Payzen’s Approach to Medical Debt Amid Healthcare Cuts

The CEO of Payzen, a medical debt purchasing firm that utilizes AI technology, is optimistic about the potential for payment plans to address the growing costs of healthcare in America. However, consumer rights advocates express concerns about the lack of transparency in the financial agreements with third-party entities.

Payzen is just one of many companies in the healthcare finance sector, where leaders are increasingly discussing solutions as hospitals grapple with financial constraints due to significant cuts driven by Republican policies.

The cuts, enacted into law by Donald Trump, are expected to leave around 17 million individuals uninsured until 2034. This translates to reduced revenues for hospitals, which exacerbates the issues faced by uninsured patients who find it tough to pay for medical services.

“Most people genuinely want to settle their bills; they’re responsible individuals,” said Itzik Cohen, Payzen’s CEO. “It’s not about collections but making payments manageable.”

To achieve this, Payzen offers payment plans that can extend up to 60 months. “If we allow payment terms of three to five years, more people will be able to pay off their bills successfully,” Cohen explained. “We’re focused on affordability.”

The company’s model involves acquiring hospital debts at reduced rates, supplemented by venture capital from notable investors including the former FDA head, Dr. Scott Gottlieb, although they have postponed any interviews for now.

A contract from 2022 with the University of Texas Medical Branch Health (UTMB) reveals that Payzen could pay as little as 10% of a bill’s full value, depending on AI-driven predictions about payment abilities. The company then seeks to collect the total amount from patients.

This same contract specifies that Payzen will charge hospitals a “platform fee” tied to transactions, reportedly about 5%. Cohen has mentioned that this figure is inaccurate and does not depict their pricing system accurately.

Payzen plays a role in an industry where some companies offer interest-bearing funding, which can help hospitals improve their liquidity situations. “This isn’t an entirely new business model. It’s rooted in traditional practices,” noted GE Bye, a healthcare finance professor at Johns Hopkins University. “Hospitals sell unpaid bills to financial institutions for immediate cash, effectively transferring the debt.”

Rural hospitals are particularly vulnerable; since 2010, 153 of them have closed or reduced services. Recent government funding cuts may lead to an expected $87 billion decline in revenue.

Over the last decade, insurance companies have increasingly shifted costs onto patients. From 2006 to 2025, the average deductible rose dramatically—from $303 to $1,562, outpacing inflation by over 352%.

These costs present challenges for many Americans, with one-third unable to handle an unexpected $400 expense. If unpaid, these bills become bad debts for hospitals. Interestingly, in 2022, individuals with health insurance represented the largest group facing hospital debt, highlighting a noticeable shift in this sector of the market. The term “patient liability” or “self-payment” is often used to describe these hard-to-collect debts.

Payzen steps in to prepay hospitals, aiming to mitigate the adverse financial impact of these unpaid bills.

“Many people are facing substantial debts, like $2,500 or even $10,000 because of high deductible plans. They’re often managing family healthcare expenses,” remarked Richard Grandling, a leader at the Healthcare Financial Management Association (HFMA).

Consumer advocates are questioning the clarity of these transactions for patients. “There’s really no transparency for those who find out their account was purchased for a fraction of its value,” stated April Kuehnhoff, a senior attorney at the National Consumer Law Center. UTMB has confirmed that Payzen has not informed patients about purchasing their debts at discounted rates.

“If the hospital was prepared to accept this reduction, shouldn’t patients have had access to that discount if they paid the hospital directly instead?” Kuehnhoff asked.

Advocates worry that low-income patients, often eligible for government-assisted care, might get trapped in payment plans. UTMB has acknowledged that Payzen doesn’t verify if patients qualify for commonly available “charity care,” even while conducting “soft” credit checks and gathering some financial information.

According to a hospital spokesperson, “UTMB guides Payzen to all patients and reviews the contract terms with them. We provide essential FAQ details; however, the connection is primarily between the patient and Payzen.”

Cohen argues his company should not be labeled a “debt buyer,” a term often criticized in media as being detrimental for patients, as seen in John Oliver’s recent segment.

“Describing it as a debt purchase is frankly unfair to patients,” Cohen stated. “When utilizing a buy now, pay later model, is that considered a debt purchase? It’s about giving clients an integrated way to pay for their services over time, making it manageable.”

According to Cohen, Payzen hasn’t employed “extraordinary collection practices” like filing lawsuits for debts and resists being compared to “buy now, pay later” models. “We’ve never labeled it ‘buy now, pay later’ in healthcare,” he noted. In fact, he indicated in a 2021 blog post that Payzen had a different framing for its approach.

Cohen mentioned Payzen is piloting a program that identifies potential charity care recipients, though participation is limited to about 2-3 healthcare providers out of nearly 100. Various states require hospitals to check for charity eligibility.

If hospitals continue to struggle with collections, some experts believe they may resort to even more aggressive strategies. “For instance, some may implement policies requiring payment up front—no payment, no service,” noted Bai.

UTMB has enacted a similar strategy, as highlighted in a report from Payzen: Master class in revenue optimization. This has led to reports of patients being expected to pay before receiving medical attention, causing discontent and challenges in waiting areas when individuals claim they can’t afford the upfront costs.

A recent review of UTMB’s payment policies noted that they signed with Payzen to offer extended payment plans through an AI-driven debt purchasing model.

“If implemented thoughtfully, these payment policies could significantly enhance collections without deterring individuals from seeking care,” suggests a report sponsored by Payzen.