This is Part 1 of "The Unit Economics of Healthcare Fintech" series. Part 2 explores credit and lending economics.
The number that changed how I think about healthcare fintech is $243. That is the weighted average monthly revenue a single dental practice generates across deposits, cards, and payments. Not projected revenue. Actual revenue from our 777-practice customer base at CLIN. I arrived at it after spending $1.2M building banking infrastructure, most of it from my Newport Beach office over the winter, and it is the number that made me realize healthcare fintech unit economics work completely differently than consumer fintech models.
The key insight: healthcare practices generate revenue through multiple simultaneous channels that compound rather than compete. Most healthcare fintechs fail because they focus on single metrics like customer acquisition cost or monthly fees without understanding how healthcare cash flows create multiple monetization opportunities from the same customer relationships.
Deposit-driven revenue accounts for 42% of total practice revenue through net interest margin on deposit balances, float revenue during ACH clearing periods, and sweep account revenue on excess cash. Card-driven revenue accounts for 38% through interchange on patient payments, corporate card program interchange, and virtual card revenue for supplier payments. Payment-driven revenue accounts for 20% through ACH processing fees for insurance payments, wire transfer fees for equipment purchases, and real-time payment premium pricing. The multiplication effect is what separates healthcare from consumer: practices that use one service adopt additional services at a 73% rate vs. 12% for consumer banking.
Our customer research provided granular data on how practices generate fintech revenue by size.
Solo practices (1-2 providers, 31% of sample): average monthly deposits of $65K, monthly card volume of $18K, monthly payment processing of $12K. Total monthly fintech revenue: $142.
Small groups (3-5 providers, 43% of sample): average monthly deposits of $180K, monthly card volume of $47K, monthly payment processing of $28K. Total monthly fintech revenue: $243.
Large groups (6+ providers, 26% of sample): average monthly deposits of $485K, monthly card volume of $125K, monthly payment processing of $73K. Total monthly fintech revenue: $428.
Weighted average across all practices: $243 monthly revenue per practice.
# Revenue analysis across 777 practices
practice_revenue_analysis = {
'deposit_revenue': {
'net_interest_margin': 3.25, # percentage points
'float_revenue_days': 2.3, # average float period
'sweep_account_participation': 0.67 # percentage of practices
},
'card_revenue': {
'patient_payment_interchange': 1.8, # percentage
'corporate_card_interchange': 2.1, # percentage
'virtual_card_revenue': 0.95, # percentage
'durbin_exempt_advantage': 6.2 # multiple vs regulated
},
'payment_revenue': {
'ach_processing_fee': 0.75, # dollars per transaction
'wire_transfer_fee': 15.00, # dollars per wire
'rtp_premium': 2.50, # dollars per instant payment
'same_day_ach_premium': 1.25 # dollars per expedited ACH
}
}
def calculate_monthly_practice_revenue(practice_profile):
# Deposit revenue calculation
deposit_revenue = (
practice_profile.avg_balance *
practice_revenue_analysis['deposit_revenue']['net_interest_margin'] /
100 / 12
)
float_revenue = (
practice_profile.monthly_ach_volume *
practice_revenue_analysis['deposit_revenue']['float_revenue_days'] *
0.04 / 365 # 4% float yield
)
# Card revenue calculation
card_revenue = (
practice_profile.patient_payment_volume *
practice_revenue_analysis['card_revenue']['patient_payment_interchange'] / 100
)
corporate_card_revenue = (
practice_profile.business_expense_volume *
practice_revenue_analysis['card_revenue']['corporate_card_interchange'] / 100
)
# Payment revenue calculation
payment_revenue = (
practice_profile.ach_transaction_count *
practice_revenue_analysis['payment_revenue']['ach_processing_fee']
)
return {
'deposit_revenue': deposit_revenue + float_revenue,
'card_revenue': card_revenue + corporate_card_revenue,
'payment_revenue': payment_revenue,
'total_monthly': sum([deposit_revenue, float_revenue, card_revenue,
corporate_card_revenue, payment_revenue])
}Healthcare practices generate 6-8x higher interchange revenue than consumer customers due to business card usage patterns and Durbin-exempt banking partnerships. Consumer debit cards at regulated banks hit the Durbin cap: $0.21 + 0.05% equals roughly $0.26 per $100 transaction. Annual interchange per customer: $65-85 typical. Healthcare practice cards at Durbin-exempt banks earn market rates: 1.4-1.8% on debit, 2.1-2.8% on credit. Annual interchange per practice: $2,850-4,200. The 6-8x multiplier comes from higher transaction values ($150-400 average vs. $45 consumer), business card rates without Durbin regulation, a payment mix weighted 58% credit vs. 23% consumer average, and volume consistency of 400+ transactions monthly vs. 65 consumer.
