger for its remaining assets, as disclosed in a recent financial filing. Despite all the recent negatives for Veradigm, this still came as a surprise to some. As reported in Healthcare Dive, TD Cowen wrote that “The combination of events suggests to us the possibility of an unsolicited bid leading the Board to explore all the alternatives.” While it has not filed required financial reports, the company says its core business is strong (projected 2024 revenues of $620M+), and is profitable (projected 2024 adjusted EBITDA of $104M+). Veradigm has also made two acquisitions this year.
Fort Collins, CO-based Epic River is a fintech helping patients cover out-of-pocket expenses by connecting financial institutions with hospitals to facilitate patient access to financing. The company is using its tech platform to offer more unique lending programs for community banks and credit unions, providing additional interest revenue streams with low customer acquisition costs. Epic River's CEO, Jeff Grobaski joins us this issue to talk about their strategy and goals for the year ahead.
Cash, while declining, still plays vital role for U.S. consumers
In May, the U.S. Federal Reserve published its annual Diary of Consumer Payment Choice. This year’s study showed that while cash declined in relative terms compared to credit and debit due to an increased number of transactions, overall cash use has remained stable as consumers continued to hold more cash than they did before 2020. The 2024 report is based on diary responses from 4,579 individuals in October 2023.
Household income (HHI) is a big driver of cash use. In 2023, consumers with HHIs of less than $25,000 used cash for approximately one in three payments. Those in households with an income of more than $150,000 used cash for one in 10 payments (see Figure 8). 20% of individuals living in HHIs of less than $25,000 reported being unbanked.
The report also pointed out the extent to which all consumers still value cash. Essentially, they said "you will have to pry my cash from my cold dead hands" as over 90% of diary participants across all demographics in the 2022 and 2023 studies said they have no plans to stop using cash (see Figure 15).
Source: The Federal Reserve, 2024 Findings from the Diary of Consumer Payment Choice.
Other cash-related findings summarized by the Federal Reserve:
Consumers made an average of seven cash payments in 2023, a number that has remained stable since 2021.
Cash use was driven by in-person shopping, as well as by the payment behavior of consumers in low-income households and individuals age 55 and older.
Cash remained the third-most-used payment instrument, accounting for 16% of payments in 2023. This is two percentage points less than 2022. However the decline is due to the increase in total payments, rather than a decrease in cash payments.
Following a five percentage point decrease in those who preferred cash at the start of the pandemic in 2020, the share of consumers who prefer cash has been stable at approximately 19% since 2021
These findings have important implications for healthcare payments. We spend a lot of time trying to increase card acceptance (e.g., payers), make it easier for patients to pay with cards (e.g., card on file and better online experience), and coming soon, integrating Pay by Bank as a payment option. But as the Fed data shows, there are still many people who live in a cash economy and who prefer to use cash and pay bills with cash. This is particularly relevant when serving lower income households and the over 55 population. (Disclosure: FinMed Partners is currently working with a client to facilitate payment of medical bills with cash.)
Bonus read: The World is Going Cashless. Get Over It. by futurist Brett King. This article is an excerpt from his forthcoming book Branch Today, Gone Tomorrow, and looks at the race towards a cashless society, including how the U.S. is behind many other countries. It also covers how access to cash remains a core social problem when there is a large unbanked population.
SPOTLIGHT ON EPIC (cont.)
Comments re: Does Judy Faulkner oppose interoperability?
In our last issue we mentioned the post by an Oracle executive that accused Epic’s CEO Judy Faulkner of being the single biggest obstacle to EHR interoperability. Well, this generated quite a bit of industry reaction including from readers of this newsletter, and the HISTalk blog. One payments executive wrote this to us:
"The notion that Judy is anti-interoperability is funny/sad. I think it’s fair to call out Epic’s policies on opening up their APIs (making it easy to allow a health system to use a bunch of different apps/products sit on top of Epic within their own organization) but when it comes to sharing patient data between health systems for the purpose of patient care, Epic designed, built, and shared the road."
He also shared a 2019 article covering some of Judy's personal perspectives on healthcare data interoperability and information blocking.
HISTalk conducted a poll asking whether readers agreed with the Oracle executive's claim that Epic/ Judy Faulkner is the biggest obstacle to interoperability. 676 (78%) said “No” while 188 (22%) replied “Yes”. Comments in the poll reveal very differing perspectives:
"Of course she is! Epic is creating a walled garden where the only way you can see the flowers is by being part of its ecosystem. My bigger complaint is Faulkner’s (and make no mistake this is her) limiting of access to the data in our own Epic instance through APIs by some of her new rules. Epic is limiting innovation. Then they say use our CRM. Use our Find a Doc. Use our Portal. All which offer horrid user experiences and functions."
"What absolute nonsense. Epic is not responsible for salvaging the failed and unethical and/or delusionally hyperbolic business plans of the health tech ecosystem. The legacy EHR vendors whining as they lost share and said they would change it all around with HIE’s and population health..."
Is It Finally Time to Reinvent Credit Card Fees? New limits on card fees may finally prompt issuers to try alternatives to traditional punitive fees, including subscriptions and more consumer-friendly options (The Financial Brand)
NOTE: Next newsletter issue will be July 10th due to the Fourth of July holiday week.
We will be at next week's HFMA annual meeting in Las Vegas (June 24 - 26). If you plan to attend, we would love to say hello - please drop us a line at info@finmedpartners.com!
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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
