AI-backed medical debt company claims payment plans can help US healthcare costs

The CEO of the artificial intelligence-backed medical debt purchasing company PayZen believes payment plans can be part of the solution to America’s high-priced healthcare, even as consumer rights advocates warn third-party financial agreements lack transparency.

The company is just one in a sea of healthcare financing companies, whose executives see “acceleration” in conversations with cash-strapped hospitals facing historic Republican-led healthcare cuts.

Signed into law by Donald Trump, the cuts are expected to leave 17 million people without insurance through 2034. As those uninsured people struggle to pay for healthcare, the change is effectively a cut to hospital revenue, and threatens some cash-strapped facilities with closure.

“We believe most people want to pay their bills – they’re decent people trying to be responsible,” said Itzik Cohen, PayZen CEO. “It’s not a collections problem – it’s an affordability problem.”

PayZen’s solution is to provide payment plans up to 60-months with 0% interest.

“If you extend the payment plan to three, four, five years … Then more people will pay their bills and successfully,” said Cohen. “What we’re trying to do is make it affordable.”

PayZen’s business model relies on buying debt from hospitals at a discount, and is backed by venture capital from groups such as New Enterprise Associates, a New York-based firm with big-name partners such as Dr Scott Gottlieb, the president’s first-term Food and Drug Administration (FDA) commissioner. NEA and Gottlieb deferred requests for an interview.

PayZen may pay as little as 10% and as much as 90% of the value of the bill depending on an AI-backed prediction of whether the patient will pay, according to a 2022 contract with the University of Texas Medical Branch Health (UTMB) at Galveston obtained by the Guardian. The company then collects the full face value of the bill from patients.

That same contract shows that PayZen also charges hospitals a transaction based “platform fee”.

“PayZen charges a 5% platform fee to support outreach, enrollment, underwriting and serving all payment plans,” it reads.

Cohen declined to comment on platform fees and said the 5% figure “is not accurate and is not reflective of how our pricing works”.

PayZen is part of an industry of companies, some of which provide interest-bearing financing, that help cash-strapped hospitals with a growing a liquidity problem.

“This is not a new business. It is based on an old model,” said Ge Bai, a healthcare finance professor at Johns Hopkins University’s Carey School of Business. “A hospital takes the unpaid bill to a financial institution, sells these bills to the financial institutions, then the financial institution will give them [the hospital] money immediately… It changes ownership.”

Chief among hospitals facing liquidity problems are rural facilities – 153 of which have closed or lost key hospital services since 2010. For these facilities, government cuts, expected to result in an $87bn drop in revenue are only the latest blow.

Over the last decade, insurers have increasingly pushed costs onto patients. From 2006 to 2025, the average deductible – an upfront payment that must be made before insurance kicks in – for a single person has grown from $303 to $1,562, outpacing inflation by more than 352%.

Those payments represent a hardship for many Americans, more than one-third of whom can’t afford an unexpected $400 expense. Unpaid, they also turn into bad debt on a hospital balance sheet. In 2022, people with health insurance became the largest group of patients in debt to hospitals – a sea change in the industry. And those debts, known as “patient responsibility” or “self-pay” are very hard for providers to collect.

Companies like PayZen come in and pay hospitals up front for bills that might otherwise languish on the hospital balance sheet and become bad debt.

“Because of the growth in high deductible health plans, many people have $2,500, $10,000 [deductibles] for families – so they’re really financing so much of their care,” said Richard Grundling, chief mission impact officer at the Healthcare Financial Management Association (HFMA).

Consumer advocates question the transparency of such deals for patients.

“I don’t think there’s any transparency to the patient that PayZen has just acquired this account at a fraction of its face value,” said April Kuehnhoff, senior attorney at the National Consumer Law Center. UTMB Health confirmed that it does not tell patients that PayZen bought their debt at a discount.

“If the hospital was willing to accept this reduced amount, was there a discount that the patient could have accessed by directly paying the hospital instead of paying the full amount to this third party company?” Kuehnhoff asked.

Advocates also argue there is a risk that low-income patients, who are often eligible for federally required discounted care, are caught up in payment plans. UTMB Health confirmed that PayZen does not screen patients for what is commonly called “charity care,” despite performing a “soft” credit pull and information on their debt and incomes.

“UTMB directs all patients to PayZen to discuss the terms and conditions of the specific agreements with PayZen,” said a spokesperson for the hospital system. “We provide basic FAQ information, but the relationship is between the patient and PayZen.”

Although PayZen relies on purchasing debt, Cohen objects to the label “debt buyer”, which he said refers to companies buying bundles of debt in default. Such companies were highlighted in a segment on John Oliver’s Last Week Tonight.

“Calling it debt buying is insulting to patients quite frankly,” said Cohen. “When you purchase something with a [buy now, pay later] approach, is it debt buying? You’re being offered a way to pay for your purchase in a convenient, integrated way that extends payments to you because now you can afford it.”

Cohen said his company does not use “extraordinary collection practices”, such as filing debt law suits and objects to describing PayZen as “buy now, pay later”.

“We never actually called ourselves ‘buy now, pay later’ for healthcare or ‘care now, pay later’.” In fact, Cohen authored a 2021 blog post on the company website headlined: “PayZen’s ‘Care Now, Pay Later’ Mission.” He later clarified that his company has moved beyond that description.

Cohen said PayZen is running a “pilot” to pre-qualify accounts for charity care, but that only “two to three” of the roughly 100 healthcare providers it works with participate. Some states require hospitals to screen patients for charity care.

If hospitals continue to struggle to collect money from patients, Bai noted that “hospitals will engage in even more aggressive mechanisms”.

“For example, all upfront payments – no payment, no service – this will happen,” Bai added.

UTMB Health instituted one such policy, which was presented in a PayZen-sponsored report as “masterclass in revenue optimization”. The hospital required patients to pay before seeing a doctor as early as 2019. However, the implementation reportedly led to loud exchanges in waiting rooms, as patients argued they could not afford to pay before seeing the doctor, according to local news outlets.

In 2023, UTMB publicly affirmed its payment-first policy, and contracted with PayZen to provide patients with long-term pay plans through its AI-backed debt purchasing model.

“When thoughtfully implemented, pre-service payment policies can significantly increase collections without driving care avoidance,” the PayZen-sponsored report said.