Using Payments and Fintech to Solve Healthcare Affordability with Itzik Cohen of PayZen

Episode Overview

Our Guest: Healthcare Affordability with Itzik Cohen from PayZen

Itzik Cohen, the President and CEO of PayZen, is a dynamic figure in the world of financial technology, driven by a profound passion for the intersection of innovation and financial services. With a remarkable entrepreneurial spirit, Itzik has ventured into various sectors, including lending, healthcare lending, and debt settlement, amassing a wealth of expertise.

In 2021, Itzik, alongside his co-founders Tobias Mezger and Ariel Rosenthal, established PayZen, a pioneering initiative aimed at addressing the pressing issue of healthcare affordability. Drawing on his extensive experience and visionary leadership, Itzik embarked on a mission to combat the challenges that many individuals face in accessing affordable healthcare.

As a serial entrepreneur and tech veteran, Itzik Cohen is at the forefront of driving positive change in the financial landscape through innovation, making him a compelling guest to explore the transformative power of fintech in addressing critical societal issues.

Episode Transcript

Itzik Cohen: Our goal is to solve affordability for the ability can be solved in some cases with breaking down a big bill to some payments and issue a payment plan or an access card. But in some cases you just need to prove that somebody is poor enough that they meet financial services or financial assistance. Guidelines prove that underwrite them, integrated back to the provider and you did your job. We solved the problem without lending $1. So what I’m trying to say is we’re trying to focus on solving the affordability problem rather than being biased towards any solution. Data will drive the solution.

Jacob Hollabaugh: Welcome to PayPod. The Payments Industry Podcast. Each week, we’ll bring you in-depth conversations with leaders who are shaping the payments and fintech world from payment processing to risk management and from new technology to entirely new payment types. If you want to know what’s happening in the world of fintech and payments, you’re in the right place.

Jacob Hollabaugh: Hello, everyone. Welcome to PayPod. I’m your host, Jacob Hollabaugh. And today on the show, we’re going to be taking a look at the healthcare industry and how payments and fintech can lead the way in solving the massive affordability problem that exists in the world of healthcare today. As always, I’ve got an expert guest to help talk us through these topics. I have the pleasure of being joined today by Itzik Cohen, co-founder and CEO of PayZen, the Operating System for Health Care Affordability. Welcome to the show. Thank you so much for joining me today.

Itzik Cohen: Great to be with you.

Jacob Hollabaugh: Let’s get a little background before we begin. When did you first entered the world of fintech or finance at large, and what brought you into that world originally?

Itzik Cohen: I’m originally a technology person from the late 90s, was one of the early guys that the early team in Webex Communications or using Zoom, but it was a WebEx before that. We went public in 2000 and obviously, we sold the company to Cisco in 2007. I started my fintech career really in 2012. I was a part of the executive team at Prosper Marketplace. You probably remember the Marketplace lending 1.0, kind of the group with Lending Club and a font and Sofi and all those. We did a lot of great things there, and that was actually my first foray into fintech since then. In 2016, I started a company in the debt settlement space called Beyond Finance. I think it’s one of the largest ones in the country right now. And in 2019 I started paying them with my two co-founders.

Jacob Hollabaugh: And what was it maybe about the health care industry you saw that needed improvement or just where did the idea originally come from and make you think, This is where we want to take my background in fintech and apply it to this industry?

Itzik Cohen: Look, at the end of the day, when you think about fintech, I mean, we’re trying to disrupt or improve a massive market with technology and innovation, and you’re always looking for verticals that have not been transformed with technology and innovation yet one of those areas became pretty clear to me and my two co-founders where there were two data points that really led us there. Prosper Going back to my Prosper days, we were looking for different types of products that we can offer and extend more credits to individuals in the US. And we realized that the healthcare market is massive. It’s a $4 trillion economy, right? So we ended up acquiring a company in the space that was offering a way to pay for elective medical procedures. So we go to a dentist to do a plastic surgery, fertility clinics, etcetera, etcetera. And when we looked at the big data set, we realized the bigger problem is not in the elective side, it’s actually in the non-elective side. And a lot of it is fueled by essentially the consumerization of healthcare. Essentially, you look at the way health plans are being structured these days.

