The notoriously complex US healthcare system is wasting hundreds of millions of dollars on bureaucracy because of poor data and a lack of transparency. So says Rajasekhar Maddireddy, founder of CoverSelf, a healthtech start-up that is today announcing it has raised almost $5 million of seed finance for a platform it says will help to solve such problems.

Coverself’s solutions are aimed at both healthcare providers, including hospitals, and those that pay their bills, largely insurance companies. On both sides, the firm warns, out-of-date legacy technologies and opacity are causing administrative delays and driving up costs.

“Cobbled-together software solutions result in scattered data and the inability to make real-time business decisions,” argues Rajasekhar Maddireddy. “Administrative complexity costs billions annually – an open and collaborative platform can significantly reduce the repetitive administrative waste.”

In theory, stakeholders in the US healthcare system are supposed to communicate through standardised language, using reference codes set by industry bodies to ensure claims can progress quickly and without hindrance through automated workstreams. In practice, however, multiple errors creep into the process at every stage, causing claims to be wrongly rejected or delayed. In addition, 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 to take action accordingly.

“The current claims integrity systems are very complex, and the deployed technologies are antiquated,” adds Maddireddy. “Significant software innovation is needed to address the broken system that is currently creating out-of-control healthcare costs and waste.”

The scale of the problem is eye-watering. Of the $4.1 trillion spent on healthcare in the US each year, administrative spending accounts for a quarter of the bill. Improvements in automated claims processing, data accuracy and transparency could therefore release huge savings for providers and payers alike, freeing up cash to fund healthcare improvements.

CoverSelf believes its technology could deliver those gains. It offers an open platform through which both providers and payees can exchange information far more efficiently and with visibility. The platform can be customised according to each user’s needs – enabling integration with existing processes – and should support innovation.

The start-up’s goal is a healthcare payments system where no claim is wrongly rejected or returned with a request for further information. “We believe that when everyone has the data, payment and reimbursement guidelines, and updated data sets, they need to process clean claims on the first pass,” Maddireddy argues.

With CoverSure still at the pre-revenue stage, this is a work in progress. But the company insists its testing and product development work suggests it can move the industry towards this goal. In pilots conducted with large Indian healthcare players, their administrative costs were reduced by an average of 18%.

CoverSelf’s next task is to prove similar savings are achievable in the US. The company is in advanced talks with at least two large players in the sector, Maddireddy says, and hopes to announce deals within weeks.

Today’s funding round should help the business accelerate its go-to-market strategy, with the $4.8 million it has raised earmarked for building out the platform, scaling up operations, and investment 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 under-appreciated features given the dynamic nature of healthcare,” argues Sonal Saldanha, VP, Investments at the former.

At BEENEXT, managing partner Dirk Van Quaquebeke adds: “Anyone who has ever worked in the US healthcare system understands its massive complexity; we believe CoverSelf has assembled a uniquely qualified team to abstract this away and improve healthcare outcomes at reduced prices for patients in the US.”