The cost of healthcare in the U.S. has been rising rapidly, but the portion of those costs footed by patients has increased even faster. Just two decades ago, fees paid by patients accounted for only 5% of hospitals’ and doctors’ revenue, but by 2017, those fees made up 35% of revenue.
This trend inevitably led millions of U.S. citizens to accumulate significant medical debt, which now totals at least $220 billion, according to estimates by independent health policy research firm, KFF.
While there’s no straightforward solution to this burgeoning debt problem, a five-year-old startup, PayZen, aims to make healthcare more affordable by enabling patients to pay their bills in interest and fee-free installments over time.
The company’s product, which it’s branding as “care now, pay later,” has had strong traction with consumers — PayZen claims that revenue has expanded six-fold in each of the past two years.
That strong growth recently helped PayZen close a $23 million Series B, led by NEA, that also saw participation from existing backers, including 7WireVentures, Signal Fire and Viola Ventures. In conjunction with the equity round, the company secured a new $200 million warehouse credit facility from Viola Credit and a syndicate of insurance companies.
The round values the company upwards of $200 million, according to a person familiar with the deal.
This arrangement also seems to benefit healthcare systems. “On average, providers who work with PayZen increase their collections rate by 35%,” said PayZen’s founder, Itzik Cohen.
Although PayZen may have hit its stride in recent years, Cohen admits that convincing healthcare providers to offer what’s essentially a “buy now, pay later” product was initially challenging.
“I was surprised that [most] BNPL providers didn’t see this massive market as an opportunity for themselves,” Cohen told TechCrunch. “After getting into it, I understood why. It’s a very complex market. It’s not like e-commerce.”
Selling technology to healthcare systems is notoriously difficult.
Besides PayZen, several startups have tried to offer “care now, pay later” products, but Cohen said that most of these competitors, including Walnut, have pivoted away from providing interest-free loans to patients.
According to Cohen, PayZen is the only fintech company offering medical loans that are integrated directly into patients’ medical record portals, such as Epic’s MyChart. Its competitors, including incumbents like Clear Balance and Access One, still rely on call centers operated by people. That’s why Cohen doesn’t view them as direct rivals.
“Providers are interested in an integrated solution,” Cohen said. “Everybody is moving to Epic. So being integrated into Epic gives us an advantage.”
PayZen currently works with over 60 health systems and large physician groups like Pennsylvania’s Geisinger and multi-state Common Spirit, who make the startup’s product available to all patients who receive care from them.
Besides offering post-care loans, PayZen recently introduced a pre-care card. “We realized that a lot of people are now being required to pay a deposit before they schedule procedures,” Cohen said. The company also uses its data and AI to help health systems determine which patients qualify for government financial assistance.
Cohen emphasized PayZen’s positive contribution to society: “We have people joining us because of our mission,” he said. “We go to sleep every night knowing that we’re making a good impact on the world.”
