The U.S healthcare system is infamously labyrinthine, with a lengthy claims process that results in frequent errors and high administrative costs. Headquartered in Bangalore and San Francisco, CoverSelf is building a cloud-native platform to improve payment integrity (or the process of making sure healthcare claims are paid accurately) by being more transparent and customizable than legacy systems. The startup announced today it has raised $4.8 million in seed funding led by BEENEXT Capital and 3one4 Capital.
Legacy systems present a major obstacle to payment integrity because many are black box, or have no transparency into their inner workings or systems, CoverSelf co-founder Rajasekhar Maddireddy told TechCrunch.
Claims and payment platforms identify inaccuracies in claims and payment contracts, including mismatches with current policies and guidelines. This means these platforms should continuously update policy and guidelines data, Maddireddy explained. But since legacy systems are black box, it is difficult for information to be shared among different parties in the payment integrity process. It also delays innovation and results in the potential leakage of intellectual property, making payers reluctant to share use cases with one another.
Founded in 2021, CoverSelf wants to provide an open and easily customizable system that makes it easier for payers, vendors and providers to collaborate by enabling real-time data to be shared while protecting IP. The startup is currently pre-revenue, but it has already partnered with leading healthcare companies.
Maddireddy said the platform can take different deployment approaches depending on what clients want. For example, it tested out its payment and claims accuracy platform by partnering with a top private health insurance provider. CoverSelf was able to show that the provider had a 9% inaccuracy rate in claims that would have otherwise gone unnoticed.
Before CoverSelf, Maddireddy and co-founder Raghavendra Pawar were early employees at U.S. healthcare startup HealthLucid (Maddireddy was its first employee). Pawar has also worked at healthcare organizations like Cotiviti and Prime Healthcare, spending a total of 16 years in the industry.
During their time at HealthLucid, a Blue Cross Blue Shield (BCBS) company asked them to build a self-manageable platform for claims and payment integrity. A Fortune 500 company also contacted Pawar to ask if he knew any self-manageable and open platforms for claims and payment integrity. The two saw the need for a platform like CoverSelf.
“Current vendors are black box and don’t enable collaboration,” Maddireddy said. “Because of that, people are reinventing the wheel multiple times and increasing the healthcare cost.”
He added that the use of black box platforms by vendors forces payers to be too dependent on them by preventing transparency into the root causes of inaccurate claims. This means that they can’t tell hospitals and doctors what is causing errors, resulting in lengthy and expensive cycles of denials and appeals.
CoverSelf’s platform was designed to adapt to increasingly complex payment models and changes to compliance requirements, code sets and guidelines.
Users are able to build on top of CoverSelf’s domain-specific platform with pre-built code sets and industry libraries, allowing them to scale quickly while staying on top of new code sets and policies. CoverSelf’s platform also include claims verification APIs for payers and providers.
CoverSelf’s competitors include startups like Rialtic and HealthEdge and legacy systems Cotiviti, Change Health, Optum and Multiplan.
Maddireddy said CoverSelf’s key differentiators include its ability to be customized and API-first/cloud-native approach, IP protection, an ideation platform for data mining and what-if scenarios and a payer-specific claims auto-correction features that automatically fixes errors in claims and processes them.
“As this is an extremely niche space to operate in, the entry into this industry is extremely rare and oftentimes difficult,” Maddireddy said. “However, this only goes to emphasize the sheer potential of the same, with companies like Rialtic raising $43 million in funding recently, it brings forth a stronger purpose for companies like ours to develop cutting-edge solutions in order to take on the business challenges in this industry.”
Dirk Van Quaquebeke, managing partner of BEENEXT, said in a statement that the “estimated cost of waste in the U.S. healthcare system is approximately 25% of total health care spending. Claims and payments integrity, i.e., incorrect billing or fraud, alone accounts for over US$100 billion of the problem. Now, anyone ever having worked in the U.S. healthcare system understands its massive complexity. We believe team CoverSelf has assembled a uniquely qualified team to abstract this away and improve healthcare outcomes at reduced prices for patients in the U.S.”