How Fintech is Lowering the Cost of Healthcare by MagpieX Med Tech Ventures

There is little doubt that the American healthcare system is facing challenges. Outrageously high prescription drug prices coupled with the over-scheduling of unnecessary procedures result in sky-high costs. While patient outcomes remain poor in relation to other developed nations, these costs are impossible to justify and policy reform seems to be in constant gridlock. However, an unlikely solution has appeared; the proliferation of fintech startups aiming to eradicate the barriers to healthcare that high costs have imposed. 

Part of what makes the American healthcare system so expensive is the reliance on a fee-for-service (FFS) model of healthcare provision. A doctor provides a service such as prescribing a drug, test, or procedure and then receives payment. Healthcare industry experts point at the FFS model as the reason behind the over-prescription of tests, procedures, and drugs. There is a financial incentive to order as much as possible per patient to maximize returns. Of course, most doctors value their patient’s needs more than that extra compensation, but nonetheless, this is a basis for a move away from the FFS model. 

In a value-based payment model, doctors are paid for the quality and value of the care they provide from start to finish instead of being paid for each individual “service.”  In order for healthcare providers to ensure they are providing high-quality care, and therefore living up to their value-based contracts, providers are turning to startups that track patient progress. IntusCare is another startup in this space, leveraging data analytics to identify patients at risk of becoming high-utilizers. By identifying potential high-cost patients, care coordinators are able to provide healthcare solutions that improve the health of the patient and decrease the potential costs the patient will incur. MagpieX’s affiliate, The Foundation for the New England Medical Innovation Center,  has supported IntusCare in its efforts to provide better, lower-cost healthcare to elderly patients. As value-based care contracts become the norm, startups that track patient expenditures and potential future costs will become a strategic asset for providers seeking to provide high-level care in an efficient manner, lowering healthcare costs and expenditures. 

While the shift from FFS to value-based care slowly continues, startups like Paytient and PayZen are at the forefront of what is called the “Care Now, Pay Later (CNPL)” model, based on the “Buy Now, Pay Later” model made popular by consumer-oriented startups like Klarna and Afterpay. Paytient and PayZen pay healthcare providers 80% of the upfront cost of the services they provide and allow the patient the ability to pay for their care in monthly payments with zero interest. This payment can even be taken directly out of the patient's paycheck every week, streamlining the payment process. For healthcare providers, this method is advantageous as it limits debt collection costs and provides them with immediate access to cash. Given the startling trend in the American healthcare system of postponing treatment or skipping procedures due to the out-of-pocket costs, startups that allow for more flexible payment plans will eliminate the urge to skip procedures that are medically necessary. 

Other fintech firms, like Codoxo and CandidHealth, are changing how providers and insurance companies interact. Codoxo works with customers like Harvard Pilgrim Health Care to identify instances of fraudulent coding practices to limit unnecessary costs. With an estimated annual cost of over $50 billion, curtailing health insurance fraud is one way to decrease overall costs. CandidHealth, on the other hand, is easing the difficulty in submitting claims to insurance companies, reducing the time spent on billing, and allowing providers more time to focus on treating patients. Both of these startups are examples of how solving inefficiencies in the healthcare industry can fit within a scalable business model.

Yet another “sector” of the healthcare fintech industry is focused on motivating individuals to lead healthier lives. Fintech industry leaders are calling this the “gamification” of health, where consumers are able to earn financial rewards for exercising or taking their medication on time. Medical non-adherence, which includes taking prescription drugs incorrectly, is estimated to be the cause of death for nearly 100,000 people annually and presents a preventable cost of over $100 billion. Several startups have emerged to tackle this problem. Paceline, for example, is a startup aimed at getting people moving by offering rewards for maintaining exercise “streaks.” Users must log 150 minutes a week of exercise in the Paceline app - with a “Paceline Minute” counted when the user's heart rate is above the level of a brisk walk. Sempre Health is taking a different approach, focusing instead on getting individuals to pick up their prescriptions when they should. By partnering with health plans, Sempre Health provides a discount on the cost of members’ medication when they pick up their prescriptions on time. This push by health plans to invest in the health of their members makes intuitive sense- healthier members require less care and are therefore less expensive. Given estimates that nearly 50% of Americans will have chronic illnesses by 2025, instilling healthy practices will be key to lowering future healthcare costs.

As healthcare-oriented fintech continues to expand, it is interesting to see how entrepreneurs are tackling problems in healthcare affordability while simultaneously changing how different players in the healthcare industry interact. By supporting founders and their teams in developing winning strategies that will make a lasting impact on reducing the cost of healthcare in America, MagpieX is living up to its mission to reduce barriers to care. With more and more fintech startups working to change healthcare, MagpieX is positioned to continue to add value to startup teams by providing a unique perspective in the healthcare industry.