Digging Deeper with HealthExpense: Disrupting the Intersection of Healthcare and Payments
Payment Week’s Andrew Barnes’ continuing series, “Digging Deeper,” is based in Silicon Valley and focuses on key innovators and how they are disrupting digital payments and commerce.
In healthcare, competitive landscapes are changing quickly and incumbents are scrambling to adjust and stay competitive, with big dollars at stake.
“The overall level of bad debt in healthcare is about $60 billion or more in healthcare today. Patient payments from you and I as individuals to doctors and hospitals is going to be about $400 billion by 2015.” “There is an overarching challenge in terms of commoditization of services and need to create better tools and engage members. ”
Andrew Barnes sat down with HealthExpense’s CEO, Vineet Gulati to talk about the challenges and opportunities for facilitating transactions and payments in healthcare and what to expect from HealthExpense in 2014.
Andrew Barnes: Thanks for sitting down with me today Vineet. Please tell me about HealthExpense.
Vineet Gulati: We focus on the intersection of healthcare transactions and payments. Specifically as we think about health savings, health reimbursement, flexible spending accounts and essentially tax advantaged accounts where there is a significant impact on individuals who are now responsible for a lot of the costs and deductibles that they have to pay for healthcare. We are using that information and using that data to create better patient and member engagement.
There are a few key things that we focus on within that intersection of payments and patient engagement. Providing tools for members to manage their healthcare costs. Aggregating claims information for health insurance carriers. Providing ways to match that up to health savings accounts. Improving their payment and pay-to-provider capabilities. Creating a significant amount of transparency in terms of the choices that patients made prospectively and giving them tools - not to just focus on healthcare shopping but really creating better access, so integrating it with some analytics or information that helps to make better choices, more timely choices, and address gaps in care.
Those are three or four different levers we pull in terms of better engagement. A lot of it starts in core areas like improving access to financial data and payment data and simplifying the payments that individuals have to make. A big part of our delivery starts to shift purely from being a very consumer-focused application or tool to an enterprise platform that is used by customers who may be third-party administrators, essentially TPAs. You will hear that term used quite often used in our discussion today.
TPAs are companies that may be part of a health plan or maybe a dependent to process and administer these advantage accounts. It could be a financial institution like a bank, which offers a health savings account or a health plan itself. It is these companies and their enterprise partners that we serve and we give them the technological tools to create better engagement, very similar to how financial institutions would offer money management and financial management tools for consumers to manage their costs to make better decisions outside of healthcare. We focus on healthcare as a vertical to provide those. That’s really where we start to differentiate ourselves in terms of how we deliver our capabilities to members, which is through those enterprise partners.
Andrew Barnes: Is that your primary channel, through those partners?
Vineet Gulati: Yes, we don’t offer a direct to consumer solution. It is completely white-label, integrated within those large enterprise partners. They already invested heavily into their processes, maybe doing claims management or maybe providing portals for members to make different types of decisions or information pertaining to the healthcare benefits.
For us to provide our technology, it wasn’t just that we could just launch a website or a mobile application. A lot of our effort goes into integrating our tools into the existing infrastructure, offering them APIs, offering them SDKs to develop and integrate our tools into their existing environment and providing tools for them to brand and change the experience so that each one is unique from one plan or one bank or one TPA to another entity. They are our primary channel. We work out long-term relationships and deals that are based on subscription or a share of the revenue itself for them.
Andrew Barnes: A share of the revenue?
Vineet Gulati: Yes, we do a combination of subscription-based deals or a revenue share type of arrangement with them, depending on what their book of business is and where they are placed in the market.
Andrew Barnes: In your first answer, you talked about healthcare and the problems that need to be fixed. Can you drill-down specifically on that?
