Health care costs in the United States are rising sharply, but the share of costs that fall on the patient's shoulders is growing even faster: Just 20 years ago, patient fees accounted for just 5% of hospital and physician revenues; by 2017, those fees accounted for 35% of revenues.
This trend has inevitably left millions of Americans with huge medical debt, which the independent health policy research firm KFF estimates now stands at at least $220 billion.
While there's no direct solution to this spiraling debt problem, PayZen, a five-year-old startup, aims to make medical costs more affordable by allowing patients to pay in installments with no interest or fees.
Branded “care now, pay later,” the company's products have received strong support from consumers, with PayZen claiming to have grown revenue six-fold over the past two years.
This strong growth led PayZen to recently close a $32 million Series B led by NEA, with participation from existing backers including 7WireVentures, Signal Fire, and Viola Ventures. In conjunction with this equity round, the company secured a new $200 million warehouse credit facility from Viola Credit and a syndicate of insurance companies.
The funding values the company at more than $200 million, according to a person familiar with the deal.
The arrangement also appears to benefit health systems: “Healthcare organizations that partner with PayZen see an average 35% increase in collection rates,” says PayZen founder Itzik Cohen.
While PayZen has performed well in recent years, Cohen acknowledges that initially it was difficult to convince healthcare providers to offer what was essentially a “buy now, pay later” product.
“What surprised me was [most] “BNPL providers didn't see this huge market as an opportunity for them,” Cohen told TechCrunch. “Once we got in, we understood why. It's a very complicated market. It's not like e-commerce.”
Selling technology to healthcare systems is notoriously difficult.
Besides PayZen, several other startups have tried to offer “care now, pay later” products, but most of those competitors, including Walnut, have pivoted away from offering interest-free loans to patients, Cohen said.
Pazen is the only fintech company that offers health loans that are directly integrated into a patient's medical record portal, like Epic's MyChart, according to Cohen. Incumbents like ClearBalance and AccessOne still rely on human-run call centers, which is why Cohen doesn't see them as direct competitors.
“Providers are interested in integrated solutions,” Cohen says. “Everybody is moving to Epic, so being integrated into Epic is an advantage for us.”
PayZen currently partners with more than 60 health systems and large physician groups, including Geisinger in Pennsylvania and multistate Common Spirit, to offer its product to all patients receiving care from those groups.
In addition to offering post-treatment loans, Pazen recently introduced a pre-treatment card. “We realized that right now, a lot of people are being asked to pay a deposit before they even book a treatment,” Cohen says. The company is also using data and AI to help health systems determine which patients qualify for government financial assistance.
“People join our company because they believe in our mission,” Cohen said, emphasizing Pazen's contributions to society. “We go to bed every night knowing we're making a positive impact on the world.”