Healthcare insurance, if you are lucky enough for it, only covers a subgroup of conditions in the United States. As a result, patients can often be burdened with horror story charges, such as large deductions, out-of-network expenses, and costly co-pays. For the illiterate and the uninsured alike, innovative ways of managing large bills are in high demand – especially as uncertainty remains around. How COVID-19 and prolonged symptoms will be controlled by patients and donors.
Walnut, founded by Roshan Patel, is a point of sale lending company with a healthcare twist. Walnut uses a “Buy Now, Pay Later” model, popularized by Affirm and Klarna, instead of helping patients pay for healthcare over a period of time, for a $ 3,000 chunk . Walnut works with healthcare providers to pay a patient’s bill through a $ 100-per-month increment for 30 months instead of an aggressive credit card swipe.
It’s a sweet deal, but Patel went on to say in more detail that he thinks Walnut stands out: Startups don’t charge consumers any interest or fees.
“Almost every ‘buy now, pay later’ company in e-commerce charges interest or fees, and each individual loan provider charges interest or fees, but we don’t.” “And this is really important to me, not to make healthcare more expensive than before. It is a very patient friendly product. “
Companies that now use purchases pay the latter model with zero interest or fees, are required to make revenue in some way, and in the case of walnuts, healthcare providers get a percentage of every sale or transaction. Have to charge.
If a provider has a collection rate of 50% for out-of-pocket, Walnut will go to them and say “Give us a 40% discount, and we’ll guarantee cash for you.” The startup will take the risk, and then the provider is able to make 60% of the collection rate.
Now, ideally, a provider would like to receive 100% payment, which is owed to them, but this is wishful thinking. Patel pointed out that a large number of bills go unpaid due to bankruptcy or default on payment (the average collection rate for out of pocket hospitals is less than 20%). Because of this, a company like Walnut has room to offer at least some stable upfront cash to hospitals, even if it is 60% vs. 100% of total bills.
The company uses a “comprehensive underwriting model” to find out if the patient should qualify for the loan. Patel says the startup goes beyond using credit scores, which he describes as “outdated metrics”, and instead looks at thousands of data points from various providers, ranging from party income to groceries and bills Used to spend on things like.
Walnut’s biggest challenge, Patel says, is to reduce the population and pay the healthcare provider in cash. It then gathers from the patient’s back end, which comes with its own risk.
“Being able to take this risk is a very challenging problem for low-risk patients, and I don’t think it’s really solved yet in healthcare,” he said.
The startup is beginning to work with small private practices of one to five physicians that focus on specialties such as dentistry, dermatology, and fertility.
A large part of Walnut’s success will determine whether it can attract people who really need flexible financing options. For example, the company does not yet have a hospital as a partner, which will tap a large group of patients, most in need of flexible financing options. Right now, “the only people who get alternative care surgery are those who can afford it.”
But Patel does not see it as disconnected; Instead, he sees it as an opportunity to broaden access to alternative medical care to more people.
“I talked to a guy last week who doesn’t have teeth and wants a denture, but it costs $ 6,000.” “That person should be able to afford it, and we enabled them to pay $ 100 per month for it.”
Walnut’s two largest customer groups are unlicensed people (who have lost their jobs since COVID-19), and consumers who have high deductible plans.
Walnut is not the first. Primisat Credit, Walnut’s closest competitor, offers a point-of-sale lending process for alternative medicine procedures. Think surgery like cataract work or dental work. The company said the service is currently available in Arizona, California, Florida, Oklahoma and Texas and will be expanded to all 50 states this year. By comparison, walnuts are mostly concentrated on the east coast and there are plans for a nationwide expansion by the end of this year.
PrimaHealth has an average loan size of $ 1,800, and Walnut has an average loan size of $ 5,000.
The company is currently working with a handful of healthcare providers in dermatology, dentistry and fertility. It has applied over 500 inpatient loan applications, exceeding $ 4.6 million in year-on-year application amounts. Patel says that Walnut has only accepted a fraction of these applications, but declined to share what percentage of the money it has lent so far. As Walnut refines its model, it may be able to cover other categories.
By this point, Walnut is lending from its balance sheet. To truly scale, it would need to obtain a new source of capital – either a credit line, debt financing round or venture capital – to lend more. Patel says the startup is negotiating with banks, and has turned down loan offers due to size and rate.
Venture Capital seems to be the solution for now: The startup announced that it has raised $ 3.6 million seed from investors including Gradient Ventures, AFF Capital, 2048 Ventures, Supernode Ventures, TA Ventures, Polymath Capital, Tech Ventures, Awesome People Ventures . Newark Ventures and NKM Capital. The Angels include CEOs of Giphy and PillPack and CTO of Rampm Financial as well as NFL coaches. The company is also a part of Plaid’s inaugural accelerator.
Patel said, “I don’t want to be yet another startup trying to offer you an unspecified insurance plan.”