Customer acquisition cost analysis shows digital acquisition at $245-385 per practice, sales-assisted at $485-725, and referral acquisition at $125-185. Revenue ramps over time: months 1-3 for onboarding and initial service adoption, months 4-6 for full payment processing integration, months 7-12 for cross-selling to additional services, month 13+ for mature relationships generating $243+ monthly. Break-even runs 2-3 months for digital acquisition, 4-6 months for sales-assisted, 1-2 months for referrals. Three-year customer lifetime value: $8,750-12,200 per practice.
Rather than treating the $847K annual compliance costs (from Part 3) as overhead, successful healthcare fintechs build these costs into unit economics as competitive moats.
At 5,000 practice scale: annual compliance costs of $847K work out to $169 per practice annually, or $14 per practice monthly. From $243 monthly revenue per practice: compliance cost recovery takes $14 (5.8% of revenue), technology and operations take $87 (35.8%), customer acquisition takes $45 (18.5%), leaving net contribution margin of $97 (39.9% of revenue). Scale advantages are significant: 1,000 practices means $485 per practice annually in compliance costs. 5,000 practices drops to $169. 10,000 practices drops to $127.
High compliance costs create sustainable competitive advantages. Competitors need $500K+ investment over 2 years to achieve similar compliance capability. Practices prefer fintechs with demonstrable regulatory expertise and established banking relationships. And healthcare practices pay for compliance expertise and regulatory relationship management, which justifies premium pricing.
Healthcare practices maintain higher average balances than consumer customers, creating significant net interest margin opportunities. Solo practitioners hold $85K-145K in total deposits across operating, payroll, and equipment reserve accounts. Small groups hold $235K-385K. Large groups hold $555K-895K.
Deposit funding cost totals 1.63-2.43% accounting for FDIC insurance at 0.13%, partner bank cost of funds at 1.25-1.85%, and reserve requirements at 0.25-0.45%. Blended investment yield runs 5.08-5.37% across federal funds, short-term Treasuries, and high-grade corporate bonds. Net interest margin: 2.65-3.74% on deposit balances.
def calculate_deposit_revenue(practice_count, avg_balance_per_practice, net_margin):
total_deposits = practice_count * avg_balance_per_practice
annual_deposit_revenue = total_deposits * (net_margin / 100)
monthly_revenue_per_practice = annual_deposit_revenue / practice_count / 12
return {
'total_deposits': total_deposits,
'annual_revenue': annual_deposit_revenue,
'monthly_per_practice': monthly_revenue_per_practice
}
# Examples across different scales
deposit_scenarios = {
'1000_practices': calculate_deposit_revenue(1000, 180000, 3.25),
'5000_practices': calculate_deposit_revenue(5000, 180000, 3.25),
'10000_practices': calculate_deposit_revenue(10000, 180000, 3.25)
}
# Results:
# 1,000 practices: $180M deposits -> $5.85M annual revenue -> $487/month per practice
# 5,000 practices: $900M deposits -> $29.25M annual revenue -> $487/month per practice
# 10,000 practices: $1.8B deposits -> $58.5M annual revenue -> $487/month per practiceDeposit revenue per practice remains constant as you scale, but absolute revenue grows linearly with customer count.
Healthcare practices receive large insurance payments via ACH that create predictable float opportunities during the 1-2 day settlement period. Average insurance payment: $4,200. ACH settlement period: 1.8 days average. Payments per practice monthly: 18-25 depending on specialty.
def calculate_float_revenue(practice_count):
avg_insurance_payment = 4200
payments_per_month = 22 # weighted average across specialties
settlement_days = 1.8
annual_yield = 0.0525 # 5.25% on overnight funds
monthly_volume_per_practice = avg_insurance_payment * payments_per_month
daily_float_per_practice = monthly_volume_per_practice * settlement_days / 30
annual_float_revenue_per_practice = daily_float_per_practice * 365 * annual_yield
total_annual_float = practice_count * annual_float_revenue_per_practice
return {
'monthly_volume_per_practice': monthly_volume_per_practice,
'annual_revenue_per_practice': annual_float_revenue_per_practice,
'total_annual_revenue': total_annual_float
}
# Results at 5,000 practices:
# Monthly volume per practice: $92,400
# Annual float revenue per practice: $315
# Total annual float revenue: $1.58MFloat revenue provides $26 monthly revenue per practice with minimal risk and no additional customer acquisition costs.
Different healthcare specialties generate different interchange opportunities based on patient payment patterns and business card usage.
General Dentistry: 67% debit, 33% credit. Average transaction $185. Monthly transaction count 340. Monthly interchange revenue: $285.
Oral Surgery: 45% debit, 55% credit (higher average amounts). Average transaction $425. Monthly transaction count 185. Monthly interchange revenue: $385.
Orthodontics: 78% credit (treatment plans and payment plans). Average transaction $315. Monthly transaction count 280. Monthly interchange revenue: $425.
