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Analysis

JPMorgan Chase to Buy InstaMed for $500M

By Jack O'Brien  
   May 20, 2019

The New York-based bank is expanding its reach into healthcare by purchasing the Philadelphia-based medical payments processor.

JPMorgan Chase announced its intent to puchase Philadelphia-based InstaMed for $500 million Friday morning, a deal which the New York-based bank expects to close by the end of the year.

In an interview with HealthLeaders, executives from both JPMorgan Chase and InstaMed highlighted the opportunity for the deal to simplify the billing and payment experience for healthcare consumers.

The acquisition also marks the next step of growth for JPMorgan Chase, as the bank has steadily built its healthcare payments business over the past two decades, according to Stuart Hanson, managing director and head of healthcare payments at JPMorgan Chase.

"We're excited about [InstaMed's] specialization in healthcare payments, in particular we're excited about the fact that they've been so innovative with regards to building a payment network of payers, providers, and consumers," Hanson said. "We are confident that their unique combination of endpoints is attractive in the healthcare space, because we feel like we can drive a lot of transactional efficiency and value for our collective clients using that network."

InstaMed CEO Bill Marvin echoed Hanson's sentiments, telling HealthLeaders that combining the company's talent with JPMorgan Chase's scale will serve as a boost to business.

"Operating as a wholly-owned subsidiary of JPMorgan [Chase], while retaining the InstaMed brand made it a no brainer. The choice was easy for us," Marvin said.

Related: Megamergers Take Center Stage in M&A Activity

Both Hanson and Marvin emphasized the importance of riding the changing trends in healthcare driven by consumerism, especially as it relates to healthcare payment processing.

Marvin referred to InstaMed's annual Trends in Healthcare Payments survey, which found that consumers spent $517 billion online with U.S. merchants last year, up 15% compared to 2017.

During the decade from 2008 to 2018, worker enrollment in high deductible health plans grew by 26% and the average deductible rose from $735 to $1,573, according to the survey.

Marvin said that reducing friction in the healthcare billing process, primarily through reducing paper billing in favor of digital solutions, has always been a bridge too far for the market.

He is encouraged that teaming up with JPMorgan Chase will solve this lingering challenge that has plagued providers, payers, and consumers in what he calls a "three party transaction."

Related: $1 Billion Sequoia-backed Health Catalyst has Picked JPMorgan Chase for its IPO

For JPMorgan Chase's part, the bank has had a healthcare focus since Hanson's first stint with the company in 2003, leading to the debut of its first healthcare payments platform in 2006.

However, over the past year JPMorgan Chase has ventured even further into the healthcare sector, notably teaming with Amazon and Berkshire Hathaway to launch Haven, a healthcare company aimed at servicing 1.2 million employees and their families at the three companies.

Hanson reiterated to HealthLeaders that the InstaMed deal is unrelated to Haven's business operations, calling it a "totally separate initiative."

Related: Haven COO Departs for Personal Reasons

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: New York, USA - May 26, 2018: JPMorgan Chase & Co office at the Park Ave in New York, NY. - Image / Editorial credit: Bumble Dee / Shutterstock.com


KEY TAKEAWAYS

InstaMed CEO Bill Marvin called the deal a "no brainer" for the Philadelphia-based healthcare payment processor.

The deal is unrelated to Haven's business operations, with a JPMorgan Chase executive calling it a "totally separate initiative."

The $500 million acquisition is expected to close by the end of the year.


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