The Why Behind So Many Healthcare Payment Buys

Healthcare needs some fixing, especially when it comes to providing a continuum of efficient care, making it affordable — and getting providers paid. Lots of specialists are working on the problems, from Amazon to JPMorgan. FinTech firms are in the mix, too, as acquisitions and consortiums are changing the landscape of what it means to diagnose, dispense and settle the bill.

All told, $3.5 trillion is a pretty big pie to divvy up.

Healthcare spending has grown from $75 billion in 1970, as measured by Kaiser Family Foundation analysis of National Health Expenditure Data, to as much as $3.5 trillion in 2018. Spending has been growing at double-digit percentages through the past few years, far outpacing economic growth.

Just as technology and platforms have changed commerce, they are changing healthcare as well, refashioning the landscape and ways in which health data flows, how it is used and, at the other end of the spectrum, how we pay for care as it is delivered — without breaking the bank.

Pain points abound, of course, from making sense of paper statements that come in the mail and run dozens of pages to paying for visits, treatments and prescriptions as they are rendered, to providers chasing down payments long after they are due. It’s not going to get any easier, either, as healthcare spending may reach $6 trillion by 2027, as noted by the federal Centers for Medicare and Medicaid Services.

Of course, where there are pain points, there also lies any number of prescriptions to cure what ails the system. Over the past few months, we’ve seen announcements from marquee names in commerce, payments and financial services (Amazon among them), linking up across mergers and acquisitions (M&A), and via consortiums. The deal-making has all been in an effort to dislodge the inefficiencies that lie within the system, which represent a huge slice of the U.S. economy.

The Continuum Of Care, Data-Driven

There has been an increased embrace of technology in settings that stretch far beyond the point of care, where tracking, monitoring and interaction with the physician and drugstore are no longer confined to the doctor’s office or pharmacy counter.

Amazon, for example, has said that Alexa can be used to interact with patients, reminding them to take medicine at prescribed times, and enabling them to make appointments or provide feedback information to healthcare providers. That comes as the eCommerce firm said it is Health Insurance Portability and Accountability Act (HIPAA)-compliant, with a roster of five healthcare companies — spanning Cigna, Livongo Health and others — creating new Alexa skills. That first set of skills means Alexa can make appointments at urgent care facilities and track drug shipments.

The Alexa news is only among the latest Amazon-tinged headlines focused on healthcare. In early 2018, the company said it had teamed with JPMorgan and Berkshire Hathaway, working jointly through an effort known as Haven (the name was unveiled in March), where the focus is on making affordable medical treatments more accessible. The plans, thus far, are nebulous. The ambition is not, with a horizon that lies beyond cutting healthcare costs for the trio’s 1.2 million employees.

JPMorgan CEO Jamie Dimon said earlier this month at a Philadelphia convention that Haven’s reach will span well beyond the confines of JPMorgan’s workforce, according to STAT, stating that the consortium wants the public at large to “get better health and reduce the costs.”

The Haven announcement — with its relative mystery, and heavy hitters in logistics, data and finance — shines a spotlight on doing things differently in a modern healthcare system that has been around for a few decades, with a focus on digital initiatives, powered by what these (and others) do best. It is the digital lynchpin that marks Haven and other announcements, such as Amazon’s acquisition of online pharmacy startup PillPack, playing to its well-established presence in logistics.

Google, in another example, has set AI sights on healthcare, with data-driven tools on offer to help doctors and other providers steer patients to tailored (and perhaps less expensive) treatments. Data is also at the heart of Apple’s strategy to serve up veterans’ health records via iPhone.

Payments, Too

If the care aspect is ripe for the truly digital age (for an interactive and automated approach that seeks to reduce errors, provide information in a timely manner, and make sure all parties are informed of what needs to be done and when), so, too, are healthcare payments. The most visible friction point in healthcare payments may lie with patients, who are finding it increasingly difficult to pay for healthcare.

As previously noted in this space, John Talaga, CEO of Flywire’s OnPlan Health (now Flywire Health), noted last year that there’s been a jump in how much patients pay out of pocket for healthcare, given the rise of high-deductible plans. Where individuals (and families) were once on the hook for 10 percent of the medical bill before insurance kicked in, that tally is now 25 percent to 30 percent.

Healthcare is, thus, ever-less affordable, and the ripple effect is that healthcare providers collect only 30 percent of what is owed because people simply cannot (and, yes, sometimes will not) pay. The traditional method of paying collectors is inefficient, given that dismal recoupment percentage. As a result, Talaga told PYMNTS, money is coming into the healthcare sector aimed at startup and early stage companies, focused on analytics that can fashion customized payment plans. For patients, that means embracing the care that they need; for providers, that can mean additional revenue streams.

PYMNTS has found that those additional revenue streams can accrue not only through the non-elective procedures, as detailed in the discussion with Flywire, but through elective procedures, too. Consider the findings of the “How Consumers Pay for Elective Medical Procedures” report, where research done in conjunction between PYMNTS and Paya found that — of nearly 1,000 consumers — 9 percent of consumers considered elective care, such as cosmetic or vision-related procedures, but opted out because they could not afford it.

As many as 63 million Americans choose to have elective procedures — to the tune of $171 billion in annual healthcare spending. However, there are more consumers who want elective procedures and decide against them than there are those who purchase such offerings. In fact, as the study found, in one subset of elective procedures (cosmetic surgeries), the value of that market could grow by $18.4 billion if those patients were offered payment plans. In a way, it’s a commerce model applied to health.

To smooth the friction on the providers’ end, UnitedHealthcare struck a deal to buy healthcare payments firm Equian — privately held by New Mountain Capital — for $3.2 billion. The company is focused on payment processing services for insurance firms and healthcare providers, with an eye on cutting down mistakes that lead to overpayments. The newly acquired company handles $500 billion in healthcare claims annually, and can analyze claims before and after they are paid.

The move aims to save costs for providers, where Optum, owned by UnitedHealthcare, already has a history of seeking to trim costs. Optum runs Optum Bank, which, through its own payment solutions, helps providers cut down on administrative costs.

JPMorgan, of course, bought medical payments company InstaMed in the biggest deal for the bank since Bear Stearns during the financial crisis. This adds to its offerings for its corporate clients, as well as connects providers, consumers and payers across a single platform.

There’s no single elixir that will aid healthcare. Rather, it seems that a range of prescriptions are in the offing to fix what needs fixing. The specialists are examining, prodding and applying new methods. In the end, a recovery (in terms of affordability and efficiency) may be in the cards.