Thanksgiving read: When healthtech and fintech meet

The future of innovation is global. We discuss it here.

The most exciting new fintech opportunities around the world are at the intersection of overlapping trends.

• Climate is upending historical assumptions in insurance and causing massive dislocations in the market

• Ecommerce and other distribution platforms are seeing business model transformation by layering in embedded financial services to expand their unit economics and relevance to businesses

• Healthcare is seeing a wave of innovation that mimics the last decade of fintech innovation, including new insurance models, new data streams and new financing options.

These waves are playing out globally. To provide some meat on the bones, I’m excited to share this guest post on fintech & health intersection by Simon Wu.

Photo by National Cancer Institute on Unsplash

This piece was originally published on Techcrunch by Simon Wu.

The struggle to provide more affordable and accessible healthcare, magnified by the spotlight of COVID-19, has spurred an explosion of innovation — attracting massive amounts of venture capital funding. In 2019, digital health represented $7.7B in VC expenditure. In 2020, $14.6B and in the first half of 2021 alone, $14.7B.

One of the largest catalysts transforming the industry today is the marriage of healthcare and fintech. Similar to the great 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, payors and providers and how payments and related electronic health records (EHRs) flows between them. Not only is the onus of payments and data flow moving from payors to patients, but providers are now facing a monumental shift to new billing and engagement models, requiring new technologies and platforms to adapt.

Through the lens of fintech, here are three key areas to watch in healthcare along with the major trends that are driving them forward.

I. Gamifying consumer wellness to combat the rise of chronic illnesses

One of the largest trends impacting patients today is the steady rise of chronic illnesses, estimated to affect nearly half the US population by 2025. People are getting sicker for longer periods of time — leading to a constant spending streak. Patient medical non-adherence is a major factor, responsible for $100B 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 US, Sweatcoin in Europe and Betterfly in LatAm 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.

II. Financial platforms for healthcare affordability & reducing friction

Looking at payors, there’s a major shift stemming from the rise of high deductible healthcare plans (HDHP) — with enrollment growing 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 — thus startups are developing financing platforms that reduce the financial burden on patients while easing the friction across patients, payors and providers. Companies such as Wellpay, Paytient, MedZERO, and PayZen offer various options for surprise medical bills. Similar to the benefits behind the Buy Now, Pay Later (BNPL) movement, these platforms offer solutions for many people who are backed into a corner by healthcare costs.

In addition, the previous administration passed changes to allow small businesses to get tax advantages from consumer-directed healthcare via the “individual coverage health reimbursement arrangement” (ICHRA). Companies such as TakeCommand help employers and consumers leverage pre-tax reimbursements and act 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. 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.

III. The Healthcare data explosion fueling the transition to value-based-care

Finally, providers are seeing a shift in reimbursement models from “fee-for-service” (FFS) to “value-based-care” (VBC). While the latter 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 with a scattered billing system leaving the industry prone to fraud and costing the nation around $68B annually. Add to this the lack of price transparency which pushes millions to opt out of healthcare services altogether. But things are changing with the Centers for Medicare and Medicaid (CMS) moving 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 while streamlining communication. Abacus Insights, Prealize, and Clarify Health are a few examples of newer 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 that 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. Whereas startups like PayGround, Artemis Health and Inbox Health, focus on an easier, consolidated billing experience with various payment options. These digital tools are not only reducing waste but greatly simplify the patient experience.

Parting Thoughts: Early innings of the healthcare revolution

We’re only in the beginning innings of a digital-first revolution in healthcare. But the convergence of health and fintech will be an important catalyst in addressing some of the most pressing issues facing healthcare today. A modern financial consumer experience can help build relationships and trust between patients, providers and payors. While we’ll need better data fluidity to see this transformation for incumbents, new transformational healthcare companies will be built from the ground up to provide stakeholders with better, more affordable, efficient and effective care by leveraging fintech.

**Piece shortened for 99%tech