How Fintech is Reshaping Our $4T Healthcare Industry

0:02Welcome to Part 2 of our series about the Emerging Intersection between Healthcare and Fintech. If you're just catching up, in Part 1, we chat with A16C General Partners, Julia and David Haver about the current state of healthcare, which hint is not very good, but also how advances in Fintech are creating a unique opportunity to solve some of the industry's grand challenges. So today, in part two, we wanted to place you right in the action, where founders are already building. You'll hear directly from six different founders who break down three key things. Number one, the key challenge they're facing.

0:42Number two, the catalyst for deciding to dive into one of the most notoriously difficult industries to fix. And number three, their vision for doing so. Here is a sneak peek. Nobody knows the price of health care. We say nobody, we mean nobody. It's unaffordable, opaque, and it's becoming a leading category for viral means as a result. Around 50 % of every dollar that is being invoiced is being uncollected, it's unheard of. Healthcare, broadly now, now understood to be among the worst consumer purchasing experiences. We have definitely talked to some clinics where if they don't get paid one month, they like literally can't make payroll.

1:24What is actually being unwound is the backbone of healthcare for a very large portion of the country. I think it's going to just blindside and surprise a ton of people. When providers' payers don't agree with right for a patient, it's really the patient that suffers. The purpose of this episode is not to be exhaustive, but to get you up close and personal with the change that despite the healthcare industry feeling so impossibly complex, is indeed happening. As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund.

2:05Please note that A16Z and its affiliates may also maintain investments in the company's discussed in this podcast. For more details including a link to our investments, please see A16Z .com slash Disclosures.

2:22Let's start by talking about one of the biggest problems in health care, the lack of transparency around price. Everyone seems to have a story about some crazy medical bill, but here is the surprising thing. Nobody knows the price of health care, sometimes not even the providers. Here is Chris Severn, co -founder and CEO of Turquoise, a company building software that gives people the cost of healthcare in advance. In our corner of the world, what we care about is nobody knows the price of healthcare. When we say nobody, we mean nobody. Patients don't know the price. Providers often don't even know the price of their own services.

3:04Payers, employers, and the list goes on and on. In fact, Chris started building turquoise because of his experience as a healthcare consultant, getting to see just how broken the system was. Yes. So in my formal lives, I was a health care consultant and I lived for five years in these payer provider reimbursement contracts. I became an expert in them and all their nuances and complexity. What I didn't realize at the time is that those were secret. And so when you think about innovation and maybe why there are startups doing this, it's because there was this information asymmetry granted to those of us that worked with these contracts before January 1st of 2021.

3:47And so that consulting experience is 100 % why we were able to hit the ground running. Although that paints a dire picture, things are changing. New laws have been passed in the last few years like the Price Transparency Act or the No Suprizes Act, which make pricing more transparent. This is very similar to a lot of other new technology life cycles, where this isn't new technology, but it is a sudden event in US healthcare. And we have access to these prices and the data is really big. And as any new technology matures and as this healthcare pricing data matures, the bear is going down to access it.

4:27It becomes cheaper, more widely available, more user friendly. We're seeing that happen day over day at Turquoise. But it's not quite smooth sailing yet. Though these new laws require providers to share prices, is those costs are specific to each patient, geography, coding system, and insurance product. These new laws mandate it, every provider, every payer in the United States to disclose the price of healthcare. In these prices are complex because it's not just like when you go to a restaurant where everybody sees a menu. First of all, we don't know what's on the menu. And second, depending on what insurance you have, you pay something different.

5:06So you can imagine that if we all went to dinner together, but we all pay to different price, it gets really complex. Healthcare pricing is still so complex that even turquoise can only give an estimate, although Chris hopes that that changes. And that is just on the consumer side. The beta B side brings its own set of complications. On the beta B side, there's a whole litany of issues that make it slightly more complex than just saying, hey, here's a big database. Go browse around the price health care. Some of the nuances that I'll just point out is that geographically, some healthcare prices are agreed by one medical billing and coding system and then you cross state borders and they use a different medical billing and coding system.

5:52So this really apples to oranges when you make those comparisons. Some prices are really a formula and so you're comparing like, you know, white equals the next plus B, like some complex formula, to another provider that might just have a street forward named Feast Schedule Prize. It turns out that high school calculus still does come in handy. And given these fundamental shifts, here is how Chris envisions the future of medical billing, a world where you can look up the exact price for care at front, prepay for it, and then never see a bill again. And as a result, healthcare providers will compete on things like quality, access, and trust.