Itzik Cohen: Most people are picking high-deductible health plans. They shift of payment responsibility from payers. The insurance companies to the patient has been pretty massive and pretty fast. And an average family is finding itself with themselves with a 3000, $3,500 a year out-of-pocket expectation that I’m just not ready and not budgeted for, etcetera. So essentially that was the first indication that there’s a real problem here. What I did next was, like I mentioned, is Beyond Finance, which again dealt with consumer debt, debt settlement. And the last data point that really struck me was that the fastest growing type of debt we were enrolling into our debt settlement programs was actually not credit cards, not personal loans. It was medical debt.

Jacob Hollabaugh: Wow.

Itzik Cohen: So all of those data points led me to believe that there’s something here. I didn’t know what it was yet, but there was something here that needs a solution. And nobody’s really addressing it in the right way. And that was the catalyst that started PayZen. Basically, the idea behind.

Jacob Hollabaugh: That’s fascinating and a true step-by-step journey of the last few stops showing you the problem, showing you a potential solution or path in towards a solution.

Itzik Cohen: It was data-driven for sure.

Jacob Hollabaugh: Yeah. Can you give the overview then, of who PayZen is, the services you offer now and the types of people you’re working with?

Itzik Cohen: Yeah, so I’ll continue the story. So essentially when we started looking into this problem and being entrepreneurs, we’re trying to really dig in and say, okay, where is the problem? Is it that people don’t want to pay their bills? We don’t think so. I mean, we actually have a thesis that most people are decent and try to pay their obligations. What is the problem? The problem has been that if you look at really the tech investments into health care, most of the tech investments, including financial processing, etcetera, has been devoted or directed towards the interaction between the payer, the insurance company and the provider, because this is where most of the value used to be. Providers, most of their revenue used to come from the insurance companies, but not so much have been invested into the interaction between the patient and the provider and because of consumerization, because of that big shift in payment responsibility to the patient. There’s so much friction now between patients and providers regarding a patient’s paying their bills that we are the first real technology solution that was trying to address that friction with technology. And the reason we’re calling it an operating system is not one solution with the product is because it’s so complex and there are so many reasons why people don’t pay that You have to take care of creating a platform and then apply different solutions that address different problems in different use cases because they’re all very different. And I’ll dive into it if we may. Essentially. Let’s talk about the market size, first of all, because I think it’s really important annually provide medical providers in the United States are billing patients after insurance about $430 Million. Just to give you a sense of the size of how much billing and what is being done, it’s growing at 15% a year.

Jacob Hollabaugh: So a lot of money to move?

Itzik Cohen: Yeah. Now, when you think about how many people are actually paying that in full, their bills in full, it’s around 20%. So only 20% of people actually end up paying their bills in full without any help. So when you look at the rest, the $360 Million that are remaining, how do you address that problem then? We think there’s several problems we’re solving. Some of them is just, hey, we need to help people pay that big bill with over time with no interest. So let’s give them a payment plan. Some people are meeting some charity or financial assistance criteria or eligibility, so we need to be able to automatically process those and underwrite for that charity and integrate back to the provider. None of this is done automatically today. Today, providers, because they’re not ready from an IT perspective, are using many different call centers, BPOs, a lot of manual work. They’re trying to use the phones process a lot of paper forms. It’s just not what you would expect from a 21st-century pathology. But PayZen is doing essentially is bringing an element of integration into the provider’s system. So we have a really good data flow.

Itzik Cohen: We have our own models and then we automate everything else on top of that with different solutions. So the first solution we started was, Hey, let’s offer the people that we see coming through the door from the provider side, people we think that they need help pay their bill over time. Let’s engage them with an offer to pay their bill with a payment plan. That was the most useful, the most used use case in the United States. You go to a doctor, you do something, your insurance pay something. 30 days later, you got a bill. How are you going to pay that? PayZen is helping you, paying it over time with no interest. And we accept 100% of patients. That’s another big north star of our product. We think that if somebody really wants to pay their bill, find a way for them to pay their bill. That’s the uniqueness in health care. Never charge interest, never charge fees. That’s another unique thing about this product. We don’t think we should make health care more expensive with adding interest to it. So that’s how we started and I’m sure can continue talking about it.

