Healthcare insurance, if you’re lucky to have it, only covers a subset of conditions in the United States. As a result, patients can often get burdened with horror story charges, like huge deductibles, out-of-network costs and expensive co-pays. So for the uninsured and insured alike, innovative ways of managing big bills are in high demand — especially as uncertainty remains around how COVID-19 and long-haul symptoms will be handled by patients and payers.

Walnut, founded by Roshan Patel, is a point-of-sale lending company with a healthcare twist. Walnut uses a “buy now, pay later” model, popularized by Affirm and Klarna, to help patients pay for healthcare over a period of time, instead of in one $3,000 chunk. Walnut works with healthcare providers so that a patient’s bill can be paid back through $100-a-month increments for 30 months, instead of one aggressive credit card swipe.

It’s a sweet deal, but Patel added one more detail that he thinks makes Walnut stand out: The startup doesn’t charge any interest or fees to consumers.

“Almost every ‘buy now, pay later’ company in e-commerce charges interest or fees, and every personal loan provider charges interest or fees, but we do not,” he said. “And that’s really important to me, not making healthcare any more expensive than it already is. It’s a very patient-friendly product.”

Companies that use the buy now, pay later model with zero interest or fees need to make revenue somehow, and in Walnut’s case it is by charging healthcare providers a percentage of each sale or transaction.

If a provider’s collection rate for an out-of-pocket is 50%, Walnut would go to them and say “give us a 40% discount, and we’ll guarantee the cash for you upfront.” The startup will take the risk, and then the provider is able to make 60% of the collection rate.

Now, ideally, a provider would want to get 100% of payments they are owed, but that is wishful thinking. Patel explained that a large number of bills go unpaid due to bankruptcies or a default on payments (the average collections rate for hospitals out of pocket is less than 20%). Because of this, a company like Walnut has room to offer at least some stable upfront cash to hospitals, even if it ends up being 60% of overall bills versus 100%.

The company uses “extensive underwriting models” to figure out if a patient should qualify for a loan. Patel says that the startup goes beyond using credit score, which he describes as an “outdated metric”, and instead looks at thousands of data points from different providers, from side hustle income to spending habits on things like groceries and bills.

Walnut’s biggest challenge, says Patel, is to underwrite the population and pay the healthcare provider upfront in cash. It then collects from the patient on the back end, which comes with its own amount of risk.

“To be able to take on that risk for patients that are less credit-worthy is a very challenging problem, and I don’t think it’s really solved yet in healthcare,” he said.

The startup is starting by working with small private practices of one to five physicians that focus on specialties like dentistry, dermatology and fertility.

A big part of Walnut’s success will be determined by if it can attract people that truly need flexible financing options. For example, the company doesn’t have any hospitals as a partner yet, which would tap a larger group of patients that likely need flexible financing options the most. Right now, “the people who get elective-care surgery are the ones that can afford it.”

In any case, Patel doesn’t consider this to be a distinction; all things being equal, he considers it to be a chance to augment admittance to elective clinical consideration to more individuals.

“I conversed with an individual a week ago who has no teeth and needs false teeth except for it costs $6,000,” he said. “That individual ought to have the option to manage the cost of it, and we empowered them to pay $100 every month for it.”

Pecan’s two greatest client bunches are the uninsured (individuals who have lost their positions from COVID-19), and customers who have high deductible plans.

Pecan isn’t the first. PrimaHealth Credit, Walnut’s nearest rival, offers retail location loaning systems for elective operations. Think medical procedures like waterfall work or dental work. The organization said the assistance is right now accessible in Arizona, California, Florida, Oklahoma and Texas, and will be extended to each of the 50 expresses this year. Pecan, similarly, is generally centered around the East Coast and plans to extend cross country before the current year’s over.

PrimaHealth’s normal credit size is $1,800, and Walnut’s normal advance size is $5,000.

The organization is right now steering with a modest bunch of medical care suppliers in dermatology, dentistry and richness. It has had in excess of 500 patient credit applications, adding up to more than $4.6 million in application volume year-to-date. Patel says that Walnut just acknowledged a small amount of these applications, however declined to share what percent of cash it has loaned up until this point. As Walnut refines its model, it very well may have the option to cover different classifications.

Up until this point, Walnut has been loaning off of its own monetary record. To really scale, it should get another wellspring of capital — either a credit line, obligation financing round or investment — to offer more advances. Patel says that the startup is in chats with banks, and turned down an obligation offer because of size and rate.

Funding is by all accounts the answer for the time being: The startup reported that it has raised a $3.6 million seed round from financial backers including Gradient Ventures, Afore Capital, 2048 Ventures, Supernode Ventures, TA Ventures, Polymath Capital, Tack Ventures, Awesome People Ventures, Newark Ventures and NKM Capital. Heavenly messengers incorporate the CEOs of Giphy and PillPack, and the CTO of Rampm Financial just as a NFL mentor. The organization is likewise a piece of Plaid’s debut gas pedal.

“I would prefer not to be one more startup attempting to offer you an undifferentiated protection plan,” Patel said.

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