Analysis Featured

Financing Unexpected Patient Healthcare Expenses

hospital bill financing

Americans spend over $400 billion out of their pockets on hospital expenses each year. The growth in healthcare costs has far outstripped inflation. Understandably, this has led to an increase in insurance premiums. In fact, if premiums were to cover all the benefits that a patient needs, they would be unaffordable for most Americans. As a result, benefits have decreased to make healthcare insurance more affordable. This has led to an increase in health plans with high-deductible expenses within the last five years.

According to Bankrate’s’ latest financial security index survey, 34 percent of American households experienced a major unexpected expense in the last year. Only 39 percent of survey respondents said that they would be able to cover a $1,000 setback using their savings. So an unexpected medical situation can push 60 percent of Americans into instant financial turmoil. Parasail was born out of the founder’s experience with a similar medical emergency.

How Parasail Makes Healthcare More Accessible

Parasail help patients plan, manage, and pay for medical expenses and helps healthcare providers (hospitals) collect more with zero-percent interest payment plans and financing. Patients can focus on treatment instead of payment because Parasail offers a suite of products that make medical bills affordable so that healthcare providers get paid right away. Affordable patient plans and patient financing empowers patients to make the right decisions for their health.

Hospitals collect 15 cents for every dollar spent on healthcare in the U.S. in a nation where the No. 1 reason for personal bankruptcy is hospital bills. Managing patient payments has become a major headache for hospitals. Parasail helps them secure predictable revenue so they can focus on healing and lowering default rates.

They underwrite the individual customer and ask the hospital to give a subsidy to cover the cost of capital. The startup then funds the hospital immediately and collects from the patient through an amortized schedule of payments.

The company uses both traditional and alternative data and machine learning algorithms for loan application processing. They can approve loans in 60 seconds. They have developed an in-house software that integrates with hospital systems and gives staff a dedicated suite of tools to engage better with patients and speed up results. Patients may also apply for financing from their smartphones or computers with no effect on their credit. Parasail sends an email or text invitation to patients to enroll in a payment plan and the patient gets approval for a plan they can afford. The company is also developing a white label solution for hospitals.

Parasail’s integration with billing companies and healthcare providers is the key component of it’s go-to-market strategy. The company integrates its offerings with its partners to offer a payment option to patients outside of the hospital’s system. Parasail ProPatient gives payment plans for the entire repayment period, and patient interest rates remain at zero percent for the entire term. Many alternative lenders offer recourse lending, but if a patient misses a payment or defaults on the loan, then the hospital has to repay what they were advanced. With Parasail, they assume the risk and therefore take the loss.

To date, the company has onboarded over 20 hospitals and has served over 20,000 patients. The product has a very high conversion rate for a consumer-lending product.

 

The Genesis of a Good Idea

Todd Kimmel is the company’s chairman and co-founder and came up with the idea with CEO and co-founder Adam Tibbs. Tibbs’ wife had an accident in 2014 that resulted in more than $11,000 in medical bills. The frustrations involved in paying and dealing with healtchare insurance led Tibbs and Kimmel to a groundbreaking idea. Parasail got off the ground in 2015 when they raised $7 million in seed money from Peter Thiel, Montage Ventures, and Arbor Ventures.

The company created a win-win platform that helps patients plan finances better through zero-interest loans. Parasail is focused on partnering with healthcare providers so they can help them recover a much larger percentage of their invoices.

The Size of the Market and Future Potential

The healthcare industry is a $3 trillion market. Tibbs believes $400 billion of out-of-pocket patient expenses will grow to $1 trillion in the next five years. He also predicts that consumers will ultimately be responsible for the first $5,000 of healthcare as the size of deductibles rise.

Parasail a massive opportunity and continues to scale and partner with hospitals. Its aim is to make healthcare affordable, and they are obsessed with finding a means to work directly with consumers at affordable pricing. They also plan to roll out four other products in the near future. A partnership with Lively, a Health Savings Account (HSA) platform for employers and individuals, helps patients pay off hospital bills with pre-tax dollars. Parasail has strong investors and proof of concept locking in the pole position a very lucrative healthcare financing market.

Author:

Written by Heena Dhir.

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