Jacob Hollabaugh: Yeah. Questions off of the end of that. The first thing before I ask you about a couple of kind of numbered things is in the current infrastructure, like the previous infrastructure before PayZen or anything, what were health care providers working off of as far as what happens when someone doesn’t pay? You mentioned it was 20% or so, could afford to pay in full or anything. What happened before if someone couldn’t pay their services or couldn’t pay them in time and they were sent to bad debt, what actually took place then that you’re trying to alleviate from happening by giving these payment plans.

Itzik Cohen: Variety of really bad experiences for the patients and very costly for the provider. Essentially, you’re being sent to collection. Eventually it could hit your credit score. I’m glad that the CFPB is stepping in now when it comes to limiting the exposure or hit on your credit score because of the medical payments. But at any rate, it was just not a good experience for patients who are really struggling and very expensive and inefficient for the provider. Now providers are really trying to do the right thing to try to help patients. With working with them. A lot of providers do have some payment plans that are homegrown, but providers are not financial institutions. It would be just like you would expect, Peloton or somebody, a merchant, to underwrite you for buy now, pay later the loan and put it on their balance sheet, and then set that loan for themselves as well. I mean, they’re just not set up for that. So providers were trying to extend some payment terms to patients, but nobody wants to carry that on their balance sheet for more than a year. So usually those payment plans end up being a 12-month term no matter what.

Well, if you have a $3,000 bill and you’re making $60,000 a year, you cannot pay $3,000 over 12 months, you’re going to have to do it over a longer period of time.

Itzik Cohen: Those options do not include or are not available to you if they’re being offered to you by a provider as much as they want to help.

This is where PayZen uses data to underwrite people’s ability to pay. Trying to use models that will say what will maximize your repayment success without overburdening you as a patient. Obviously, you responded to our offer to pay. So you want to pay. Now let’s find a better way for you to actually afford it and be successfully paying that rather than get behind or go delinquent because of it. So this is the first part that we do very well. The other thing we do for the provider is say the provider. Well, if you want to finance that payment plan. Then we can price the risk and bite off your head. So essentially you’re getting the money. Now it’s off your balance sheet. You don’t have to service it. You don’t have the risk. We take it on ourselves. And all providers that we work with are very interested in that option because essentially, look, they don’t want to be the bank. They don’t want to hold it on their balance sheet. They don’t want to service it themselves. They want to get the cash acceleration now and move on essentially. And that’s what we do.

Jacob Hollabaugh: Yeah, and you’re doing two incredible things for the providers. Then as you touched on earlier, it’s very complicated in time and costly too, for them to solve these payments and they want to get the money collected, but to collect it in the past version costs them a bunch more just to get to the end of it. But then the second thing that you’ve referenced a couple of times and I think is laid out really well in your site, I’d actually taken a note about it was really the basic statement of what fintechs and a lot of the great ones we talk to are doing is getting a business or a vertical or an industry out of the financial services businesses like it says on your site, you’re getting health care providers out of the financial services business. They don’t need to be doing that. They don’t want to be doing that. And they will gladly accept. I’m sure if you’re not charging any interest or anything to the folks actually paying these bills, you’re making the money from the provider side in some small way. But they’re happy to say we’ll take a tiny bit off of that to get rid of all this complexity and all of this. How difficult it is for us to, one, run this other business and get our money collected and everything else. So that makes a ton of sense. The couple other numbers question if you have them to speak to or not is with the increased volume of services, the one of the main kind of stated goals that pays and then is by offering these plans and things for the patients, you’re able to help more people afford these things, which should come with increased volume of services. Do you have any numbers or stats you could share on how many people are currently forgoing medical care because they don’t know if they can pay for it or they don’t think they can or they don’t know how they can?

Itzik Cohen: This is such a good question, Jacob. So there’s a new regulation that providers are struggling with, but they need to adhere to, which is basically called price transparency. Price transparency is a part of the No Surprise Bills Act. Essentially, patients were complaining that they’re surprised with these huge bills. Nobody told them they’re going to have to end up paying that. So providers are now required to run your insurance before you do any procedure and disclose to you really accurate estimate of what you’re going to end up paying out of pocket. This is great, but it doesn’t solve your affordability problem, essentially. Okay. Now you know you’re going to pay $3,000 out of pocket. You still can’t afford it. So what happens as a result of that is that affordability conversations are occurring before care, not aftercare. And what is driving people to do is to defer a lot of care that they actually need. So people are saying, I can’t afford it. I’ll do it next year if it’s not urgent. I’m just not going to do it right now. So two things are happening here. First of all, you’re limiting access to health care by people who really need that health care. And it’s bad for their health. And providers are doing less services because it’s like, to your point, the volume of services could decline. And providers on our platform already late last year started talking to us about this problem and said, Can we offer payment plans before care? And we actually thought about it together with them and said we have a better solution for this. We called the care card and I don’t know if you saw that on our website. We’re going to make it generally available starting next week, by the way. So it’s coming out of pilot, so the secret’s out of the bag here. But essentially this.

