JPMorgan and VisitPay launch financing option for hospitals

Patient financing company VisitPay on Thursday unveiled a new venture with JPMorgan Chase that will temporarily lift unpaid medical bills from health systems' balance sheets while helping patients pay them off.

The companies' new recourse financing venture expands on Boise, Idaho-based VisitPay's existing online portal that patients use to manage and pay their bills. In an era of increasing enrollment in high-deductible health plans—currently about 40% of the employment-based market—patients are on the hook for higher proportions of their medical bills. Meanwhile, healthcare consumerism is hitting health systems' bottom lines, according to VisitPay CEO Kent Ivanoff.

The plans offer health systems a low-cost capital source and more liquidity, “so they can focus on what they are best at, which is providing healthcare to patients,” Ivanoff said. “We can help them take care of consumers on the financial dimension, but always in accordance with a provider's policies.”

This is not a traditional debt sale in which a third-party buys patients' unpaid bills from a provider and attempts to collect on it. Under those arrangements, buyers typically have broad sway over how they can collect the debt, said Todd Cole, vice president of sales and marketing with Cincinnati, Ohio-based Medical Recovery Systems.

“The buyer could then perhaps decide to be a little bit more aggressive than the hospital had been in the past,” Cole said.

In VisitPay's scenario, patient balances transfer to VisitPay behind the scenes and VisitPay handles the financing under an arrangement that's co-branded with the health system. Each month, VisitPay bills the customer and works within their chosen financing plan.

The arrangement helps health systems maintain good relations with their patients, hopefully creating repeat customers, Ivanoff said.

“Probably the most important thing to us at least is we really protect that relationship between the consumer and the provider in a way that's completely consistent with their brand,” he said.

Under VisitPay's arrangement, if patients default on bills, they go back to the hospital. That's different from a traditional debt sale, in which a hospital is no longer responsible for the debt.

In Cole's experience, though, hospitals typically prefer the latter option, which lets them make a sale and focus on patient care rather than getting the debt back down the road.

But Mike Ginsberg, CEO of the strategic advisory firm Kaulkin Ginsberg, said he thinks there's a growing demand for recourse financing arrangements like this one, especially given the current regulatory environment in which patients are responsible for larger portions of their medical costs. This gives patients and providers more flexibility in paying their bills.

“It's an emerging market and it's almost out of necessity,” he said.

Even with modest interest rates, Ginsberg said he sees this being a lucrative deal for a lender like JPMorgan.

Ivanoff said he thinks the product will be attractive to hospitals because it's backed by the capital provided by JPMorgan, a company that separately is partnering with Amazon and Berkshire Hathaway to try to figure out a way to cut cost in healthcare.