6:34It'll get to the point where as a patient, you'll be spoiled by the providers who spoil you, right? And you'll come to expect that level of financial experience everywhere you go. You know, you'll be a dinner at a bar. People do actually talk about this stuff. I've learned at dinner as an at -bars. It's like, wow, you got this crazy medical bill. And someone at dinner I don't be like, what? Why'd you get a bill? Are you still using a provider or insurance company that sends you a bill? It'll be similar to if someone were to bring up like non -electronic medical records. Your office has like folders of paper?

7:08Why? And I think that's for, we'll be at about three years. Chris did a great job of highlighting how regulation is enabling consumers to get access to healthcare prices and how this can eventually change how consumers interact with providers. But, price visibility is just one piece of the puzzle. Billing is another.

7:32While the number of scientific papers published each year continue to grow, those advances do not seem to be making it into the consumer's pocket. One significant barrier, billing. Medical billing is so complex that even people who can pay struggle to do so. Here is Florian Auto, co -founder and CEO at Cedar, a company that's trying to simplify the billing process, discussing the lack of innovation and how that's hurting all parties involved. The medical piece is very different, I think, from the administrative piece. On the medical piece, I think there have been amazing innovations over the last 50 years or something.

8:10I mean, we just compare right now on which kind of robots are in the operating rooms you have paused. On emission tomographs, you have MRIs everywhere, so it's really amazing on what you see there. When you see on the administrative side, I think it's still completely stuck in the 80s, right? So you literally have the fax machine still there. You're still having checks being mailed right and left. And you still have something like prior authorization, different parties trying to fight over literally what is good for the patient or not. Not only does this complexity result in a painful experience for patients, but it's actually hurting the revenue of healthcare providers as well.

8:52Around 50 % of every dollar that is being invoiced is being uncollected. It's unheard of. You have never heard that in any other industry that only 50 % of everything that gets built gets paid. It's completely crazy. And when you enable it, make it easy for patients to pay, that amount increases. In fact, Florian's own personal experience, dealing with the complexity of a payments process, is exactly what inspired him to create Cedar. Yeah, I put it for starting Cedar, was my wife at a really bad billing experience, based in New York. She fainted on the street, was admitted to the emergency room, and then with a terrible billing experience, a swipe credit card for the co -payment needed to pay $250 for the co -payment so far, so good.

9:36but was not the right time actually to pay when you're you are concerned about what's going on with the loved one. Then a month later came the first invoice was everything was written in strange code so it was really tough for her to pay. In the other month later came the imaging center bill and then half a year later the debt collected quarter because of the bill from the lab company that she never received. So overall, it was really interesting she basically said never take me back to that hospital because she lost trust in us. So if the building is so messed up, she also lost trust in the medical side.

10:13We all know that Florene's experience is not an isolated one. Unfortunately, multiple surprise bills invoices occurring six months later and incorrect charges being built are problems that Americans are becoming far too familiar with. But it does not have to stay like this, and companies like Cedar believe it won't. With recent advances in machine learning, software is emerging that actually personalizes and simplifies the billing process. We know what is the insurance plan. That's also another data point. So that in first is it a blue color, is it a white color plan. Then of course we know what is the demographics of a certain pension because we have data of birth, right?

10:55And then we have past payment histories or past engagement histories. So we know whether they defaulted already on certain invoices or not. And together with that, you can come up with basic hypothesis on what is the best outreach. And that's of course what these machine learning algorithms are doing. We use these multi -unbended stair -code. And then based on how the patient clicks through the app that gives us another set of data which is engagement data. And together with this engagement data, then of course the follow ups are different. I mean it's the same. When you shop on Amazon, they get you to check out the shopping cart in a nice way.

11:32And we'd use these same algorithms that basically nudge the patients throughout this process in personalizing all of these cascades. And the simplified experience isn't just something consumers want. It's actually something that healthcare providers need and also are pushing for. And the second thing is, of course, for a hospital right now, margins X to me then. So when you consider a health system, for example, of a billion dollars in net patient service revenue, you, it probably get around 50 million from patients directly. If you right now increase that by 30%, that gets you 65 million. So it's a delta of 15 million dollars to the bottom line.

12:13It's 1 .5 % additional margin, right? Out of a billion dollar. And when you before see there, only had a margin of maybe 1 or 2 or 3%, getting additional percent or percent and a half is of course very impactful. Well, simplifying the entire payments process in healthcare is easier said than done. Companies like Cedar are beginning to slowly ship away at this problem. Their method, personalization. Also, that means basically using modern technology to personalize the billing experience and give patients the same experience that they're expecting from the health care system that they're experiencing at any other consumer -facing industries like when they hail the lift or they book a trip on like Speedyer or Watch Netflix.

12:59When you basically right now go to the healthcare system, everybody gets the same invoice after 30, 16, 90 days with the same amount of codes. Nobody really understands that. And this one size with non -solution is not really the best interact, right? Because for some people, the problem to pay is maybe understanding English. For another one, it might be they don't have the money to pay. For another one, it might be they're not always at their home to get the bill. So what we basically doing is we want to reach the patients where they are with the methods of communication on what applies to them.