Cosmetic Dentistry: 85% credit (elective procedures). Average transaction $485. Monthly transaction count 165. Monthly interchange revenue: $465.
Corporate card usage adds another revenue layer. Supply purchases run $8K-15K monthly. Lab fees $3K-8K. Equipment purchases $2K-12K. Professional services $1K-4K. Corporate card interchange rates: business debit at 1.65-1.95% (no Durbin regulation), business credit at 2.25-2.85%, purchasing cards at 1.85-2.15%. Additional monthly revenue per practice: $125-185.
Payment processing revenue breaks down across multiple payment types. ACH insurance payments incoming: 18-25 monthly at $0.75 per transaction, generating $14-19 monthly per practice. ACH supplier payments outgoing: 35-65 monthly at $1.25 per transaction, generating $44-81 per practice. Wire transfers for equipment: 1-3 monthly at $25 per wire, generating $25-75 per practice. Real-time payment premium: 2-6 monthly at $2.50 per transaction, generating $5-15 per practice. Total payment processing revenue per practice: $88-190 monthly.
Acquisition channel analysis by efficiency: email marketing at $65-125 CAC achieves 15:1 LTV:CAC. Content marketing at $125-185 CAC achieves 12:1. Referral programs at $125-185 CAC achieve 11:1. Partnership channels at $245-385 CAC achieve 7:1. Google Ads at $385-485 CAC achieve 5:1. Sales development at $725-985 CAC achieves 4:1.
def acquisition_payback_analysis():
channels = {
'email_marketing': {'cac': 95, 'monthly_revenue': 243},
'content_marketing': {'cac': 155, 'monthly_revenue': 243},
'referrals': {'cac': 155, 'monthly_revenue': 243},
'partnerships': {'cac': 315, 'monthly_revenue': 243},
'google_ads': {'cac': 435, 'monthly_revenue': 243},
'sales_development': {'cac': 855, 'monthly_revenue': 243}
}
payback_months = {}
for channel, metrics in channels.items():
payback_months[channel] = metrics['cac'] / metrics['monthly_revenue']
return payback_months
# Results:
# Email marketing: 0.4 months payback
# Content marketing: 0.6 months payback
# Referrals: 0.6 months payback
# Partnerships: 1.3 months payback
# Google Ads: 1.8 months payback
# Sales development: 3.5 months paybackHealthcare fintech CAC payback periods are dramatically faster than consumer fintech due to higher revenue per customer and multiple revenue streams.
The total addressable market helps contextualize scaling potential. U.S. dental practices: 200,000 total. Solo practices: 62,000 (31%). Small groups (2-5 providers): 86,000 (43%). Large groups (6+ providers): 52,000 (26%). Medical practices: 275,000 total across primary care (145,000) and specialty (130,000). Allied healthcare: 85,000 practices across physical therapy (35,000), mental health (28,000), and other specialties (22,000). Total addressable market: 560,000 healthcare practices.
Conservative penetration targets: Year 3 at 1% market penetration (5,600 practices), Year 5 at 2.5% (14,000 practices), Year 7 at 5% (28,000 practices). Revenue projections: 5,600 practices producing $16.3M annual revenue. 14,000 practices producing $40.8M. 28,000 practices producing $81.6M. Unit economics remain stable at scale while absolute revenue grows linearly with customer count.
Healthcare fintech unit economics support high-multiple valuations when investors understand the multiple revenue streams, customer stickiness, and compliance moats. As Scott Kupor explains in Secrets of Sand Hill Road, VCs evaluate unit economics not for current profitability alone but for the scalability and defensibility of the underlying business model. Healthcare fintech's multiple monetization streams and regulatory moats create the kind of sustainable competitive advantages that drive high valuations.
Recurring revenue predictability matters because healthcare practices change financial service providers infrequently (3-5 year average relationships). Revenue diversification from multiple income streams reduces concentration risk. Expansion revenue from existing customers adopting additional services at 73% rate drives organic growth. Compliance barriers requiring $500K+ investment create sustainable moats. Market size of 560,000 practices with $243 monthly revenue potential supports multi-billion dollar outcomes.
Public healthcare fintech multiples: Veracyte (genomic testing) at 12x revenue, Health Catalyst (data analytics) at 15x, Teladoc (telehealth) at 8x. Private healthcare fintech multiples: Series B healthcare payments at 8-12x revenue, Series C healthcare banking at 10-15x, growth-stage healthcare fintech at 12-18x. CLIN's unit economics support 12-15x revenue multiples based on predictable recurring revenue, multiple expansion opportunities, defensible competitive positioning, and a large addressable market.
Healthcare fintechs that master unit economics across deposits, cards, and payments can build sustainable, valuable companies that justify the compliance investments required to serve this market.
Data sources: CLIN 777-practice survey data, internal unit economics analysis, healthcare fintech industry research, banking partnership economics modeling