- Healthcare payments startup InstaMed is booming amid the coronavirus pandemic.
- InstaMed was acquired by JPMorgan a year ago for $500 million. At the time, it was the bank’s biggest acquisition since the global financial crisis in 2008.
- Healthcare payments are complex and largely non-digital. InstaMed offers a way for doctors and patients to pay and get paid online.
- Since the acquisition, InstaMed has retained nearly 90% of its employees.
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It’s only been a year since JPMorgan acquired healthcare payments startup InstaMed, but business is already booming.
At the time, it was JPMorgan’s largest acquisition since the global financial crisis in 2008, totalling $500 million. InstaMed was brought into JPMorgan’s wholesale payments business, a growing part of the firm’s corporate and investment banking unit.
The startup digitizes billing for healthcare companies and patients, giving JPMorgan exposure to the historically complex segment. And while JPMorgan’s wholesale payments business saw a 3% decrease in revenue year-over-year in the second quarter, InstaMed is seeing record sales as the coronavirus prompts healthcare providers to shift online.
“In the first half of 2020, we’ve seen our strongest bookings ever and closed our largest deal ever,” Bill Marvin, the CEO of InstaMed, told Business Insider.
“Healthcare has been impacted unlike any other industry by COVID,” Marvin said. “The industry is quickly realizing that an online payment strategy is critical. They’ve realized that contactless payments are critical, and cash flow is critical.”
Since the acquisition, InstaMed has retained close to 90% of its employees
Historically, big banks have seen startups as no more than technology assets to acquire, Marvin said. And that can result in a mass exodus of employees for the acquired company.
“If you were to look at this acquisition being done by a bank 20 years ago, it would have been more like somebody acquired a factory and they look at it like an asset,” Marvin said.
But InstaMed has retained nearly 90% of its staff since being acquired last year.
“It’s not just a ‘JPMorgan buys technology’ story,” Marvin said. “There’s something in it for InstaMed people too.”
And now, as part of JPMorgan, InstaMed employees have seen their responsibilities expand throughout the bank.
“We’ve actually seen a lot of mobility for our people because we’re so vertically focused in healthcare,” Marvin said. “We’ve seen people within our leadership team actually increase the scope of their responsibility as the bank has looked at us being experts in the vertical.”
And retaining tech talent is key to making the acquisition worthwhile. If the acquiring company can’t hang on to employees, the tech they buy can become outdated.
“If you don’t take a people-first approach, then as you look down the road, three, four years later, you might still have that technology. But if you don’t have the people, that technology is not going to get updated,” Marvin said,
InstaMed is seeing a surge in demand amid the coronavirus pandemic
With record sales in the first half of 2020, InstaMed is seeing heightened demand for its digital payments platform. And it’s onboarding new customers quickly.
“We’ve seen customers stand up electronic payments and remote payment solutions within telemedicine within a matter of days,” Marvin said. “Often these projects would happen over a matter of months or a matter of quarters.”
InstaMed’s platform enables healthcare providers to accept payments in several ways, both in-person and online. And now, as a part of JPMorgan, it’s looking at ways to speed up the way healthcare providers get paid.
“From a technology perspective and a product capability perspective, we’re working on faster and more innovative funding capabilities that we can give to customers who are using InstaMed and who bank with JPMorgan,” Marvin said.
Healthcare is a particularly complex industry for payments
As an industry, healthcare is a challenging space when it comes to payments. Doctors are often paid by both insurance companies and patients. For an added layer of complexity, 88% of healthcare providers rely on manual, non-digital transactions to get paid, according to an InstaMed report.
“It’s not like running a taxi service or running an e-commerce service where you know very clearly who your customer is, and they interact and pay you directly,” Marvin said. “It’s not a seamless payment flow from the start because to get made whole on the service you provided a lot of times you have to collect from two sources.”
Not only are there multiple parties involved, but there’s a lack of transparency in the system, where patients don’t necessarily know what services will cost when they see a doctor, and how much insurance will cover.
“It’s an industry where trust is not high in the transaction,” Marvin said.
And while 77% of consumers would prefer digital payments in healthcare, only 23% have actually received online statements from healthcare providers, according to an InstaMed study.
“Because of the friction in healthcare, because of the three-party payment ecosystem, and because of the mistrust in all of those payments and the confusion and the intense need for data in all of those payments, you don’t see the healthcare industry moving to close that gap like you do in manufacturing or in e-commerce.”
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