PeakSpan’s Thesis for FinPay
The PeakSpan team is thrilled to have led FinPay’s latest equity financing, joined by the Company’s existing partners at Montreux who have doubled down on the business. FinPay sits at the convergence of, not one, not two, but three of PeakSpan’s blueprint themes: i) Payments, ii) Digital Health, and iii) Customer Experience Management. At PeakSpan, we collectively have a quarter-century of experience in these markets, all of which underscore the brilliance of the FinPay strategy and the attractiveness of the overall market opportunity.
The team assembled at FinPay is a bit atypical for the scale of the business. On average, management has 25 years of experience (175+ years in aggregate!) [ageist remarks have been removed from this blogpost]. As we got to know Tim, Chris, John, Lauren, Eric, Stacey and Joe — it became clear that this executive leadership team sees what PeakSpan sees which is: an exceptionally large and untapped market opportunity surrounding one of, if not the biggest pain points in healthcare today — payments. You know what they say about when preparation experience meets opportunity. This is FinPay.
FinPay is a provider of pre-care engagement, education and payment solutions focused initially on the behavioral health market. The Company’s platform improves patient financial experiences while significantly increasing the percentage of payments collected by the provider. The business has taken a fully managed approach thus far, orchestrating and optimizing pre-care patient financial experience through providing immediate access to care specialists and who are armed with real-time patient and insurance-related information, provider payment policies and pre-configured patient payment programs. The platform injects further intelligence into the patient financial conversation via consumer protection compliance tools, capacity-to-pay scoring, patient financial management analytics and situational risk stratification capabilities. In simple terms — the platform does two things — i) it greatly improves the patient experience through immediate, transparent and straightforward communication surrounding the patient financial responsibility and ii) optimizes patient admissions and payments. The solution value is twofold: i) superior patient experience and ii) more (and higher margin) revenue for healthcare facility. Thirdly, there is an efficiency gain through care provider staff not needing to spend time on financial conversations. Left to their own devices, healthcare facilities are simply not active in pursuing out-of-pocket medical expenses, leaving significant potential revenue on the table (especially as out-of-pocket medical expenses are on the rise). The Company is developing and rolling out healthcare-facility facing functionality which will allow FinPay customers to work the FinPay magic on their own terms or in a hybrid environment where both the admissions professionals and FinPay specialists are harmoniously driving optimal patient experiences and payment results.
Below is PeakSpan’s thesis for FinPay:
FinPay attacks one of the largest, most opaque and costliest pain points in healthcare today, the payment. Specifically, the Company approaches this pain point through offering its pre-care engagement, education and payment platform. FinPay pairs a robust set of product capabilities with highly-trained and qualified payment specialists to deliver a fully managed, end-to-end patient financial experience solution to its customers. The magic of FinPay’s solution can be depicted across three pillars: i) the solution is focused on pre-care payments, driving more payment volume through education, automated payment plans and orchestrated, data-driven patient conversations, ii) FinPay has several modules such as the risk stratification engine and financial policy builder which supercharge the patient financial conversation and iii) the solution is fully-managed, offering the customer do-it-for-me automation and greatly reducing the risk of the program failing. The strategic and high-ROI nature of the solution (FinPay collects 82% of Patient Financial Responsibility (or “PFR”) vs. the industry average of 19%) leads to a highly profitable situation for both the customer and FinPay (despite the usage of patient financial specialists, FinPay operates with high gross margins, a metric that continues to improve with scale and further investment in technology). The Company started in the behavioral health vertical where FinPay is the emerging market leader. The team at FinPay has lots of experience in this space which when paired with recent momentum of new customer wins, has led to an extremely strong, self-reinforcing reputation. The behavioral health segment is attractive for FinPay who benefits from a larger % of patient financial responsibility (relative to other verticals), a heightened importance around pre-care engagement, and a large TAM with little-to-no competition today. We’ve identified several trends supporting our thesis for FinPay, listed below:
- Behavioral Health Growth: U.S. behavioral health projected to grow from $78B in 2021 to $99B in 2028, a 3.6% CAGR. Further, 1 in 5 adults suffer from behavior health issues; 1 in 4 have a mental or substance abuse disorders
- Provider Financial Health: 31% of hospitals are not profitable today and others are breakeven (aggregate operating margins of ~7%)
- Rising Patient Financial Responsibility: increased patient liability: high deductible health plans will continue to pressure healthcare utilization. We have seen a 30% increase in patient healthcare costs including deductible and out-of-pocket max payments since 2015.
- Healthcare-Related Financial Stress: Recently, we have seen a 3x increase in healthcare bankruptcy filings
- Bad Debt Opportunity: ~50% of patient responsibility is written off as bad debt; ~70% of patients fail to fully pay medical bills. ~73% of providers report that it takes one month or longer to collect from patients
- Pre-Care Opportunity: only 10% of provider revenue is collected at or before time of service (FinPay collects 67%)
- Patient Financial Experience and Education: 92% of patients want to know their patient financial responsibility prior to a visit. 75% of patients say that understanding out-of-pocket costs improves their ability to pay for healthcare
- Digital Payments Opportunity: Healthcare payments is a $3.3T opportunity, 11% of which falls on the patient, or $360B. 68% of patients prefer electronic payment methods
- Pandemic Impact: the global pandemic will spur an increase in mental health and drug challenges over the next three years
- Market Maturity: revenue cycle management is a mature market. 15% of all healthcare revenue is spent on revenue cycle. In total $525B is spent between i) claims processing, ii) payments, iii) billing, iv) RCM and v) bad debt
FinPay has all the makings of a future market leader in the patient financial management space: i) a world-class management team, ii) robust market size / opportunity, iii) ample avenues of expansion, iv) a strong product / product roadmap, v) intense product-market fit and lastly vi) the team is executing against a focused mission with clear purpose. We look forward to supporting the team with capital and resource as they embark on the Company’s next peak of value creation.