Healthcare Paperwork

Anyone who’s walked into a doctor’s office or filed a health insurance claim since the turn of the century can attest that the healthcare industry could use a heavy dose of technological streamlining. Between medical records, billing, insurance, and a half dozen other areas, there are far too many interactions relying on paper, physical file cabinets, and fax machines.

Several startups are tackling problems in this space, but for all but a few, the bureaucracy of government agencies and the inertia weighing down enormous private institutions have made progress incredibly difficult to come by.

Eligible, a Y-Combinator Summer 2012 alumni company that launched quietly in November, has seemed remarkably immune to most of this. The startup offers an API that allows medical practitioners and insurance companies to assess patient eligibility without the burden of offline paperwork and phone calls. The company has been on a roll lately. Just a few months in, it is currently processing more than 10,000 eligibility transactions per day for prominent partners like Kareo.com, Passport Health Communications, Cathay Health, ZocDoc, and Nevada Medicare.

Today, Eligibility revealed that it has raised nearly $2 million in seed funding ($500,000 of which was reported shortly following YC demo day). The bulk of the new cash, more than $1 million in fact, was raised through the investor and startup platform AngelList. What’s more, the company crossed this seven figure threshold within 48 hours of turning on its “online fundraising” campaign earlier this month – a new Accredited Investor-only feature the platform launched in conjunction with SecondMarket.

Investors in the company’s initial round included SV Angel’s David Lee, Esther Dyson, Anvil Capital’s Michael Liou, Accenture Managing Director Anand Swaminathan, and Andreessen Horowitz. Since then, it’s been largely strategic investors like iTriage investor Raj Sandhu and Deerfield. The latter is typically a late stage investor but Eligible founder Katelyn “Kat” Gleason says they approached her, semmingly too interested to wait to invest further down the road. Deerfield reportedly conducted the vast majority of its due diligence through AngelList, such as contacting the company’s customers (on New Year’s day no less).

Not all of the money has hit Eligible’s bank account yet, Gleason concedes, but her phone has been ringing off the hook with interested parties. On the day that I talked to her at 9 am, she was already three hours into calls with potential investors. Given the momentum, it’s hard to see the existing commitments not coming through.

So how did Eligible make such a big early splash?

The company started by exploiting an Obamacare mandate that insurers begin automating their responses to eligibility queries. It’s not a problem that directly affects the consumers, but the current manual, analog solution is costing hospitals and insurers – and thus federal healthcare entitlement programs – piles of cash each year. Each time a patient goes the doctor’s office or to a hospital, a manual query is submitted to the patient’s insurance company to determine her coverage and treatment eligibility. This happened 2 trillion (with a “T”) times around the world last year alone, according to the company. In many cases this took the form of a 30 minute phone call, while a patient was waiting for essential care.

Eligible automates this process by using big data technology to help these various computer systems and data sets communicate efficiently. The company has built a standardized set of protocols that makes eligibility data universally accessible – data from doctor’s visits, lab test, insurance claims, pharmacies, etc. is currently presented in different decade-old languages and standards, and is rarely interoperable. Through eligible, doctors can immediately learn if a patient’s coverage is active or inactive, whether they will owe a co-payment, the status of their deductible or health spending balance, and guidelines for specific procedures such as MRIs.

Each time it processes one of these “transactions,” Eligible earns $0.05, a sum that quickly adds up. (The fee is paid by insurers, or developers who implement its API.) The company has seen revenue growing at 200 to 300 percent per month in its first three months. This is less difficult to achieve when the numbers are small, no doubt, but the trend indicates that the solution is catching on. Eligible has connected to over 700 insurance companies, and numerous hospitals and independent healthcare providers in the US.

Eligible didn’t go with the standard post-Y Combinator splashy launch. In fact, the company chose not to even launch at all immediately following its demo day. The initial product, a consumer-facing iOS app, was just a test. The big vision of becoming a B2B platform had not been fully fleshed out yet.

The eventual launch was done quietly in November when the company finally turned on its API and began processing transactions. The pair have since joined the Rock Health accelerator this winter with the goal of deepening its an industry relationships.

The healthcare space is enormous – almost too big, convoluted, incestuous, and political to wrap your head around. There are a laundry list of things that could still go wrong for Eligible including, at a high level, regulatory changes, competition from much larger providers, legal liability, and a few dozen other yet to be navigated minefields.

Before founding Eligible, Gleason worked at an electronic healthcare records company called drchrono, so she’s well aware of the challenges. Judging by the way that fundraising and partner integration have taken off since the New Year, I’d say whatever she and the rest of her team at Eligible are doing is working. If the company can keep on this trajectory, it may eventually grow to be an fixture within the healthcare IT infrastructure.