Jacob Hollabaugh: This episode will be released probably right around the day that those cards are. So it’ll be perfectly timed.

Itzik Cohen: But essentially, we had a pilot with two systems. Essentially, it works on the same platform, same decisioning, same underwriting, same financing. Essentially you’re getting an access card that a provider is issuing with their logo, by the way, and it’s locked to the provider. And when you talk about affordability pre-care, they’re asking, okay, you have a $3,000 out of pocket, are you going to pay for that? And by the way, can you put a deposit down and you say, well, I can’t afford it either. Yes, you can. Here’s a product you already approved just to activate your card. Give us your card, put a deposit down. It’s going to give you a payment plan that you can afford with payments that you can afford. Every swipe is basically going to turn into a payment plan. You know what you’re what you expect from your monthly payments. No surprises there. And take care of your health, essentially. The other thing it gives the provider is loyalty because you can’t get a card from one provider and then go use that card in a different brand. So it brings you back to the provider that actually sponsored that card. And the financing payment part works the same way as a payment plan. So essentially we created a product because of our innovation with providers. Now it’s only up with two providers for about five months now, six months, and it’s already 20% of our revenue. So we didn’t even release it. We have a huge waiting list of providers and that dynamic in the market where this conversation is about affordability are happening right here is a dynamic that I think we hit the right product at the right time considering the need in the market. And I’m glad that this is something that providers a really interested in. So we have high hopes for this product.

Jacob Hollabaugh: It sounds like it’s off to a great start showing that promise in the trials there. That’s a pretty big numbers for that low of a small of a sample size and trials and everything to be bringing in that much business. So that’ll be exciting to see how that goes. And that’s obviously a new layer of financial service or payment type that you’re adding into your platform and your suite. Are you purely the tech platform that connects already existing infrastructure in the payments and financial world, or are you taking on any of that infrastructure yourself? Are you actually holding money at any point doing any of that, or are you purely the tech platform, the API, that connects all of the already existing financial infrastructure?

Itzik Cohen: So we’re doing everything from holistically from A to Z, including the financing part. We are the ones who are financing it using our own credit facility and we do everything ourselves. Essentially, our future products will not include credit and financing. For example, when you talk about charity, it’s basically an automation play where we can take a transaction fee without lending. Essentially, when you think about it, if your purpose in life is to lend money, you’re going to look at lending in every situation. And I’m going to avoid that because essentially if you’re a hammer, everything looks like a nail. And when I told the team when we started the company, it’s like, look, our goal is to solve affordability for the ability can be solved in some cases with breaking down a big bill to some payments and issue a payment plan or an access card. But in some cases, you just need to prove that somebody is poor enough that they need financial services. Our financial assistance guidelines prove that underwrite them, integrated back to the provider and you did your job. We solved the problem without lending $1. So what I’m trying to say is we’re trying to focus on solving the affordability problem rather than being biased towards any solution. Theta will drive the solution. We just need to have enough solutions to address more of that wallet share that I spoke about before that remaining $360 Million that are not addressed right now with automation and are being addressed with, again, call centers, BPOs, manual work, administrative work.

Itzik Cohen: The way in the care industry amounts to 33% of the cost. Right. Try and make that better. And there’s a lot of low-hanging fruit there lying around. Right. So this is our goal. Now, you touched on another thing that I want to mention. Providers already invested millions of dollars in what we call the patient financial experience. Great products like Epic MyChart or Flywire have a great product or companies like Cedar. What our goal is to be the embedded affordability suite within those products. So essentially, if somebody’s using Epic, for example, we’re embedded in Epic, you don’t have to use PayZen and send them to PayZen. It’s going to be a separate experience. Think of it as the same situation, as if you use Shopify to check out financing. Options are going to be available to you within your checkout experience, and that is the expectation of people when they pay online. In commerce today, the expectation is that you’re going to have a pretty sweet experience and very digital. It’s all going to be well integrated. Health care is behind and we’re trying to take it to the next level when it comes to raising the game and technology and the digitalization of payments in health care, including all different payment options for the same level of of e-commerce, essentially. So that’s what we’re playing.

