With Rs 20cr in funding, can Affordplan solve a key problem in Indian healthcare?

On Tuesday, Affordplan, a fintech startup in the healthcare space, announced raising Rs 20 crore (approximately $3 million) as a part of its Series A funding led by Prime Venture Partners and co-invested by Kalaari Capital.

The investments will be used to expand the current team with a predominant focus on sales, marketing, business development, and technology functions; to increase the network of hospitals on the platform; and to scale the business to newer geographies in India.

Started in May 2016 by Tejbir Singh and Hemal Bhatt, Affordplan is a parallel financial product to enhance healthcare while making it accessible and affordable. Addressing the liquidity and capital problem, their solution helps patients plan, save, and pay for upcoming non-emergency medical procedures.

Explaining the existing problem statement, the founders say that 86 percent of the healthcare expenses are covered by cash out of pocket, with the rest being organised through the covers of various instruments of health insurances.

Hence, with health insurance being underpenetrated, small to mid-level hospitals lose out on opportunities because they have to turn away patients who have insufficient capital to fund the treatment. Quantifying the same, Tejbir says that these small to mid-level hospitals lose out on close to 40-60 percent of their patients because of the same liquidity issue.

Through planned savings for a particular treatment, hospitals can offer Affordplan’s solution as an alternative option while retaining customers instead of denying them treatment upfront.

On the other end, the solution also eases the burden on these institutions to collect these payments.

So how does it work?

Focusing majorly on the small and mid-level hospitals, the team first identifies the geography it needs to address. Once decided, the business development teams try to convince the hospitals and complete the paperwork required for the onboarding process.

The hospitals then guide specific patients to the Affordplan kiosks on the premises so that they can understand and subscribe to the plan.

What does a patient get?  

With the value proposition for hospitals in place, how does the plan really benefit the patients? The founders tell us that the systematic plan not just allows specific patients facing cash crunch to finally subscribe to the solution but also helps them save on the entire treatment cost.

According to the company, consumers of the plan can save as much as 15 percent of the overall treatment cost incurred.

While subscribing to a plan, customers have to make a small down payment, with algorithms at the backend calculating the monthly savings needed for the diagnosis. Customers pay or siphon off these savings, with the amount being deposited with the hospital.

The technology also enforces financial discipline for customers to pay their dues to ensure the treatment takes place.

Further, providing an aggregated demand to hospitals and medical institutions allows them to offer customers discounts on medicines, tests, etc. In case a patient plans to cancel a certain diagnosis at a partner hospital, the amount will be refunded within 24 hours.

Tejbir adds,

Through our product, we are building business intelligence on the average spends for different diagnoses. To give an example, now we know what the average spend or saving for delivering a child, let’s say at the fourth or sixth month of pregnancy, should be. Also, we are close-ended catering to a specific planned process, unlike a health savings account which can be used for any kind of medical expenditure.

Focusing on a salary segment ranging anywhere between Rs 16,000–80,000, the firm seems to get adoption for planned procedures in areas of dental, fertility, maternity, orthopaedics, as well as eye care.

Working on a web interface, the firm plans to roll out their mobile app in the next 30–40 days. At present, the firm charges hospitals on a per-transaction or savings basis, with the fee varying for different hospitals. This can range anywhere between 5–15 percent depending on the sum of saving.

Further, the average ticket size of treatment at these mid to small-level hospitals is usually around Rs 40,000.

Moreover, the founders don’t deny the possibility of exploring newer avenues of healthcare financing in the future. Tejbir adds,

Right now we are looking at savings, but the DNA of the company is essentially financial services and technology. Our real addressable opportunity is the 300 million Indians who are being denied good healthcare services. You might see us moving from a closed and diagnosis-specific savings product to an open-ended healthcare savings product. We might also move towards a lending product and delve more into the insurance market at a much later stage, but right now we want to take care of only savings.

Currently operational only in the Delhi-NCR region, the startup is considering Bengaluru and Mumbai for expansion.

Investor speak

This investment in Affordplan seems to be Prime Venture Partners' sixth investment in the fintech space, previously having funded players like KredX, MoneyTap, Ezetap, Happay, and NiYO.

Speaking on the investment, Shripati Acharya, Managing Partner, Prime Venture Partners, said,

As a fund, we are focused on category-creating companies that are using technology to solve fundamental problems. Affordplan directly fits into that bracket. Further, application of fintech to make healthcare more accessible and affordable is the need of the hour in India. Further, we will continue to invest in the fintech ecosystem, as we see high scalable businesses coming from this sector in the future.

While Bala Srinivasa, Partner, Kalaari Capital added,

The problem with Indian healthcare at present is access to credit, which hampers quality treatment to be given to individuals. The product created by Affordplan aims to address this problem. Secondly, we are excited to see the next generation of financial service companies like Affordplan which have a bite-sized product, yet have the potential to disrupt and be consumed by the large populations of people.

Bala also credits Affordplan’s team for having built a highly systematic solution. Further, the company was a part of the first batch of Kalaari’s incubator programme, Kstart, in 2016, receiving Rs 3 crore.

What do the stats say?

The industry opinions might actually be correct.

In 2015, Deloitte had claimed that healthcare in India was an estimated five percent of gross domestic product (GDP) in 2013 and was expected to remain at that level through 2016.

Total healthcare spending in local-currency terms is projected to rise at an annual rate of over 12 percent from an estimated $96.3 billion in 2013 to $195.7 billion in 2018. Further, this rapid growth is expected to lead to higher inflation and increased pricing.

This leaves potential markets for companies like Affordplan to function in the healthcare financing space. Also, the government and Ministry of Health and Family Welfare's (MHFW) failure to fully deploy funds might aggravate the gap in financing.

(Disclaimer: Kalaari Capital is one of the investors in YourStory Media)