Anomaly announces $17M in funding to tackle a $300B healthcare problem

Anomaly, a company looking to simplify medical billing, announced a $12 million Series A round on Tuesday. Anomaly is a young company — it was only founded in 2020. But it has its eye set on an old, gargantuan problem: wasteful spending in the U.S. healthcare system. 

Anomaly’s platform is designed to detect irregularities in medical bills. Its AI-driven process comes as a result of working with “massive amounts” of claims data from insurance companies and health systems, says Jacob Shiff, co-founder, president and COO of Anomaly. That training allows the software to preemptively flag claims that might be irregular, or identify patterns in billing that end up resulting in wasteful spending. 

“Our overall goal in our work with insurance companies and providers is to really use technology and deep healthcare domain expertise to remove that friction between providers and payers so that we can pay the right amount the first time,” Shiff told TechCrunch. 

This round comes after a previously unannounced $5 million seed round which closed earlier this year, bringing the company’s total funding up to $17 million. The Series A round was led by RRE Ventures and included participation from Link Ventures. Existing investors also include Madrona Venture Group, Declaration Partners and Redesign Health.

Anomaly will use the funds to grow the team (the company currently has 12 employees), and scale up their business by partnering with more insurance companies and healthcare systems. 

Traditional solutions have focused on an outsourced and reactive approach to dealing with improper payments,” said Kyle Tatz, the head of new ventures at Redesign Health. “We felt that Anomaly’s approach from day one to partner with payers and providers to pay the right amount the first time stood out from the industry standard.” 

While there are inefficiencies in clinical care that cost extra dollars, the bulk of wasteful spending, at least according to one 2019 JAMA analysis, doesn’t happen at bedside. Analysis of over 54 publications suggested over $300 billion each year is wasted on inefficiencies related to medical billing. That study was conducted by a team of economists, but William Shrank, the chief medical officer of Humana, an insurance company, is the paper’s lead author.

The biggest category of waste was “administrative complexity” — in other words, the burden of needlessly complex paperwork. 

Tatz calls that $300 billion “an indication of how much white space there is in the market for better solutions.” 

“Imagine that, with your credit card, every month you got your statement and 10% of your charges were just incorrect,” says Shiff. “That’s the status quo in healthcare.” 

But the question of how to fix the paperwork problem happened to be a blind spot in healthcare research. The paper was unable to find any studies revealing solid ways to save money by reducing administrative complexity.

When the paper was published, some argued that turning to a single-payer healthcare system was the most expedient way to tackle this category. Others argue other countries with private healthcare systems still manage to spend less on administrative costs than the U.S. does. 

For instance, take one March 2018 JAMA study on healthcare spending in the U.S. and 11 other high-income countries, including the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland and Denmark. The U.S. spent about 8% of its GDP on “administration and governance.” The other nations spent an average of 3% on that category. 

Anomaly calls its approach to this financially leaky blind spot in healthcare spending “precision payments.” When a provider files a claim with an insurer, Anomaly can peruse the claim and ensure there are no errors. If there are, the provider would receive a real-time response pointing out the error (that’s the idea behind one of the company’s products: Anomaly Prevent). 

The company’s other product, Anomaly recover, identifies past overpayments that otherwise might have gone unnoticed. 

Shiff would not name which insurance companies or healthcare systems Anomaly is already working with, but the company does have ties to major players in the industry. The chairman of the company’s board is Jeff Alter, the former CEO of United Healthcare’s commercial branch and current executive vice president of IngenioRx and Anthem Health Solutions. 

Shiff did note that Anomaly is working with two “regional payers in the Northeast” and a “healthcare system in Florida.” He also wouldn’t disclose any metrics as to how Anomaly has managed to save these systems money or simplify claims. Instead, he described the results abstractly.

“We’re really excited by the results that we’re seeing. The results are really very meaningful, in terms of the dollars and cents, themselves,” he said. 

The fact that medical billing is overly complicated and rife with errors isn’t exactly breaking news. Tatz argues that now is the time to tackle the problem because of an “increased recognition among healthcare stakeholders” that AI can reduce waste, and, because healthcare costs are “reaching a breaking point.”

We have found payers and providers are increasingly seeking solutions like Anomaly that reduce administrative waste and friction, which is the low-hanging cost to cut in the healthcare ecosystem,” he said.