Healthcare credit: a $510 bil under-addressed market

Healthcare credit: a $510 bil under-addressed market

Only 20% of the $510 billion out-of-pocket annual expenses in the US are being financed. This is a massive pain point and a huge addressable market. Prima Health Credit (PHC) was born to provide a one-stop platform for professional healthcare services and outpatient care providers (which represent 62% of the out-of –pocket health care expenditures). The […]

Healthcare credit: a $510 bil under-addressed market

Only 20% of the $510 billion out-of-pocket annual expenses in the US are being financed. This is a massive pain point and a huge addressable market.

Prima Health Credit (PHC) was born to provide a one-stop platform for professional healthcare services and outpatient care providers (which represent 62% of the out-of –pocket health care expenditures).

The total US out of pocket expenses are comprised of the out of pocket payments for insured patients, which in 2015, was $420 billion. Added to the over $90 billion out of pocket for elective care procedures (dental, cosmetic).

Prima health credit wants to change how elective care providers and patients use healthcare financing by offering simple, easy to use, mobile friendly lending platform. The company is helping healthcare providers extend point-of-care credit to patients without having to create an entire back office to handle the transactions.

Company history

Prima Health Credit is based out of Newport Beach, CA and was launched in 2014 with a seed capital of $1 million and in June 2015 they raised another $1.2 million. It was founded by Brendon Kensel, an experienced entrepreneur, with his particular focus on fintech, ad tech, and sports tech. Before starting Prima Health Credit, Brendon was President of MediaShift, a next-generation ad tech company that monetizes Wi-Fi networks.  He was also the co-founder of Elite Smiles, a south Californian chain of orthodontic clinics. The start-up has recently been able to bring Hugh Bleemer on board as Chairman. He was Senior Vice President at JP Morgan Chase and has spent several years in retail banking. He was also the president of Chase Health Advance, which he built from scratch to 1 billion dollars in size.

Product strategy

Prima Health has 2 products for healthcare providers: they can outsource their financing function to Pay Assure or they can start offering financing thanks to Loan Assure.

Pay Assure – the payment management turnkey solution helps medical offices with existing financing functions outsource their loan underwriting and servicing functions.

Loan Assure helps the healthcare providers to make more income by developing new in-house patient financing programs. Loan Assure focuses on the healthcare provider who has not implemented an in-house patient financing program. Loan Assure helps the health care providers to improve efficiency and reduce cost. PrimaHealth Credit manages loan originations, servicing, and collection for in-house loans.

Because most marketplace lenders serve a relatively homogeneous client base they can create a one-size-fits-all credit scoring model. That is not the case with PrimaHealth Credit, with each model using more than 200 separate data points. Each specific healthcare area has its own unique characteristics which need to be assessed.

Business model

PrimaHealth generates it’s revenue by charging the patients an average APR of 19.99%. The entire application is done electronically and the solution is cloud-based. It is a SaaS solution for the client. When a new client comes onboard, they provide them guidance on default rates across all the credit tiers, so the providers know what to expect from this program.

Pay Assure has a unique business model, it is based on medical bills that are hard to underwrite like addiction treatment, weight loss clinic etc.

Pay Assure enables the healthcare provider to use a cloud-base network to send the credit application via SMS or email. The online application has only 12 fields and is easy to fill. After the completion of the form, the loan is immediately underwritten and the decision is made right away whether the loan is approved or not.

Pay Assure has multiple payment options.

  • Equal Payment Plans- No interest and Low-interest equal payment plans are offered to patients by Prima Health Credit with regular repayment terms.
  • No Interest Equal Payment on certain procedures – No interest is charged if loans of $300 or more are paid in full within 3, 6, 12, and 18 or 24 months. Low-Interest Equal Payments Plans are available for loans over $2400 or more, starting at 14.99% APR if the loan is paid in full within 24, 36, 48 or 60 months.
  • Minimum Payment Plans- With low monthly payment patients are able to afford most of the treatments. No interest is charged during the promotional period. At the end of the promotional, whatever amount is left either can be paid full or can be extended to 12 months more at 24.99% APR.
  • Alternative Payment Plans- This is available for those who do not qualify for the Equal Payments or Minimum Payment Plans. Minimum down payment is required by the patient and loans are available at 19.99%

Legal Framework

PrimaHealth Credit provides the disclosure, note, and payment documents which are signed by the borrower and money is disbursed. It also provides service and collection on the behalf of doctors.

PrimaHealth is registered and operating in California, Texas, Florida and Oregon.

Future steps

The management believes that they have a better product because while testing the products in the market, they also considered the lessons they learned from the recession, that having a good credit-scoring model was not sufficient for the product or company to last the recession. Since, their management has extensive experience in dentistry, orthodontics, and vision care; the company decided to focus on those sectors and developed scoring models focussing on each segment separately.

PrimaHealth Credit plans to expand to more health care areas because of high demand; another segment they are considering to expand in is deductible financing. For marketing, it focuses on Doctor’s office and there are no charges for the practitioners if they want to join. PHC is different from other fintech companies as it does not have any balance sheet risk and is a service provider. But it needs to bring third-party lenders on the platform so that it can also cater to healthcare providers who want to outsource not only credit monitoring and disbursal but the entire finance portfolio from their balance sheet.

Author:

George Popescu