13:34So for example, some patients might get where convenience probably matters. They might get a text message at 8am in the morning with a call to action, one quick to pay. Another patient might get an email in Spanish at 4pm with the call to action pay as little as $50 every other week on a payment plan. In the bigger picture, personalizing payments is just the first step toward a larger goal of ensuring that both healthcare providers and patients can focus on what matters most. The quality of healthcare provided. Nobody should not go to the doctor because they're afraid of how much something costs or that they are not able to pay for something.

14:16That is really something that totally breaks my heart. In a country like the US that is so wealthy, it just can't be that people do not go to the doctor because they don't have the money for it, or they're afraid because they don't have transparency on how much something will cost. As Florian touched on, the broken payments experience doesn't just hurt consumers. It's also a mess for providers. We've entered a stage of healthcare where in order to receive care, healthcare providers often need to get multiple approvals or referrals, driving up costs and extending the payments process. But how did we actually end up here in the first place?

14:55Here is Jade Chan, CTO of Juniper, a company simplifying revenue cycle management for recurring health clinics. Reaffirming how misaligned incentives between patients, payers, and insurance providers have resulted in an extremely complex healthcare payment system. Yeah, I think the more I've sort of learned about healthcare, the more I'm really starting to see that a lot of issues stem from misaligned incentives in healthcare. And I think that is a lot of what drives the most pressing issues in healthcare and Fintech today. There is sort of this natural relationship between patients, providers, and payers.

15:35And I think they're all sort of not aligned to succeed together, sort of in the current set up. Like patients find it hard to get care. It's hard to understand your own insurance coverage. It's hard to get insurance coverage. You know, you cannot be incentivized to get care early. Could potentially lead to unchecked issues, sort of ultimately higher costs for everybody in system. Providers find it hard to get paid for their services. Right. There's a lot of nuance and detail in the process of submitting tracking triaging claims. And payers are sort of naturally incentivize to create cost structures that are difficult to navigate and sort of also leading to higher costs for everybody in the system.

16:19This misalignment generates all sorts of externalities, including a serious pain point for recurrent care clinics as they struggle to get paid for the services that they're providing. Recurrent care clinics address everything from mental health to neurodiversity support to physical therapy. And one example of this is within autism clinics and the opportunity to build for this niche is actually what inspired the creation of Juniper. Yeah, I think there's a growing field in recurrent care, right? Like I think mental health. It's just sort of become increasingly popular. Juniper is actually sort of currently really focused in the autism space.

17:01Within recurrent care We do want to expand into other areas, but right now most of our customers are sort of autism clinicians and providers and we did choose that sort of pretty intentionally. One, I think it is a canonical example of recurrent care, right, patients who receive care, like receive very sort of the same session over and over at high frequency. And also two, it's actually where we thought we could have one of the biggest sort of impact. There has been a lot of legislation passing around the 2008 mark. I think Medicaid started covering a lot of these services where autism and a lot more people and children were being diagnosed with autism, that means more people are aware and can get care.

17:41But the number of clinics haven't actually necessarily scaled with that. And so our focus is like a pretty big mismatch between patients who need care and the care available in the United States. And with this increasing attention, recurrent care clinics like autism clinics are trying to scale. But to offer more services, these clinics need to ensure that they're actually getting paid. Right now we're sort of really focused on helping clinics get paid for their services. That in turn, I think helps clinics offer care to more patients. And then it also helps ensure that there can be more clinics and that the clinics can grow.

18:20We have definitely talked to some clinics where if they don't get paid one month, they like literally can't make payroll. There's like sort of very real concerns that go into revenue cycle management for a clinic and on paper, you know, they might be building a lot that month, but if their claims are delayed for X number of days, it can literally struggle to make it week through week. And so I think we are sort of focusing on the clinic right now helping them get paid for their services and then by also then helping them offer more care for the patients. Well, Juniper is focusing on automating the billing process for these clinics.

18:57clinics, that is only one part of the problem. Clinics are also burned with the administrative processes that are unnecessarily complex and reduce the time spent with patients. Another problem that Juniper hopes to solve one day. Yeah, I have a seat. Juniper has like a one -stop shop for recurrent healthcare for sort of clinics and patients. So like on the clinic side, like you're like, I want to start a clinic. Juniper can help you with, you know, registering your NPI numbers. It can help you with setting up all of your stuff to make sure that it's best practice, that it's sustainable, use the knowledge that we've accumulated to help you get set up for success.

