The round, announced Wednesday and led by SignalFire, included participation from Link Ventures and 7Wire Ventures alongside previous investors Viola Ventures and Picus Capital. The funding brings the startup’s total investments to $20 million since it was founded in late 2019.
The San Francisco-based fintech company sells an AI-backed technology that hospitals, health systems and other large physician groups can use to figure out patients’ ability to pay for their care, whether that be regular visits for a chronic illness, an elective procedure or a much-needed surgery. If money is a problem, the medical provider can have PayZen bridge the gap between its billing department and the patient to set up an interest-free payment plan.
“The way we engage patients is not only after they have care, but before they have care,” Itzik Cohen, company CEO and co-founder told Crunchbase News. “We let them know that you can afford that procedure you’re supposed to do and you’re never going to pay more than you owe. Basically, we’re going to make it successful for you to repay it over time, … and, by the way, we approve 100 percent of patients.”
The startup’s business model relies on medical providers to pay for the platform and integrate it into their own internal systems. In return, PayZen’s product is meant to pay for itself by helping more patients pay their medical bills over time and streamlining the hospital’s billing process, Cohen said.
PayZen’s launch months before COVID-19 descended on the U.S. comes as data shows medical debts are rising dramatically in America.
A study released this year in the JAMA Network medical journal shows collection agencies held $140 million in medical debt from nearly 18 percent of Americans last year. And those numbers would not include any COVID-19-related debt, the authors note.
That’s up from 2016 when another study, published in health policy research journal Health Affairs, showed that about 16 percent of Americans had medical debt in collections totaling an estimated $81 billion.
Both studies found that in areas where health insurance was less accessible and median income was lower, the medical debt trended higher.
By the end of the year, PayZen expects to have 10 major health systems and hospitals signed up for its platform. One of its early success stories is Pennsylvania hospital Geisinger, where 82 percent of patients enrolled in the PayZen program after it was implemented and payment collection grew by 23 percent.
That’s the kind of response Cohen said the company was hoping for when it launched. The company sets up payment plans for both new and existing medical debt.
“Our thesis was if you give people a way to break down a big payment into payments without interest that they can afford—using data, underwriting and trying to maximize the payments access without overburdening the patient—more people will participate in paying their medical bills,” he said.
PayZen will use the Series A funds for marketing and business development as well as to grow its artificial intelligence and machine-learning technology. That work will help the company expand its underwriting capabilities, including in financial, medical and alternative data sets.
“Medical debt remains the number one source of bankruptcy in the U.S., and as a result, people are avoiding potentially life-saving care,” Chris Scoogins, a partner at SignalFire, said in a statement. “With PayZen’s zero-interest model, Americans can stop being forced to make the choice between a doctor’s appointment and a rent bill.”