Technology is a double-edged sword, and nobody knows that better than doctors.
Pre-digitization, doctors billed insurance companies by circling a handful of codes corresponding to diagnoses and processes and turning it in. The digitization of that process made it much easier for doctors to double reimbursements by selecting more billing codes. As a result, insurance companies demanded more proof and recordkeeping for the services doctors billed.
That led to a gamified billing system in health care, requiring doctors to take meticulous notes of each interaction and procedure with a patient, documenting every minute of an appointment, and turning massive patient panels into hours of administrative billing work on top of caring for patients.
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“A really fairly simple, straightforward method of fee-for-service billing has now become a giant monster where the temptation of maximizing each billing opportunity drives an infrastructure that makes life absolutely miserable,” said Paul Chung, Kaiser Permanente physician and UCLA health policy professor.
The advent of technology fixed a lot of problems in billing, but brought an onslaught of new ones. Now the medical industry and startups are finding their way out of the mess that technology created.
Health care-focused insurtech startups have raised $215 million so far in 2022, a paltry amount compared to how much the sector received in 2021 ($1.3 billion, largely due to fertile economic times), but far more than 2020 and 2019, showing the problem is not one that venture left behind after the pandemic.
Why is billing so complicated?
The billing process is integral to the electronic health record system in the U.S. Each flu shot, diagnosis and procedure corresponds to a billing code and acts as a ledger for insurance companies to look at as proof the encounter took place.
Here’s the problem: A 10-minute appointment could have one billing code, while a 12-minute visit could correspond to another billing code. Can a patient’s diabetes be deemed mild or severe? Those are two different codes as well.
“As you start to see health care expenditure grow the way that it has in the U.S. without the improvement of outcomes, you start to question a lot of what’s driving the cost to go up,” said Jordan Nof, co-founder of Tusk Venture Partners which focuses on industries that operate in heavily regulated markets. “And a lot of it is inefficiencies that are driven around the infrastructure of health care.”
For example, doctors weren’t paid for conducting appointments over the phone or video, even if it was the most efficient process, until insurance companies made telehealth billable. And documenting every patient interaction prevents them from spending more time with the patient and affects rapport.
Pair Team, a San Francisco-based administrative platform that streamlines operations in rural or understaffed clinics, entered the fray in 2021 with $10 million in funding. Part of the company’s tech stack translates doctors’ notes into billing codes across different health plans, allowing doctors to spend more time with patients.
Can new technology fix the problems that came with old technology?
Very few startups have been ambitious enough to tackle payments in the health care sector, partially because the web of insurers and providers is so vast, and each comes with its own set of reporting standards and styles.
Tusk Venture’s Nof said he’s eyeing companies like San Francisco-based Flexpa that builds developer tools and API integrations for the platforms health care systems are already using. Instead of creating one single, standardized system that clinics and doctor’s offices probably won’t adopt, Flexpa creates specific tools linking already-present systems together
“You’re letting them build on top of those APIs,” Nof said.
We’ve talked about companies that act as scribes in health care before. Abridge, which raised $12.5 million in August, helps physicians with the meticulous note-taking process that comes with billing through conversational AI. This infrastructure is key, especially for lower-income health clinics that need to wring every last dollar out of their patient interactions.
“Only bigger systems can do all of the complicated reporting … Rural hospital systems haven’t been able to compete,” Batlivala said. “Even though they’re providing the same or higher-quality care, their reporting isn’t in place because they have to work across four or five or six different health plans that all have their own different interpretations and reporting requirements. And there’s just no standardization.”
Indeed, billing isn’t just an inconvenient thorn in the side of physicians. It’s a massive, cumbersome portion of the health care system that incurs waste, creates inefficiencies and lowers the quality of care in a country that desperately needs to raise it. Startups will have to figure out how to throw more technology into it without causing unintended consequences.
Illustration: Dom Guzman
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