Healthtech x Fintech’s Biggest Prize: Financial Operating Systems for Healthcare | andreessen horowitz

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Consider this: Most healthcare providers are blindsided when it comes to their finances.

Once a medical provider treats patients, they do not know exactly how much they will be paid, when they will receive payment, and if that payment is more or less than what is owed. In many cases, providers lack insight into whether they will be able to make payroll based on expected inflows of cash from insurance and patients. This is true for most independent medical practices and even many large hospital systems.

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This is especially sad after arguably one of the toughest years in recent history for providers in terms of financial performance. In 2022, even the most prestigious hospitals were severely unprofitable, and overall visit volumes and payment rates displayed the volatility that has been detrimental to most traditional medical practices.

For healthcare providers, electronic health record (EHR) systems serve as the clinical source of truth, but the financial source of truth does not yet exist. Most industries (let alone $4 trillion industries) don’t work that way!

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Why is this so in healthcare? It is concerned with the flow of money, and the lack of healthcare-specific systems for accounting and financial planning that track the flow of money. Here’s a specific example of how money moves when a patient visits a provider:

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A patient visits a healthcare provider. They are asked to share their insurance information and accordingly, they will pay their co-pay and—if the provider checks eligibility—the bill covers the part of the insurance. Or, the patient will pay out of pocket or be billed directly if not using insurance.

Then, the provider provides care and sends a summary of that care to the internal or external medical biller. That person converts that document into billing codes (known as “CPT codes” and “ICD codes”) and figures out how to format the claim to be accepted by the insurance company. Each insurance company and plan product may have slightly different forms and deposit requirements.

Then again, the biller doesn’t usually send the claim to an insurance company (as one might think). They send it to something called a clearing house, which is an intermediary between the provider and the insurance company. The clearing house reviews the claim, and may later reject it (if, say, the CPT code doesn’t match the services provided), or pass it along to the insurance company if everything appears to be in order. .

Once the claim is with an insurance company, the insurance company will send this information back to the clearinghouse to adjust the claim based on factors such as contractual agreements, secondary payers, benefit coverage, and expected reimbursement and insurance. Then, the insurance company will pay the doctor for what they determine they should do.

Next, up to 90 days after the claim is submitted, the provider will receive this money (in most cases via a paper check in the mail) and try to figure out what they need by manually digging through their bank account, EHR, RCM Why was this amount given? , and unique payer contracts. If they are able to catch payment discrepancies, the provider may try to fight for more money, or go after the patient and try to get the amount that the insurance has not paid.

In other words, it is no wonder that medical practices have no idea how much money they will make and when!

The above process is called revenue cycle management (RCM), and there are countless vendors that handle it (it’s a multi-$100 billion industry today). But most of them do not comprehensively track accounts payable and accounts receivable relative to the actual cash balance of the practice. Thus, we have found that healthcare providers are fraught with financial problems, including but not limited to:

Disconnect between clinical and financial data: Most doctors’ offices think of the EHR and/or Practice Management System (PMS) as the operating system (OS) that runs the practice. These tools include some billing data but are far from being sources of financial truth. The most complete (though rarely complete) financial picture exists in general ledger (GL) tools, such as QuickBooks and Sage, or enterprise resource planning tools (ERP), neither of which are built for the intricacies of health care. Is. GL and ERP are rarely integrated with the practice’s EHR or RCM, but if they are, it’s usually a hacky plug-in that breaks when payer contracts or CPT codes are updated. This leads to inaccurate revenue figures and … surprisingly. Manual revenue reconciliation: Given the lack of EHR integration, accounting departments export spreadsheets and manually reconcile EHR codes, RCM data, and finals at the end of the month or quarter. Compare insurance payments. This leaves significant room for error and makes active cash flow adjustments nearly impossible. We’ve heard several anecdotes from practice and hospital CFOs that they were owed millions of dollars several months after the fact because of errors in accounting. Rudimentary business forecasting: Most strategic planning is done through exporting (which is often inaccurate) historical financials from the general ledger, and using that data to build ad hoc models in spreadsheets. In addition, most practices do not have a very good sense of how much they expect to receive from each payee and over what time frame, which makes cash flow management a challenge. Lack of Healthcare-Specific Tooling: The vendors current financial technology stacks for providers are not healthcare-specific, meaning they were not built to easily capture the complex flows of money in this ecosystem. They are also not built for the upcoming wave of increasingly complex financial structures (eg, value-based payment) and regulatory compliance with Medicare and Medicaid. Limited Access to Debt Financing: With manual revenue resolution processes that make it difficult to predict the timing and magnitude of outstanding claims payments, health care practices often have trouble accessing affordable debt financing, as lenders tend to lose money in the business. Prefer to underwrite simple and repeatable flows of This has many consequences for the practice, ranging from lack of ability to expand (eg opening a new practice) to bankruptcy (eg being unable to make payroll).

While the above may feel like an insurmountable web of administrative issues, with great pain points, come great opportunities. We at a16z believe we are in the early days of a huge wave of healthcare fintech innovation, and Financial OS for Healthcare can serve as the system of record for it all. A financial OS for healthcare will act as a real-time, action-oriented engine that pulls together financial data from EHR, RCM, banking and credit products, and payroll to become the financial system of record for the practice; predictive analytics to surface opportunities for proactive and reactive improvements; and a trusted source of truth for lenders, vendor partners and insurance companies when underwriting loans or contracts. We are looking for builders to deal with some or all of the below product features as a wedge in the wider opportunity:

Automated budgeting and forecasting: Streamline and up-level financial planning and analysis (FP&A) by pulling accurate, comprehensive and real-time financial data that enables finance teams to refocus their time on strategic financial assumptions and decisions. Smart Revenue Solutions: Ensure consistency across claims (EHR), submissions (RCM), and final records (GL) tools primarily through real-time data integration and up-to-date Chargemaster linkage. Financial Regulation Module: Offer out-of-the-box bookkeeping infrastructure for complex corporate structures such as value-based care or managed service organizations (MSOs). Help clients navigate federal and state-by-state regulations and reporting compliance.

Products with these qualities are well positioned to become the financial source of truth for accounts payable, accounts receivable and other payment flows through the exercise. From here, businesses can expand to a wider product footprint (and higher annual contract value) by integrating bank accounts, credit cards, expense management, asset-based lending, patient financing, claims coding, and even adjacent financial products. The doors open for. Data-driven revenue cycle management and payer contracts. A financial OS of this access and the centrality to the financial position of the practice holds the promise of re-orienting the focus of EHR (and care) from billing to patient outcomes.

Leaning into financial services has become more feasible with the widespread spread of fintech infrastructure, making it easier than ever for non-bank entities to offer financial services to their existing customers, driving higher LTVs without any incremental CAC Used to be. In many cases, systems of record are in a better position than banks to underwrite said customers, as they have access to all of the key operating data of the business. In fact, we think that either Waze—software or financial services—could be a viable initial go-to-market approach. Having said that, we believe it is essential that any business truly pursuing a complete financial OS for healthcare vision bases itself in the platform architecture referenced above, and the core software Takes strong root in the form of functionality.

As healthcare increasingly accounts for a greater share of the country’s GDP – while still relying on disconnected, outdated financial rails – building in the healthcare x fintech space becomes more important to the health of the system as a whole . If you are working on any or all of the points mentioned here, we would love to connect.


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