Vineet Gulati: I think a lot of dialogue and policy discourse has happened over the last couple of years as a result of healthcare reform. It’s about the increase in healthcare costs and the need to bend the cost of healthcare. A lot of changes as a result of healthcare reform have happened in terms of exchanges and increasing the number of enrollments or covering the previously under-insured. I think those are all important social needs that healthcare reform is trying to address as well. If you step back and look at the underlying issues with healthcare, they are not new. They have just become more visible now. Increase in healthcare costs is a thirty-plus year problem. It really started to surface first in the late 70s, early 80s and the industry’s response to those types of issues has not necessarily been met with a lot of success.
We had Section 125 Cafeteria Plan flexible spending accounts. We had health plans experimenting with creating smaller networks where patients would had limited access.
Really, if you look at the problems that healthcare has, from my point of view; they are in three different categories. One is that there is a major access problem in healthcare. We have had a tremendous number of people who could not afford healthcare, who could not get insurance, so broadening access was, I would say, the first major problem. The second problem, which nobody is really addressing, is the infrastructure in terms of delivery optimization. Do we have too many or too few hospitals, too many doctors or too few at any given region?
If you go back and look at different studies around healthcare, delivery optimization is a major challenge in and of itself. If you don’t address those two, you really cannot address payment. Healthcare reform is really focusing on the first part of the problem, which is really by broadening access and insuring everybody. The theory goes that you will reduce costs. You will improve access to care and perhaps over time, you will change the way the delivery is optimized. As it relates to health expense, really the reason our solution makes sense right now in the market was that a net factor of healthcare reform was that it commoditized the services provided by the different customers that we have. You can get insurance without having to worry about preconditions. You can go to an exchange or go outside and really the costs are differentiated only by where you live and what age band you are in.
You can get a health savings account from pretty much any bank. You can go to any network and most of the provider networks are more uniform and homogenous than they were in the past. For all of these categories or enterprise partners, really their product has become much more commoditized than it was in the past.
Andrew Barnes: Product commoditization due to additional transparency?
Vineet Gulati: Yes, one of the obvious factors is transparency. When I think of healthcare reform, the implementation of the act itself forced a certain level of standardization on those problems as. Why would a health plan or a bank care about transparency? Why would they care about providing tools to their members? Why would they care about making sure that their members are not only getting the right level of healthcare benefits but are actually being served and provided with all these tool? It’s because you want to retain your best patients. You want to retain your best members and consumers, like any other industry.
That is one aspect of the problem where we see a number of enterprise partners now looking for solutions that are more focused on transparency, more focused on patient engagement and cost reduction.
HealthExpense solves another part of the problem by integrating the cost data, the claims data, the payment data, and the use of healthcare savings accounts and health reimbursement arrangement accounts. We remove one of the significant inefficiencies that happen in the administration of these types of plans, which is a concept of cost substantiation. Essentially, substantiation is to ensure that any medical spend, let’s say you go to a doctor’s office and you paid a certain amount of copay, that it is for the right medical reasons and it is an appropriate spend as well.
It is one of the hidden problems in the use of these accounts that the companies who manage these types of plans and arrangements have to continuously reject members. There is a lot of paperwork, a lot of inefficiency created around substantiation. HealthExpense actually removes all of that and makes the whole process paperless. That is a key value-add in terms of our product and it is probably one of the first levers that these partners pull. We move all the paper-based activities, all the manual inefficiencies that come into play by members receiving notices for proving that yes, the spend was correct, for instance, providing receipts. All of that goes away with HealthExpense.
There is an overarching challenge in terms of commoditization of services and a need to create better tools and engage members.
Then there is a second layer of value that HealthExpense provides after substantiation. This is the process of creating and providing visibility into future spends. We can really shape how members use healthcare facilities and services, and that they are focusing on cost-efficient choices and therefore, the right quality providers. This further reduces the cost. We provide value in both the historical management of costs when using these accounts as prospective choices for healthcare. Those are the two key areas where we now engage with some of the largest partners and are in the process of implementing and providing solutions for them.
Andrew Barnes: Sounds as if your partners are the ones in the middle having to make tough decisions about delivering a leaner, more intelligent healthcare solution. Is that accurate?
