Rectangle Health taps partner for BNPL financing

July 11, 2022 / Payments Dive / — One of the nation’s oldest healthcare payments companies, Rectangle Health, announced a partnership with a patient-financing company last month to allow consumers to pay for care over time instead of upfront at the doctor’s office. When patients can’t pay, they often skip visits to their physicians or dentists, making their health worse.

Valhalla, New York-based Rectangle Health, which offers practice management and patients’ payment software to physicians, dentists, and other healthcare providers, said in a June 9 press release that it will work with Healthcare Finance Direct (HFD), a company in Bakersfield, Calif., to give patients a healthcare version of buy now, pay later. Using what Rectangle Health and HFD call “care now, pay later,” providers can offer a financing option that approves every patient for financing of care, HFD said.

For many patients, healthcare can be unaffordable because costs rise each year—almost always increasing above the rate of—inflation and because annual insurance deductibles and copayments have risen as well.

“That’s why we partnered with Healthcare Finance Direct to offer patient financing,” Rectangle Health Chief Technology Officer Mike Peluso said in an interview. “That’s where the provider delivers services and then gets paid up front on day one. Then, the patient pays back Healthcare Finance Direct instead of paying back the provider over time.”

Founded in 1993, Rectangle Health began as a practice-management company, providing consulting and management services to dentists and to physicians in different specialties. In the 1990s, Rectangle Health encouraged its client doctors to keep patients’ credit cards on file and it developed a proprietary credit card reader for physicians to accept payments.

Today, Rectangle Health’s 250 employees process about $10 billion in annual patients’ payment volume from about 60,000 medical and dental practices, about half of whom are physicians; the other half are dentists, Peluso said. Each group includes specialists such as orthodontists and endodontists; and also primary care doctors, oncologists, cardiologists and physical therapists, Peluso said. About 5% of its customers are hospitals.

The goal of the partnership is to allow patients to pay bills online, leave a credit card on file and get reminders by text about appointments and bills coming due, as consumers do in most retail and online settings, Peluso said. If patients agree, Rectangle Health’s providers also can access patients’ flexible spending and health savings accounts, he added.

Working with HFD allows Rectangle Health to offer non-recourse financing, meaning neither the patients nor the providers would have negative consequences if a patient cannot or will not pay for care, he said.

For example, neither party would send any information about nonpayment to a bank or credit-reporting agency. If a balance remains unpaid, HFD would write it off, as most physicians and hospitals do with patients’ unpaid medical bills. Typically, physicians and hospitals classify such unpaid balances as charity care.

Last November, Rectangle Health landed an investment from GI Partners, a private-equity funder in San Francisco that invests in healthcare, information technology and software companies. Boston-based TA Associates, another private equity company that invests in technology, healthcare, financial and other services, provided funding to Rectangle Health in an earlier round, Peluso said.