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Home / Business / JP Morgan buys InstaMed in JPM's biggest deal since the financial crisis

JP Morgan buys InstaMed in JPM's biggest deal since the financial crisis



Bill Marvin and Chris Seib (CTO and co-founder) action shot

Meagan Ebersole | JP Morgan Chase

J.P. Morgan Chase buys the medical payment technology firm InstaMed to push deeper into the $ 3.5 billion market for US health spending.

On Friday, the bank agreed to buy the Philadelphia-based company of about 300 employees who processed $ 94 billion in transactions last year, according to the two companies.

JP Morgan pays more than $ 500 million for the business, making it the lender's biggest takeover since acquiring Bear Stearns and the bank's assets in Washington Mutual in 2008, according to people with knowledge of the situation.

The move shows that the country's largest bank looks at the rapidly changing world of payments as a battlefield worthy of aggressive bets. When it comes to keeping pace with new technology in lending or investing, JP Morgan has typically collaborated with fine companies such as OnDeck or used its own engineers to build solutions such as the YouInvest brokerage program.

But payments are being transformed by global technology giants and rising due to the increase of e-commerce, giving a rare opportunity for banks to grow. In fact, one of J.P. Morgan's only other major acquisition of the past decade of his 201

7 purchase of WePay, a competitor of PayPal and Stripe. (That year, JP Morgan also weighed a bid for Worldpay, a merchant before a competitor bought it for $ 9.9 billion.)

So last year, JP Morgan investigated health care for opportunities to increase investment, according to takis georgakopoulos, the bank's head of wholesale payments. The decision was based on the huge size and complexity of the market: US $ 3.5 trillion health spending in 2017 is expected to reach $ 6 trillion by 2027, according to the Federal Medicare and Medicaid Services Centers.

Network Effects

"One of my favorite statistics is that about 90 percent of all health enterprises are still using paper bills," Georgakopoulos said in an interview. "What InstaMed has created is both the platform and the network that allows them to simplify and streamline payments across payers, providers and consumers across the ecosystem."

InstaMed, founded in 2004 by former Accenture consultants Bill Marvin and Chris Seib, automates medical billing with electronic rails for the provision of health information and payments. It connects those in the health care ecosystem involved in demanding payments, from hospitals to laboratories and emergency clinics, with groups such as insurance companies and HMOs making payments.

An illustration: Instead of filling out paper forms at a hospital reception and later paying for paper checks, a consumer can enter information via an InstaMed app and pay with a credit card. The information flows seamlessly between doctors, payers and users.

Apart from its cloud-based platform, the company has set up a network that many of the country's healthcare professionals, from large hospital groups to small medical lectures, have signed on, as well as most US health insurance companies.

Takis Georgakopoulos

Meagan Ebersole | JP Morgan Chase

"We obviously always look to whether we are building something or buying it," Georgakopoulos said. "In this case, what InstaMed has done is not just the platform, but it is also the network, which took them 15 years to build. We thought it would probably take us so long to build, and so it was a unique opportunity."

With this acquisition, JP Morgan will integrate into the technological foundation of the labyrinthine US health care system in a way that is unusual for a bank.

The plan is to add JP Morgan's large payment infrastructure in InstaMed to offer a complete solution to customers, Georgakopoulos said. The business will sit within its wholesale payments division, which moves $ 6 trillion a day for companies worldwide. The bank will also offer InstaMed to the entire universe of clients, from large corporations to small businesses, and potentially integrate it with their J.P. Morgan Chase Bill paying apps, he said.

"The idea is that you take your platform and our payment skills, and you bring it together as a package to our customers," Georgakopoulos said.

Separately from Haven

While InstaMed has high ambitions to improve the user's experience and bring down the cost of US healthcare, the effort is completely separate from Haven, the joint venture formed last year by JP Morgan, Amazon and Berkshire Hathaway. This effort is an ideal burden of reducing the cost of the company's 1.2 million employees.

InstaMed will continue to be led by CEO Marvin out of Philadelphia, and there are no plans to change their branding, Georgakopoulos said. The company is growing fast. InstaMed processed $ 94 billion in health allowances last year, more than doubling its volume for three years.

"We are a mission driven company, we are looking to really have a major impact on health care," Marvin said in a telephone interview. "We are very happy to combine the technologies and talents we have with the scale and resources of J.P. Morgan. We know they share our desire to influence health, and this decision really made it easy."


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