Flywire’s Massaro: Healthcare Payments’ $375B Efficiency Opportunity

According to the Centers for Medicare and Medicaid Services, healthcare expenditures in the U.S. are expected to approach $6 trillion by 2027, with an annual growth rate that will eclipse GDP growth for that same period. That may not come as much of a surprise.

What may be surprising, however, is the share of those expenditures that are borne by the consumer.

In 2018, that was 28.4 percent, making the patient (along with the federal government at 28.3 percent) the largest healthcare payors in the U.S. That amounted to approximately $375 billion. Roughly 2 percent, or $7.5 billion, of those out-of-pocket costs, go totally unpaid, according to PYMNTS’ research, because consumers haven’t been offered an option that matches their willingness to pay with their ability to make those payments. Another 15 percent of total healthcare costs are attributed to billing and payment inefficiencies.

Those inefficiencies, combined with the growing share of healthcare costs that are borne by the patient, as Flywire CEO Mike Massaro told Karen Webster in a recent conversation, is the latest evidence that healthcare payment dynamics have shifted more rapidly than the providers’ ability to adapt.

“Providers who used to collect 5 percent of their overall payments from the patient are now looking at collecting a minimum of 30 percent – and they just don’t have the payments infrastructure to adapt to that,” Massaro said, noting that trend will continue as more consumers are electing to pay out of pocket – whether that’s because their care is elective, they want to use money to preserve a high level of service or choice, or they are choosing a deductible plan that requires more direct consumer investment.

But where there is a hole leaking billions of dollars in inefficiency, there is an opportunity for a firm like Flywire to step in, Massaro emphasized. The recent acquisition of healthcare tech startup Simplee, combined with the 2018 acquisition of OnPlan and its consumer-facing healthcare payments platform, makes Flywire a serious contender to leverage its end-to-end payment capabilities in healthcare payments, he said.

“In healthcare, you have a lot of people trying to go into the market, but there isn’t a leader,” Massaro remarked. “Healthcare [payments] is messy and confusing – success for providers and the patients they serve requires a lot more specialization than simple merchant acquiring and processing.”

Consolidating the Clutter Away

Flywire’s major interest as it pushes deeper into healthcare, Massaro said, remains nearly identical to what it was when it entered the market as a tiny startup trying to fix higher education and healthcare payments around the world: simplifying the payments and receivable process for the biller so they can match payments to the bills they send out.

For Flywire, that means making it more efficient for the consumer to make those payments. In the case of healthcare payments, instead of having “a million customer integrations” with insurance company payors who are sending payments to providers, Flywire is targeting the consumer payor, who now represents 30 percent (and growing) of provider healthcare spend.

What Flywire and Simplee combine into a single package is a consumer-facing front end and a fully enabled, vertically specific backend that can streamline end-to-end payment complexities for providers.

A provider is able to offer the consumer a relevant payment plan for services upfront, instead of chasing them down as part of a collections process or having the consumer forego what could be a necessary medical procedure. On the receivables side, the Flywire platform streamlines payments reconciliation and matches the payment with the provider’s bill, including the movement of funds directly into the provider’s account without further integration.

“We are able to use our [payments] network to streamline a lot of the challenges for providers who touch payments as part of their offering but don’t specialize in them,” said Massaro.

The integration of Simplee into the Flywire healthcare payments platform will take roughly six to nine months to complete, he added.

The Faster Road Forward

In five years, Massaro noted, healthcare payments will hopefully look quite a bit different than they do today, as digital and mobile technology accelerates the pace of innovation in the sector, forcing payors and providers to adapt.

In 2018, at $375 billion, out-of-pocket healthcare spending was two-thirds the size of the eCommerce market, and the possibility exists that healthcare spend could easily outpace it over that period of time. Massaro said that as the consumer’s share of healthcare spend continues to rise, billing will have to become a lot more transparent, and the payments experience will have to look more and more like any other digital transaction – otherwise, consumers might take their business to other providers who offer a more integrated payments and services experience.

“There is a lot of good software, and an industry that is calling out for an end-to-end, modernized payments process,” he said. “We can’t wait to really start building it.”

The announcement of the Simplee acquisition also included news of an additional $120 million capital raise. Other than the integration, Massaro noted that the rest of the funds will go toward growing their staff, particularly in healthcare, and expanding their global footprint.