The notoriously complex US health care system wastes hundreds of millions of dollars on bureaucracy because of poor data and a lack of transparency. So says Rajasekhar Madireddy, founder of CoverSelfa healthtech start-up announcing today that it has raised nearly $5 million in seed funding for a platform it says will help solve such problems.
CoverSelf’s solutions are aimed at both healthcare providers, including hospitals, and those who pay their bills, mostly insurance companies. On both sides, the company warns that outdated legacy technologies and opacity are causing administrative delays and driving up costs.
“Amalgamated software solutions result in scattered data and the inability to make real-time business decisions,” said Rajasekhar Madireddy. “Administrative complexity costs billions a year – an open and collaborative platform can significantly reduce repetitive administrative waste.”
In theory, stakeholders in the U.S. healthcare system should communicate through standardized language, using reference codes established by industry associations to ensure claims can be processed quickly and unimpeded through automated workflows. In practice, however, multiple errors creep into the process at each stage, wrongly rejecting or delaying claims. In addition, because participants use a wide variety of often incompatible software solutions from different providers, it is often impossible to see where a problem has occurred and to take action accordingly.
“Current claims integrity systems are very complex and the technologies deployed are outdated,” added Madireddy. “Significant software innovation is needed to address the broken system that currently leads to unmanageable healthcare costs and waste.”
The magnitude of the problem is stunning. Of the $4.1 trillion spent annually in the US on health care, administrative expenditure makes up a quarter of the bill. Improvements in automated claims processing, data accuracy and transparency can therefore deliver huge savings for both healthcare providers and payers, freeing up money to fund healthcare improvements.
CoverSelf believes its technology can deliver those benefits. It offers an open platform with which both providers and beneficiaries can exchange information much more efficiently and transparently. The platform can be adapted to the needs of each user – allowing integration with existing processes – and should support innovation.
The goal of the start-up is a healthcare payment system where no claim is wrongly rejected or returned with a request for further information. “We believe that when everyone has the data, payment and reimbursement guidelines, and updated data sets, they should process clean claims on the first pass,” Madireddy argues.
With CoverSelf still in the pre-revenue phase, this work is in progress. But the company insists its testing and product development work suggests it can move the industry toward this goal. In pilots with major Indian healthcare players, their administrative burdens have been reduced by an average of 9%.
CoverSelf’s next task is to prove that similar savings are feasible in the US. The company is in advanced talks with at least two major industry players, Maddyreddy says, and hopes to announce deals within weeks.
Today’s funding round should help the company accelerate its go-to-market strategy, with the $4.8 million it raised to build out the platform, scale operations and invest in sales, product and technology teams.
The seed round is led by 3one4 Capital and BEENEXT. “CoverSelf’s payment integrity solution is designed to be easy to implement and maintain, both undervalued features given the dynamic nature of healthcare,” said Sonal Saldanha, VP, Investments at the former.
At BEENEXT, managing partner Dirk Van Quaquebeke adds: “Anyone who has ever worked in the US healthcare system understands its sheer complexity; we believe CoverSelf has assembled a uniquely qualified team to address this and improve care outcomes at discounted prices for patients in the US.”