The notoriously complex US health care system wastes hundreds of millions of dollars in red tape due to inadequate data and a lack of transparency. So says Rajasekhar Maddireddy, founder of CoverSelf, a health start-up that today announced it has raised nearly $5 million in seed funding for a platform it says will help solve such problems.
Coverself’s solutions target both healthcare providers, including hospitals, and bill payers, primarily insurance companies. On both sides, the company warns, outdated legacy technologies and opacity cause administrative delays and drive up costs.
“Mixed software solutions result in scattered data and an inability to make real-time business decisions,” argues Rajasekhar Maddireddy. “Administrative complexity costs billions annually – an open and collaborative platform can significantly reduce repetitive administrative waste.”
In theory, stakeholders in the US health care system are supposed to communicate through standardized language, using reference codes defined by industry bodies to ensure that claims can move quickly and smoothly through automated workflows. In practice, however, multiple errors creep into the process at every stage, causing claims to be wrongly rejected or delayed. Furthermore, with participants using a wide range of often incompatible software solutions from different providers, it is often impossible to see where a problem has occurred and take action accordingly.
“Current claims integrity systems are too complex and the technologies that have been developed are outdated,” adds Maddireddy. “Significant software innovation is needed to address the broken system that currently creates out-of-control healthcare costs and waste.”
The scale of the problem is terrifying. Of the $4.1 trillion spent on health care in the US each year, administrative costs account for a quarter of the bill. As such, improvements in automated claims processing, data accuracy, and transparency could unlock enormous savings for both providers and payers, freeing up cash to fund improvements in health care.
CoverSelf believes its technology could deliver those gains. It offers an open platform through which both providers and beneficiaries can exchange information much more efficiently and with visibility. The platform can be customized according to the needs of each user – allowing integration with existing processes – and should support innovation.
The startup’s goal is a healthcare payment system where no claim is wrongly denied or returned with a request for further information. “We believe that when everyone has the data, the payment and reimbursement guidelines, and updated data sets, they should be processing clean claims on the first pass,” Maddireddy argues.
With CoverSure still in the pre-revenue stage, this is a work in progress. However, the company insists that its testing and product development work shows it can lead the industry towards that goal. In pilots conducted with large Indian healthcare providers, their administrative costs were reduced by an average of 18%.
CoverSelf’s next task is to demonstrate that similar savings are possible in the US. The company is in advanced talks with at least two major players in the industry, Maddireddy says, and hopes to announce deals within weeks.
Today’s funding round will help the business accelerate its go-to-market strategy, with the $4.8 million it has raised to grow 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 attributes given the dynamic nature of healthcare,” argues Sonal Saldanha, VP of Investments at the former.
At BEENEXT, managing partner Dirk Van Quaquebeke adds: “Anyone who has ever worked in the US healthcare system understands its enormous complexity. we believe CoverSelf has assembled a uniquely qualified team to take this away and improve healthcare outcomes at reduced prices for US patients.”