Vineet Gulati: Yes, a lot of energy goes into focusing on reducing cost without really understanding that you can’t really reduce cost without improving access to care and making sure that the care is being delivered at the right level in an efficient manner. Really, when we look at transparency, our focus is not about creating a shopping capability that fits all. We provide the tools for individuals to be able to make meaningful comparisons about quality and positive behavior of providers, use the right provider within the network, whether they are in or out of network.
You can’t just go and provide a low-cost avenue or channel to provide this because that ignores the fact that providers have to focus on creating better, more efficient services.
Andrew Barnes: Sounds like you are positioned where payments intersects with healthcare, analytics, and marketing.
Vineet Gulati: That’s one aspect that we dealt with early on. We were dealing with individuals who had - let’s say a health reimbursement arrangement account. Let’s say you have a Blue Shield plan with $5,000 deductible, which is not that uncommon now. The employer will say, “That’s too much, let me share some of that burden and I will pay the first $2,000 or first $3,000. It’s really the employer’s determination on how they design the benefit.
We were helping ensure they were paying the provider on time and that they had the information necessary. We did not handle the payment itself right up front but we facilitated the transaction to happen. They had already paid, they could get reimbursed, or they could pay in time. What we are seeing is that as we get into more of the actual payment stream ourselves, because we are dealing with both the financial and the healthcare claims information in tandem, several opportunities open up and can create potentially significant amount of scale for the business over time.
One major emerging problem in healthcare is around bad debts. Most patient payments where the patient’s responsibility is over $200, and there is a significant chance that it will get delayed. Industry trends & statistics indicate an average of 3 statements have to be sent before patient payment obligations are settled. The overall level of bad debt in healthcare is about $60 billion or more in healthcare today. Patient payments from you and I as individuals to doctors and hospitals are going to be about $400 billion by 2015.
It’s a major area of healthcare, which has now essentially moved away from the historical model where the employer pays everything to individuals not only paying for premiums or sharing the cost in premiums but paying in the form of higher deductibles. We see opportunities for us in areas where we can provide value, like improving the certainty of that payment for the hospital and providers themselves. This has significant value in not just improving certainty of payment, but in creating mechanisms where that payment can happen earlier, tying it to certain types of incentives that the provider may wish to offer.
The concept of prompt pay is something that is emerging that has really allowed the provider to incentivize an early payment for a major scheduled or elective procedure. Let’s say you have some type of surgery or a certain type of care in the hospital. The last thing you want to do is deal with that payment of several hundred dollars when you go for that care. If you leave and get that care and move away, there is a significant chance that the actual payment will be delayed. What we are looking at is how to move that payment to a point of scheduling versus paying it after the care itself. There are several things as it relates to innovation around payments that we are engaged in, not just in facilitating the data, but actually the transaction itself.
Andrew Barnes: Maybe a finance piece in there as well in the future?
Vineet Gulati: Yes and that is definitely an avenue which is being looked at in healthcare. How do you finance these ever-higher deductibles? Historically it was all done through health savings accounts and reimbursement of flexible spending accounts but now some of the largest institutions are looking at them saying, “How do you turn that into more of a service that finances these costs up front and helps individuals have more certainty about paying those after the fact?”
Andrew Barnes: Let’s talk a about you Vineet. How did you get to HealthExpense?
Vineet Gulati: That’s a good question. I come from a CPA background and was in healthcare or pharmaceuticals and healthcare. I was at Capgemini and a number of years before that, with companies such as Deloitte and KPMG. One of the core values that I learned was, “how do you deal across a very, very broad section of the industry all the way from research and development to drug distribution and payers and providers?” I’ve had a lot of experience working with different types of enterprise and partners across all the way from the FDA to payers and providers. One of the things that ended up happening when I moved to this area in 2000 was that the industry practice at Capgemini was very small. We really started to rebuild that practice and one of the things that we learned along the way was you really have to build trust and make sure you are delivering for your clients on an ongoing basis and that they trust that you will deliver things on time and that they will work.
Andrew Barnes: Can you tell me about the role that data and data analytics plays for you?
