As artificial intelligence in revenue cycle management quickly gains ground, a new startup, Procode AI, launched out of stealth with a unique approach to AI-powered RCM for complex procedural and surgical cases.
The company is using an AI-roll up strategy, acquiring an established surgical billing business to embed AI into workflows while also strategically focusing on building intelligent billing infrastructure for surgeons in private practice.
Procode AI co-founders Jeff Cripe, a tech startup entrepreneur, Kameron Rezzadeh, M.D., a board-certified plastic and reconstructive surgeon, and James Baez-Silva, an engineer, saw a fragmented RCM market that didn't serve the needs of private practices that face growing administrative burden and uncertainty around reimbursement. Outside of the largest players, many smaller RCM companies struggle to scale and lack the resources to adopt the latest AI technology.
"Outsourced medical billing is a massive $15 billion industry, growing at about 13% per year. The largest companies in the space, think R1 and their peers, generate about 10% of that revenue, and the other 90% is generated by about 5,000 companies, 85% of whom generate less than $5 million a year annually. That means most of the revenue in the market is being generated by thousands of very small kind of mom-and-pop businesses, and those businesses are very clearly having trouble scaling past $5 million a year of revenue," Cripe told Fierce Healthcare in an interview.
RCM is a labor-intensive business, and many companies face hurdles in scaling talented workers.
"We thought we could build AI products related to medical coding and AR (accounts receivable) and denials management that will chip away at how people-inefficient these companies are," said Cripe, a startup founder who launched Cargo, a company that turned rideshare vehicles into mobile vending machines and was a former Birchbox team member.
But rather than sell a standalone AI product to RCM companies, Procode AI's strategy is to acquire and vertically integrate AI technology within those companies to make them more efficient, he noted.
"Our strategy is to acquire these companies, keep all of their people, but give them tools that will make them three to five times effective and productive," he said.
He added, "We have not, in five months, laid off a single person from the Auctus Group, and that was intentional, because our goal is not to replace people with AI. It is to use AI to make those same employees superhuman at what they do."
Procode AI built automation to expand margins and reimbursement outcomes for its clients with an AI coding copilot tool for surgery, an AR/denials management engine that leverages AI for AR decision making, payment posting, charge posting and other AR processes and a provider app that puts real-time financial and claims data at surgeons' fingertips, according to the company.
Procode’s AI coding copilot translates operative reports into billing and diagnostic codes, significantly reducing manual coding time and downstream denials, executives said. The company says its AI copilot enables medical coders to code 90% faster and with much greater accuracy by translating operative reports to billing and diagnostic codes.
“On average, based on data that we have used to build our models, humans are making coding errors, in particular in surgery, which is very nuanced and technically complex coding, about 21% of the time. Our error rate on coding is about 9%, so there's a huge uplift,” Cripe said. All medical claims go through human review, he noted.
The company currently works with more than 300 providers, and its roadmap includes expanding to other surgical subspecialties, including orthopedics, neurosurgery, spine surgery and vascular surgery.
Last year, Procode AI raised $4 million in a seed round led by Story Ventures with participation from CHAP Health Ventures, Progression Fund and Dmitry Shevelenko, Perplexity's Chief Business Officer. The startup bought The Auctus Group, an RCM company for plastic and reconstructive surgery and dermatology, serving more than 300 plastic surgery and dermatology providers.
The startup is taking a "build then buy" strategy rather than the typical roll-up strategy of "buy then build." The goal, Cripe said, is to create "the first, best and largest AI-powered revenue cycle management company for surgeons in private practice."
"The Auctus Group is a tech-forward, missionary team who want to build the next generation biller with us," he said.
The company has already added $2 million of annual recurring revenue in five months post-acquisition, demonstrating the benefit to providers: fewer coding-related denials, fewer AR days and maximized reimbursements, Cripe said.
"The technology is making the billing team more productive, and that is translating into better results for our company. But we also work on a contingency fee, so we are only successful if we make our clients successful from a reimbursement perspective, so it’s also driving better reimbursement outcomes for our clients," Cripe said.
Last year and the acquisition of The Auctus Group was about proof of concept, he noted. The company now has metrics showing that the Auctus acquisition and integration of AI materially changed the performance of the business. Procode AI will now be building a capital pool to efficiently roll up more of these businesses.
"We want to rapidly acquire additional companies in this space and transform them in the way that we have done with this same company, so that, at the end of the day, we build a big, surgically-focused, AI-powered RCM company that will be AI-native from the ground up, and will rival, at some point soon, the big companies in the space," he noted.
The startup plans to acquire another company by end of this year and then ramp up more acquisition deals. "We've developed a really comprehensive, well-documented playbook for how to partner with these companies and accelerate their growth and accelerate their rate of technology adoption," Cripe said.
Procode AI also wants to provide better billing and RCM services to physicians and private practices. As a plastic and reconstructive surgeon, Rezzadeh, one of Procode AI's co-founders, was frustrated with outsourced billing/RCM services, often paying hundreds of thousands of dollars per year for low-quality results. Antiquated spreadsheet-based claims tracking, claim denials for untimely filing and frequent CPT coding errors have been accepted by surgeons as the industry standard when dealing with insurance companies via third-party billers, Cripe wrote in a LinkedIn post.
Procode's technology ensures that providers are reimbursed fairly for procedures they perform receive reimbursement faster. With its provider app, the company gives surgeons easy access to claims and financial data.