JPMorgan Chase & Co. said Friday it plans to acquire InstaMed, a U.S. healthcare payments technology firm, as the company dives deeper into the $3.5 trillion healthcare market.
JPMorgan is paying more than $500 million for the business, according to CNBC, which is the bank's biggest acquisition since the financial crisis in 2008.
The deal will expand the bank's suite of payment services designed specifically for healthcare consumers, providers and payers and will give it access to InstaMed's network of healthcare stakeholders. InstaMed reportedly processed $94 billion in transactions in 2018.
InstaMed's platform alleviates a number of challenges in the healthcare payments industry, with particular focus on eliminating paper, improving the consumer financial experience and reducing costs to collect payments, according to JPMorgan.
Founded in 2004, Philadelphia-based InstaMed was launched by former Accenture consultants Bill Marvin and Chris Seib with the goal of simplifying healthcare payments. Officials have said JPMorgan's joint venture with Amazon and Berkshire Hathaway—called Haven—is an attempt to simplify healthcare.
"We've made significant investments in our wholesale payments business over the years and this acquisition will give us a unique advantage in one of the fastest growing sectors. With InstaMed, we combine the strength and scale of JPMorgan Chase's payments capabilities with a leading healthcare payments solution for consumers, providers, and payers," Takis Georgakopoulos, global head of wholesale payments at JPMorgan Chase, said in a statement.
Recent moves made by JPMorgan and Amazon hint at future plans for Haven, the healthcare venture created by the two companies along with Berkshire Hathaway, according to Michael Abrams, managing partner of Numerof & Associates.
"Haven could become a test bed for some of these new products and services," Abrams said, noting that Amazon recently announced that its voice assistant technology Alexa now has medical skills that are HIPAA-compliant. Amazon also launched Amazon Comprehend Medical, a natural language processing service that uses machine learning to extract medical information from unstructured text.
"This indicates that Haven may not be a developer of new products and services. The real product and service development power lies with the individual partners," Abrams said. "Haven is more likely to be the recipient of what the individual partners do in their own businesses and perhaps less likely to be the source of the silver bullet that fixes healthcare. Haven may find a way to integrate the various solutions that these partners make available and create a whole that is greater than the sum of its parts."
The individual companies could also leverage Haven for their healthcare-related products and services, Abrams noted. If Haven were to create a network of providers for its millions of employees between the three companies, JPMorgan could leverage that business relationship to require providers in the network to use the InstaMed platform, Abrams said.
JPMorgan's plans for InstaMed
U.S. healthcare is challenged by significant transaction friction and inefficiency, according to the companies. Legacy approaches to bill pay, claims processing, payment collection and reconciliation, among other areas, have been slow to modernize, causing pain points across the industry.
InstaMed's platform connects healthcare consumers, providers and payers through a proprietary healthcare payments network, enabling digital payments by sharing information securely and more efficiently than in traditional payment models, JPMorgan said.
As healthcare spending is projected to hit $6 trillion by 2027, JPMorgan's deal with InstaMed offers a significant opportunity for the bank to increase its volume, said Abrams. "It's a ready-made technology platform and InstaMed has built the network already. They are already an up and running operation with a substantial base and a network and platform and just need to grow it."
Marvin, co-founder and CEO of InstaMed, said that as a result of the deal JPMorgan and InstaMed will be able to invest in and expand the InstaMed Network, accelerate the company's consumer reach and deepen its commitment to innovation.
The plan is to embed JPMorgan’s vast payments infrastructure into InstaMed to offer a complete solution to clients, Georgakopoulos told CNBC. The business will sit within JPMorgan's wholesale payments division, which moves $6 trillion a day for corporations around the world.
The bank will also offer InstaMed to its entire universe of clients and potentially integrate it with its JPMorgan Chase bill paying apps, Georgakopoulos said, according to CNBC.