Jacob Hollabaugh: Yeah, it’s an amazing goal. And I want to come back in just one second to the kind of big holistic goal to close this out. But before I do, you mentioned you use the word marketplace earlier. And then just in that answer there, you mentioned some of the different solutions and not being focused on one, being focused on the problem, not the solution. But one of the other solutions that you’ve referenced a couple of times is the financial assistance. And I think you call it the affordability triage on there of being able to match people with the assistance that’s already out there and that they might qualify for, but they don’t know that they qualify for. Can you speak at all to the number of folks who that is? Or is that gap like that is there of these folks qualify for this stuff? This stuff exists, is there to help, but they just don’t know it. They aren’t being matched with it. And so one of your solutions is to be able to basically be that marketplace, if I’m reading it right, to match those people up to help again with the affordability.

Itzik Cohen: Just think of how much is being spent on the interaction on the phone or in person between patients and financial assistance or advisors or the provider side to answer their questions about what they’re eligible for and ways for them to pay their bill. When we’re connected to all the data sources, we have our own machine learning model and we know what you’re eligible for and what is the best product for you anyways, right? So essentially think of a chatbot, it’s an MLM-based chatbot essentially speaks many languages, opens 24 hours a day, right? You don’t need to call anyone. It can be on your mobile experience or web or whatever it is, and you can ask them questions like, My name is Jacob and I’m trying to do this procedure. We authenticate you, we know who you are. You allow us to pull data from you and you say, Jacob, we think you might be eligible for financial assistance. Let us ask you a few more questions. This is a conversation that is very natural, just like you would expect from a chatbot, like a GPT-type bot. But it’s for the purpose of understanding you, offering you matching you with the best option possible for you optimizing that, and then of course offering your product either by canceling your bill if you’re meeting financial assistance criteria or you should use the card, activate your card, it’s right here and there. So essentially you saved money to the provider by not somebody being on the phone for an hour without a solution. Better satisfaction. Again, it meets the expectations of people when it comes to digital interactions today with the providers or merchants that they’re using. And again, we have all the data to provide that immediate solution and triage the problem right there and then and close the problem. So that is where we expand our operating system with more and more solutions that address the same problem. So hopefully that answers that question. But that’s the goal here.

Jacob Hollabaugh: It certainly did. And it’s amazing work you’re doing. It sounds like incredible service to me and a wonderful way that a payments and fintech company can have such a positive effect on an industry and on that industry’s consumers. The final topic or big question then to ask is you rep I love that you are focused on that goal first and you’re not focused on one single solution, but just the goal and any solution that comes along with it. The big question then is, does do these things alone reverse the vicious cycle of patient affordability? A lack of affordable payment options leads to lower collection, which leads to the need to raise costs from providers, which then starts the cycle all over again. And as that continues, it gets worse and worse. Do you think solutions like yours and bringing affordable payment options, increasing collection rates alone will make a real dent in lowering patient out-of-pocket costs in the long term? Or do you think there are a lot more solutions that are going to be needed or other factors outside of just the payment side solutions that are going to be needed to really reverse this cycle? Because trying to make health care more affordable, trying to solve the affordability of health care, that is a problem almost anyone in the States would probably be behind and supportive of and interested in. So do you think this is the one kind of suite of things that can really reverse that cycle, or is there a bunch more and this is just a part of it?

