Simon Wu
The quest to provide more affordable and accessible healthcare, magnified by the COVID-19 pandemic, has spurred an explosion of innovation, which in turn has attracted massive amounts of capital. To put this into perspective, consider this: In 2019, digital health saw $7.7 billion in VC investment, and that number rose to $14.6 billion in 2020. However, the first half of 2021 alone saw $14.7 billion in VC investment.
Its marriage with fintech is the catalyst for the transformation of the healthcare industry. Similar to the unbundling of financial services and how fintech is scaling vertical SaaS, the pandemic-fueled disaggregation of healthcare has created new players that are taking a page out of the fintech revolution book — all starting with payments.
A growing number of startups are now leveraging the fintech playbook to solve a key part of the healthcare problem — the shifting dynamics between patients, payers and providers, and how payments and related electronic health records (EHRs) flow between them. Not only is the onus of payments and data flow moving from payers to patients, but providers are now facing a monumental shift to new billing and engagement models, requiring new technologies and platforms to help with the change.
Through the lens of fintech, here are three key areas to watch in healthcare.
Gamifying consumer wellness to stave off chronic illnesses
One of the largest trends impacting the population today is the steady rise of chronic illnesses. It is estimated that nearly half the U.S. population will have a chronic illness by 2025. People are getting sicker for longer periods of time, which leads to a constant spending streak. Patients not adhering to medical guidance is a major factor and is responsible for $100 billion of healthcare spending and over 100,000 deaths annually. With around a fifth of patients never filling their prescriptions, it has become a priority to educate and incentivize patients to complete care and avoid readmissions or ER visits.
To curb the rise of chronic illnesses and the associated recurring costs, many startups are using behavioral economics and gamification to incentivize patients and build healthy habits. For example, companies like Paceline in the U.S., Sweatcoin in Europe and Betterfly in Latin America gamify wellness by combining fitness and financial rewards.
On the other hand, startups like Sempre Health and Wellth are tackling medical non-adherence with behavioral economics. For example, Wellth financially rewards actions like on-time prescription intake or regular A1c tests for diabetic patients.
Fintech for affordability and reducing friction
Looking at payers, there’s a major shift stemming from the rise of high-deductible healthcare plans (HDHP) — enrollment has risen 43% in the last five years — emphasizing an increase in premiums and patient financial responsibility. Out-of-pocket expenses threaten the financial stability for many, with 40% of Americans unable to pay an unexpected bill of $400.
Startups are developing financing platforms that reduce the financial burden on patients while easing the friction for patients, payers and providers. Companies such as Wellpay, Paytient, MedZERO and PayZen offer various options to tackle unexpected medical bills. Similar to the benefits behind the buy now, pay later (BNPL) movement, these platforms offer solutions for many people who find themselves backed into a corner by healthcare costs.
In addition, the previous U.S. administration passed laws to allow small businesses to get tax advantages from consumer-directed healthcare via the Individual Coverage Health Reimbursement Arrangement (ICHRA). Companies such as TakeCommand are helping employers and consumers leverage pre-tax reimbursements, acting as an integration point for a better end-to-end consumer financial experience.
Alternatively, companies such as Candid-health are building AI-driven insurance billing services. This has significant implications, as clearer insurance billing means there should be simpler patient billing, better financing linkages and, ideally, less fraud.
One thing is clear: We the consumers will be playing a greater role in healthcare payments than ever before.
Data and the transition to value-based care
Finally, providers are seeing reimbursement models shift to “value-based care” (VBC) from “fee-for-service” (FFS). While the former bills on outcomes, the traditional FFS model bills patients on individual procedures and services, incentivizing providers to prioritize quantity over quality. This has driven many underlying issues, as the scattered billing system leaves the industry prone to fraud and costs the nation around $68 billion annually and the lack of price transparency pushes millions to opt out of healthcare services altogether.
But things are changing with the Centers for Medicare and Medicaid (CMS) planning to shift to 100% value-based contracts by 2025. With VBC on the horizon, many startups are looking to revolutionize the data aggregation process — from patient onboarding to patient release — to avoid issues like unnecessary lab tests or procedures and trying to streamline communication. Abacus Insights, Prealize and Clarify Health are among the players seeking to become the essential backbone of the transition to VBC.
Others are looking to address major pain points from the FSS model such as inefficient billing, which has led to late, delayed or fraudulent payments and claims. Companies like Codoxo leverage AI to help insurance and medical providers stop fraudulent claims from being reimbursed. Meanwhile, startups like PayGround, Artemis Health and Inbox Health focus on an easier, consolidated billing experience with various payment options.
These tools reduce waste while greatly simplifying the patient experience.
The healthcare revolution is just beginning
In March, President Biden signed the $1.9 trillion relief package known as the American Rescue Plan, which included provisions that would improve health insurance affordability for millions, although temporarily. The plan is the latest attempt at healing a healthcare system that has long been broken. The persistent issues plaguing healthcare are not unique to the U.S. — it’s a global mandate set out in the UN’s Sustainable Development Goals (SDGs).
We’re only in the early innings of a digital-first revolution in healthcare, but the convergence of health and fintech will be an important catalyst to address some of the most pressing issues facing healthcare today. A modern financial consumer experience can help build relationships and trust between patients, providers and payers.
While we’ll need better data fluidity to see incumbents transform, newer healthcare companies will be built to leverage fintech and provide stakeholders with better, more affordable, efficient and effective care.
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