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JPMorgan Chase & Co. is throwing down more than $500 million to acquire healthcare technology company, InstaMed, a move the investment bank hopes can cement its place in the niche payments market.
JPMorgan said the acquisition will expand the bank’s suite of payment services designed specifically for healthcare consumers, providers, and payers and also give it an advantage in what the financial institution described as 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. The InstaMed team is passionate about delivering an excellent client experience with a focus on innovation, keeping data safe and secure, and simplifying the end-to-end healthcare payments process – a natural fit with our Wholesale Payments franchise,” Takis Georgakopoulos, the global head of Wholesale Payments, JPMorgan Chase, said.
News agency, Reuters reported that the deal gave JPMorgan the chance to add a new, niche business sector to its wholesale payments business, an area into which the bank has steadily expanded in recent years.
This is JPMorgan’s biggest acquisition deal since 2008, when it bought Bear Stearns and the retail banking assets of Washington Mutual.
However, JPMorgan has yet to comment on how much it is spending to acquire InstaMed. It is expects the deal will close before the end of the year.
Healthcare spending in the U.S. was estimated to be worth more than $3.5 trillion in 2017. JPMorgan pointed out that there was significant “friction and inefficiency,” with these transactions. The financial services firm is betting that, with automation, it could reap huge rewards in the health payments sector.
“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 centralized 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,” the statement announcing the acquisition said.
JPMorgan’s Chief Executive Officer, Jamie Dimon, was quoted saying healthcare is one of the “toughest, most complicated [problems], but we know there are some things we can do to make the system work better.”
InstaMed’s selling point is that it runs a centralized platform that helps eliminate paper, making an efficient process for consumers, while also cutting collection costs. The Healthcare Dive website explained that InstaMed, which employs about 300 people, built a patented, private cloud-based platform to link healthcare consumers, providers and payers, adding that the platform streamlines “the often confusing world of medical billing and payments.”
CNBC said that following the acquisition, JPMorgan plans to embed its vast payments infrastructure into InstaMed to offer a complete solution to clients. “The business will sit within this 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, from huge corporations to smaller businesses, and potentially integrate it with its JPMorgan Chase bill paying apps.”
It is estimated that automating claims-related business transactions could save providers and health plans more than $11 billion annually.
In 2018, InstaMed processed almost $100 billion in healthcare payments.
InstaMed co-founder and Chief Executive Officer, Bill Marvin, said they were excited to be joining JPMorgan, saying the deal combined “one of the world’s preeminent financial institutions with the premier technology and talent in healthcare payments.”
Marvin, who will continue running InstaMed from Philadelphia, said: “Together, we will be able to invest in and expand the InstaMed Network, accelerate our consumer reach, and deepen our commitment to innovation.”
The acquisition of InstaMed shows JPMorgan’s strategic focus on healthcare. At the beginning of 2018, it came together with Amazon and Berkshire to form Haven, an “independent company to address healthcare needs of their U.S. employees free from profit-making incentives and constraints.”
The Financial Times reported that the joint venture, Haven, is meant to reduce annual healthcare costs for the three groups’ roughly 1 million employees.
The idea behind the creation of Haven was that it would initially focus on technology solutions to provide the three companies’ U.S. employees with “high-quality and transparent healthcare at a reasonable cost.”
The InstaMed operation is separate from Haven.