Bank of America is big in health care — more than 2,000 hospital clients in the U.S. and more than 17,000 relationships with health care providers — and now it's focusing on being faster to market.
In buying AxiaMed, the bank is avoiding a complex IT project to upgrade health care payments and other merchant services. It can now provide a digital payments gateway to these clients immediately.
"We would have had to build the tech ourselves and then get certified with the software providers," said Guy Harris, head of merchant services for Bank of America.
Axia's platform is "fundamentally a health care payment system, but we are also gaining domain expertise that we can gain from in other industries," Harris said.
Financial terms of the deal, which closed April 1, weren't disclosed. The Santa Barbara, Calif.-based-based AxiaMed works through independent software vendors to sell SaaS-based patient payment technology. Its branded product, Payment Fusion, uses an API to integrate into electronic health records systems, practice management and revenue cycle management systems at health care providers.
Payment Fusion uses point-to-point encryption to take providers out of scope for PCI compliance, and it also is HIPAA compliant, addressing a regulation that doesn't accompany payment processing for most industries.
The deal is part of Bank of America's strategy to build its own merchant services/card issuing combo following the end of its
"Health care is a major vertical for us, and payments are a critical part of that relationship," Harris said. "When we decided 18 months ago to exit our venture with First Data to build our own platform, part of that is having a platform that can work with as many partners as possible."
The AxiaMed acquisition comes as payment companies focus more on health care providers, which had been slow to modernize due to the complexity of hospital billing systems. Among health care providers there is a demand for a range of merchant services tied to payment credential onboarding, or acting as a
"There has been a lot of innovation happening, but maybe not to the scale and pace required as the innovation has not happened with acquiring and processing as a key piece of the solution," said Michael Trilli, a research director for Aite Group's insurance practice. "The pandemic has pushed health care further into a retail, digital, consumer driven market."
Health care is the more-complicated cousin for mainstream payment processing. Health payments for years have remained more manual than automated because of complicated funding sources and compliance.
While most merchant transactions involve a consumer drawing from an account to funnel money that eventually winds up in the merchants' account, health care in most cases involves an insurer that acts as a third party, paying some but not all of the bill. The role of the Affordable Care Act, the pandemic and the rise of consumer-directed health care payments add complications.
National health care spending in the U.S. is expected to grow at an average annual rate of more than 5% between 2019 and 2028, reaching $6.2 trillion, according to the
In the banking industry, most innovation has come via commercial payments through treasury services, with some basic retail capabilities, according to Trilli. Several banks, such as
In the technology industry, the need to simplify transaction rails in the eyes of the consumers and merchants has drawn dozens of technology companies offering payment innovation. In many cases, the developers are adapting payment technology for other purposes, such as
"So the fact that BofA bought AxiaMed and their acquiring capabilities is a strong signal the bank is positioning itself with these trends," Trilli said.
Writing for