19:34And then you can then use Juniper as a platform to manage your scheduling, your data, and as a billing platform, and all of that is there. For the patient, which we haven't even necessarily explored yet. While recurrent care clinics are struggling to get paid for their services, Emerging practices like mental healthcare clinics can't even accept insurance in the first place. One in four Americans have a treatable mental health condition like depression, anxiety, or PTSD. Yet, most still don't have access to care. Why? Because the infrastructure to actually let therapists accept insurance for mental health appointments is still on the way.

20:18Here is Andrew Adams, Founder and CEO of Headway, a company that enables therapists to accept insurance, discussing the lack of infrastructure in the mental health space. So the natural question is if providers want this, they don't want to say no, so therapists just want to say no, I can't afford me. If payers are really looking to invest in this more, build out their networks, why isn't it happening? And we see at its root, all again, return to the one word I returned to at the beginning of this, we see an infrastructure problem. We see a health insurance that was built around the medical system, and in the medical system, medical doctors have been consolidated into large hospital groups where there's three billing admins, manually filing insurance claims for every one doctor.

21:03Therapists are totally different. Therapists are these offices of one who don't have billing admins and so don't accept insurance, which is where we come in. For Andrew, the impact of this problem is one that he's experienced firsthand. With no insurance coverage, Andrew was unable to afford a therapist in New York City, and this experience ultimately inspired him to build Huttway. I'm someone whose life was totally changed when I saw a therapist when I was out in California. I saw someone that really helped with depression, I was going through the time. And then when I came in here to New York, as part of settling down, I tried to find another therapist again.

21:39And I totally failed. I couldn't find anybody who might feel like I could get it forward. At the time, it accepted my insurance. In terms of that wasn't a unique problem to me. That was the problem that kept people kept on talking about. That's the number one problem. One in four Americans have a tree development law that they should like depression or anxiety or PTSD. Most don't get care. And the number one reason is price. Meanwhile, most therapists don't accept insurance. And if they did, therapy would be accessible. It would be a $20 or $30 co -pay. Though Andrew's experience is far too common, the future actually looks promising.

22:14With mental health awareness growing, payers and therapists are both actively seeking a solution. And the result is a growing opportunity to build the connective tissue between payers and therapists. Every payer in the United States right now, every health plan in the United States right now is scrambling to invest in their mental health care offering because it's something that can drive, top line and bottom line results. So from a top line perspective, because everybody's talking about mental health care. That means now they're talking about with their employers. Their employers are the customers of insurance companies.

22:49That's a real top line driver. Plans, health plans, win, lose, upsell, their potential customers to hang on if they have a good mental health care product or not. So they're scrambling to really looking that thoughtfully invested mental health care. providers also want to accept insurance too. They don't like having to say, hey, Andrew, hey, Lauren, I know I could really help you. I know I could really help with the depression, the anxiety, the PTSD, whatever you might be going on with you. But sorry, I don't accept insurance. They won't have to say no. Headway is one of many companies filling this infrastructure gap.

23:24But with any infrastructure layer, the challenge often lies in distribution. So we have a model where for therapists, it's the party of friends, a one -click magic tech experience where money just appears. To payers who look really familiar to start, we look like something they've seen before and they all had to work with, a doctor's office. In fact, we are the largest provider group, a .k. doctor's office of therapists in the United States of America. That was core to our ability to solve the distribution challenge for our infrastructure offering. It's a look familiar to payers. So we have an, we look behind the scenes because we are behind the scenes.

24:02The largest behavioral health provider group, largest doctors office entity in laymen terms. So we look familiar there. But to providers, the therapists, the clinicians who are those solo practitioners who need something new, we look like the consumer grade payment experience or money disappears. Though it's still early days, Andrew believes that a world where mental health benefits are covered by a majority of insurance providers actually isn't that far away. Soon, visits to the therapist will be treated the same as any visit to a medical facility. We have a vision that mental health benefits power by headways in the back of every US health insurance card.

24:41We truly want to power a new mental health care system that ensures that we go from a world where most Americans right now with a treatile mental health condition don't get care. We want to create a world and create a new mental health care system where they do get care. So far we've shared four challenges in health care that founders are tackling, but health care is no monolith, and One particular demographic is about to face an entirely different problem. Here is Jimmy Chen, founder and CEO of Propel, a company building software for low -income families who use the social safety net. Discussing how millions of Americans are about to lose access to its central Medicaid services in just one month.

25:27And the craziest part, most of them don't even know about this yet. Yeah, I think, you know, the most pressing issue that I see is actually one that's happening this year. It's that there are between five and 14 million people that are expected to lose their Medicaid coverage once the COVID -19 public health emergency officially expires in May. That is going to leave millions of people without healthcare. And so while experts and policymakers are calling this the unwinding, just kind of this terrifying term, when you think about it, like what is actually being unwound is the backbone of healthcare for a very large portion of the country.