On October 26th, in Las Vegas, NV, Peachy’s CEO, Lex Oiler, took the stage at the world’s largest fintech event, Money 20/20, to discuss whether there will ever be a Square or Toast of healthcare payments.
The panel was moderated by renowned investor David Jegen of F-Prime Capital and Lex shared the stage with Flywire’s EVP and GM, John Talaga. While the healthcare payment experience is largely dreadful for the majority of patients, the payment experience in retail or restaurants via Square and Toast, respectively, is far more delightful. Over the course of a 40 minute discussion, this trio dug deep into the many challenges facing both patients and providers in improving the healthcare payment process, as well as possible solutions moving forward and how Flywire and Peachy are each building a better future for healthcare.
In this article, we’ve captured the main points and key takeaways from this exclusive discussion, so that you can learn more from these bright minds.*
The unique nature of healthcare
Healthcare is very unique in its lack of predictability around pricing, often due to unplanned services. According to John, healthcare spending is currently more than $3 trillion per year and is expected to grow by about 5.4% per year, reaching about $6.2 trillion by 2028. This leads healthcare to this critical juncture that really needs to be solved by technology.
Lex reaffirmed John’s point that a technology driven solution is necessary here, adding that while older generations may be totally comfortable mailing checks to their doctor, this digitally-native, millennial generation has grown up paying for everything from their phones and computers. And now, this generation is starting families and spending a significant amount of money on healthcare, especially with the rise we’ve seen in high deductible plans. The digital generation wants it to be easy to pay for services, as convenience is highly important to them.
The shifting burden of healthcare payments
Lex noted that, as long as insurance continues down the path that it’s on, the trend of payment responsibility shifting toward patients does not seem to be headed in a positive direction. Fortunately, companies are popping up with value-based, and subscription-based care models. Providers are also becoming more willing to offer payment plans, which is a great step in the right direction. While the cost of healthcare is likely continue to rise, a core driver of that cost is administration. So if healthcare providers’ administrative burden can be lowered with technology, healthcare providers can get back to providing care, which is what they went into business to do.
In response to Lex, David asked whether HSA’s are the answer to this problem. John shared that the problem isn’t where consumers are putting their savings, but that they simply don’t have enough of it to go around. Flywire recently conducted a survey of a few thousand patients and 46% of patients responded that they can’t pay for their entire medical balance in one lump sum. Meanwhile almost half of consumers don’t have savings of up to $400 to make an unplanned payment. Thus, while HSA’s can be helpful for managing money, they don’t answer the affordability question.
Making healthcare more consumer friendly
While Lex opined that it’s unlikely that healthcare will ever get to a point where providers can fully predict ahead of time what someone will owe, people are beginning to understand insurance benefits better and start shopping around for care. Combining this with the price transparency laws slowly coming into effect, progress is being made in the right direction. Still, under the current insurance system, it’s unlikely to ever be possible to fully estimate what the cost of healthcare services are and then simply pay at point of sale. However, many providers are steering away from insurance and towards more patient friendly models, e.g. subscriptions or value based care.
John shared the importance of the distinction between elective procedures and non-elective procedures. It’s the unpredictability of non-elective procedures which drive the most affordability problems. But for the elective procedures and the more standard visits, that is where there could be an opportunity for a more seamless Square or Toast-like payment process.
"Buy Now, Pay Later" in healthcare is different
Healthcare is different than retail, according to Lex, in that people don’t buy more healthcare than they need. While current, retail-focused buy now, pay later ( BNPL) products might enable consumers to purchase more than they can afford, healthcare-focused BNPL products are unlikely to have a similar effect. Patients aren’t going to the doctor when they don’t really need to because of BNPL, but instead, just getting access to the healthcare they need.
Interestingly, Lex noted, that consumer insight studies have long shown a 0% correlation between someone's FICO score and their willingness or ability to pay back a medical bill. The reality of uncollected medical bills for the majority of patients is not the $50,000 hospital bills, like you might think–it’s bills under $500. And these are often consumers’ only collection tradelines, so if patients who might not have $500 to pay a bill today, but can pay $100 per month for the next five months, there should be a significant decrease in uncollected medical bills.
John added that the key differentiation between true “buy now pay later” and traditional payment plans is who is funding the installment plan. For a long time, providers, especially hospitals with large reserves, have funded these and carried the risk, now the trend is reversing. Providers are asking questions like, “why should we be a bank?” and instead looking to third parties to finance and manage those plans.
Learning more from Lex
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