Itzik Cohen: So instead of giving you anecdotal information, we’ll give you actual quantitative information because the proof is in the pudding, right? So I would say that providers who are using patient. In the first month already enjoyed 32 to 33% improvement in payment adherence. So that is a massive improvement. So we’re not perfect. We’re not going to eliminate the problem, but we’re making a huge dent when it comes to how many people now participate in paying their bills. And how is that helping the provider when it comes to several layers of value, meaning more people are paying, you’re getting a much higher velocity of payments than and you’re getting much happier customers and more volume because now more people can afford their care. So that from the provider side it’s a no-brainer. And then the only number I can point you into our when it comes to the patients because they’re getting a pretty bad experience if they’re not using something similar to this is our NPS scores, the NPS scores in health care, especially when it comes to payment and payment and health care is 20, right? It’s terrible. RNPS scored. The latest one is 71. Right. So obviously patients are really happy with the options we’re giving them, how we’re treating them, the experience they’re getting. It’s so easy transparent and fast to use our service. It’s very straightforward and we’re very proactive about it. You don’t have to go look for assistance. We’re coming to you and saying, Hey, we think you can actually pay this over time with no interest. So we’re getting a lot of great engagement there and those numbers are speaking for themselves. So,

Jacob Hollabaugh: Wow.

Itzik Cohen: Absolutely. We’re making a difference with this. This alone was not going to eliminate the problem, but we’re making huge progress when it comes to making a big dent here.

Jacob Hollabaugh: Yeah, it’s absolutely amazing. And I and I’m sure everyone listening certainly are rooting for you to make that dent as big as possible. And it sounds like we’re well on our way. The final question to get you out of here on then is a little bit of a business development question that I’d love to ask folks who’ve had successful careers across many types of fintechs as you’ve done. What do you see from your time in these different types of companies and working in different industries within the financial world or the fintech world? What do you see as the most important characteristic or characteristics? You can have a few, if you want, of a company that wants to be successful that you would be able to say, if this company has these couple characteristics about it, about its culture, about its goals, what have you, I think that would be a successful company in the world of payments and fintech.

Itzik Cohen: I’m old enough to speak from experience here, and I think that if there’s one leading characteristic that I’ve seen in successful companies that I was a part of is discipline and focus. We started the company exactly four years ago. We were turning cash flow positive next year already. Right? So obviously we’re doing something right. When you think about the last few years, there have been very challenging for a lot of entrepreneurs, especially in fintech, right? I mean, especially in health care. I mean, we started the company in 2018, then the COVID pandemic hit. Guess what you’re sending to providers who don’t want to talk about anything else other than COVID. So

Jacob Hollabaugh: Yeah. Can’t think of a better, more of a stressful company to be leading than one who works in financial. But in the world of health care, the last few years have definitely been.

Itzik Cohen: And then you have the bubble in fintech and valuations bursting sometime. And then you have earlier this year a banking crisis. I mean, at the end of the day, what kept PayZen successful is extreme focus and discipline. We didn’t drink any Kool-Aid on crazy valuations, and every funding we had was milestone-based. We achieved our milestones, we raised more money. We didn’t spend like crazy. And at some point maybe you would think about, Oh, you guys are not making enough noise and you’re not. Some of our investors told me like, Hey, you got to make some noise. We kept focus. It’s all about execution at the end of the day, and this is why we’re building a multi-billion dollar business being quiet about it. But essentially we don’t have a lack of Tam. It’s a massive market we’re going after. We have no real competition right now. So this is where you see companies that are successful is basically who’s leading the company, What’s the culture of the company? It’s all about execution. It’s all about focus and being disciplined. And I think that’s sticking to these principles is what’s going to make us successful.

Jacob Hollabaugh: Yeah, I love that. And as the great analogy you used earlier, if you’re a hammer, everything is going to look like a nail of don’t take the step forward or make that noise to appease someone. If you’re ultimately going to have to take two steps backward, like there might be three steps for you to take right over there. But if it’s a dead end, stop and wait and only take the steps forward that are going to stay there and you’re going to keep being able to go forward. So love all of that. This has been a real pleasure For those listening who may want to follow you or learn more about PayZen, keep up with everything the company has going on. Where would be the best place for them to go to do so?

Itzik Cohen: LinkedIn, Twitter, our website, we’re everywhere. And anybody who wants to either join the company or have interests, there’s a great channels to interact with us.

Jacob Hollabaugh: So wonderful. We will link to those and more in the show notes below. Thank you so much for your time and knowledge today. I’ve greatly enjoyed it and hope to speak to you again sometime soon.

Itzik Cohen: Same here. Thank you. I enjoyed it. Jacob.

Jacob Hollabaugh: If you enjoyed this episode and want to hear more, head on over to soarpay.com/podcast to subscribe on your podcast listening platform of choice. That’s soarpay.com/podcast.