Vineet Gulati: One of the things that we do is if you are familiar with financial services and tools like Quicken, we aggregate the cost data on behalf of consumers. It is not just designed to be a medical bill and cost aggregation play for us. It is designed to support and simplify their basic needs. They want answers to questions such as, “How much do I use my health savings account for? Do I pay that bill? Am I funding the account correctly? Am I getting the right type of information to know that my employer’s benefit plan is set up correctly?” Those problems around substantiation and use of these accounts record basic transaction problems. Typically, it is not the problem that everybody looks at and says, “I need to solve that.” It is not the biggest part of the industry and it is so much of a tactical transactional problem that it is not intuitive and obvious that everybody needs to look at. People just get used to grappling with it.
We focused on that because it gives us clear visibility in terms of the data itself. We aggregate the data on behalf of the members. It is never sold outside. That is why we don’t have free affiliation in the market because the individual to simplify their life, to simplify their reimbursements and payments to give them better tools and make better choices, owns that data. You are right, that data becomes the core of all the decisions that come either around incentives, around transparency, around bill payments and that’s why the focus is on that basic problem up front.
Andrew Barnes: Can you tell me about any announcements that that we should stay tuned for?
Vineet Gulati: We have haven’t publicly gone out and done any kind of releases but in the last four months or so we have signed some major partnerships and contract relationships with companies that serve a very large chunk of the consumer-driven healthcare marketplace. These are companies that will either support the categories of customers or provide the enterprise back to those partners or the companies that are in care management and support large self-insured employers by providing disease management, care management, and those kinds of services. Those are the types of relationships we look for. Those are multi-year mutually beneficial value-added partnerships that we focus upon; those very strategic partnerships that help us capture a large chunk of the market over time. Those are some of the announcements that we will be making in the near future.
They are signed and in implementation. In some cases, they are rolling them out right now. In some cases, they are going to be rolled out in the next couple of months.
Andrew Barnes: We will stay tuned for that. Lastly, HealthExpense is located in the Sunnyvale Plug-and-Play Center, which is a crucible of entrepreneurial activity. Any thoughts about working in Silicon Valley?
Vineet Gulati: One of the things about this place is that there is a higher level of acceptance for the struggle that is associated with starting and conceptualizing a business. Understanding perseverance and the fact that failure is much more prevalent when you form a business or start a company than most people realize.
I would say the biggest value for me personally is that even though it took us a good couple of years to really understand the market, understand the client needs in a way that I would say is reasonably scalable, we were still able to go ahead and communicate that value to potential investors and customers who then responded from other parts of the country and from England, India and Canada. It is not easy to start a company. It’s just that failure is considered as much an asset and in some cases more than success.
About HealthExpense
HealthExpense helps health plans, administrators and employers; increase member engagement in healthcare marketplaces through simplified medical bill management and payments, healthcare shopping tools and tailored incentives for efficient choices resulting in reduced healthcare costs.
About Vineet Gulati, CEO
Vineet is the founder and CEO of HealthExpense.com. He has over 20 years’ experience in the Healthcare and Pharmaceuticals industries. For Capgemini, he led the Western US Region Pharmaceutical Consulting Practice, growing it from $3m in 2002 to $45 million in 2006. Vineet has a Bachelor of Commerce in Accounting and Finance from the University of Delhi, India and is a Chartered Accountant certified with the in England and Wales, UK.
Andrew Barnes, Senior Executive Writer, Emerging Markets
Barnes is a self-confessed payments and commerce “geek” working in Silicon Valley and San Francisco. He utilizes c-level relationships in tech, startups, retail, and financial institutions to identify emerging market opportunities and analyze challenging business models. Barnes recently launched “Digging Deeper,” a published series focusing on startups and key innovators that are solving digital payments and mobile commerce problems worldwide. He has held executive business development positions in Asia with Sprint, Global One, and 2Roam Mobile, and is an Advisor to the Electronic Transactions Association (ETA). Barnes has an MBA from Waseda in Tokyo 早稲田大学大学院 and a BA from Penn State. He can be reached on Twitter @AndrewinSV and Linkedin.