Our First Investment out of DVIII in Glide Health’s Pre-Seed Round

Darling Ventures is excited to go live with our new fund, DVIII, and announce its inaugural investment, Glide Health! DVIII invested $500,000 into Glide Health’s pre-seed round alongside our longstanding co-investors The Hive.

Glide Health is a software startup transforming the US healthcare industry by making the cost of care more financially transparent for both patients and providers (doctors / clinics / hospitals). Its cross-functional and AI-based revenue intelligence solution not only predicts the financial viability of different treatment plans ahead of time so to deliver greater transparency on out of pocket expenses, it also automates away a large portion of the administrative tasks and burden faced by providers when dealing with insurance reimbursement processes. On top, the software allows providers to increase the accuracy of their revenue forecasting and take specific actions to improve associated metrics.

The result, providers and patients are able to make financially informed decisions on which treatment is best for them and providers deliver more personalized care at lower cost. Thereby transforming the enormous industry known as Revenue Cycle Management (RCM) whose broken processes contribute over $500B annually to the healthcare bill in the US.

The startup is coming out of the Palo Alto based venture fund and co-creation studio The Hive that co-creates startups focused on AI powered applications in the enterprise and industry. Since 2012, they have co-created and invested into 27 companies and have put together a strong team of experienced company builders, serial entrepreneurs and investors. Glide marks our third co-investment with The Hive after Foghorn Systems and Geminus Ai. We’ve been consistently impressed with their efficient, focused and successful approach and execution to company building and are excited to be partnering with the team again as they venture into the healthcare industry.

Glide’s founders have decades of combined experience successfully delivering technology innovation and managing teams in the healthcare industry. Bhupesh Bajaj is Glide Health’s co-founder and CTO, joining from being VP of Engineering at Change Healthcare (acquired by McKesson NSYE:MCK) and Senior Director of Software Engineering at Cardinal Health. He is joined by co-founder Dan Lodder as CCO whose 20 years in senior roles in healthcare include 10 years at McKesson ($200B in annual revenue) as CTO of McKesson Specialty Health, CPO at HealthHelp and General Manager at Practice Fusion (acquired by Allscripts).

We feel fortunate to benefit from Glide management’s domain expertise, industry networks and capability to build Glide into a successful disruptor of the RCM space.

The Problem & Market Opportunity

The US healthcare industry is the largest in the world spending $3.5T annually, yet it lags many nations in terms of the overall quality of care this enormous sum buys its population. With spend on track to almost double to $6T by 2027, the US healthcare system is under significant pressure to reduce costs while at the same time deliver better care to patients. In order to achieve this the industry is undergoing a transformational shift away from fee-for-service (paying for each treatment) to a value-based (paying for an outcome) reimbursement model.

While this shift comes with benefits to the patients in form of better care, and is geared to drive down overall healthcare costs, it is also making it much more complex for every stakeholder in the industry to understand who will cover what and how much it will cost. Patients are faced with increasing out of pocket expenses, the exact amount often not known until after the treatment. Providers are faced with back office costs going through the roof, an increasing number of claims being rejected by payers (health insurance) and an increasing default rate on the patient side. And the payers too are struggling under the mounting complexities associated with value-based care.

To illustrate just how complex reimbursement has become, the number of possible claim codes for treatments has shot from 12,000 to over 70,000 in recent years. In addition, Payor requirement and Provider’s costs for prior authorizations has continued to go up — estimated 60% in just 2019 alone. Providers are left needing to hire specialized back office staff to manage the billing and claims process, a ballooning function in the industry called Revenue Cycle Management (RCM). On average there are now four back office staff to every doctor in a US hospital, a major drain on profitability.

The labor intensive and convoluted back and forth RCM process between providers, patients and insurance companies is estimated to contribute $500B yearly to US healthcare costs. On top, the lost revenue for healthcare providers due to claims being rejected by the payers, e.g. due to disagreeing which claim codes to assign, amounts to $300B of annual revenue leakage. This huge market opportunity of reducing such wastage in the US healthcare industry is where Glide Health is building its business. The startup is looking to take what is currently a post-treatment reactionary RCM function to one that is pre-treatment and proactive. What is human driven with manual inputs is transformed into a software defined system that is interconnected, rapid and intelligent. In doing so, Glide Health’s software automates away a significant portion of administrative costs, reduces claim denials and provides overall financial transparency to both providers and patients so they can make financially informed choices of care.

A summary of market opportunity wouldn’t be complete without a look at any impact from the COVID-19 pandemic. In the context of Glide Health we see two tailwinds emerging as a result of the current healthcare climate:

• Greater data liquidity: accelerated access and API integration to medical data platforms mandated by US regulators last month as part of the 21st Century Cures Act.
• A use case for COVID-19: while the US covers the cost of COVID-19 testing it is up to a patient and their payer to cover treatment. Glide Health can help providers rapidly respond to the additional stress of assessing coverage and treatment costs using its existing solution.

Glide’s light-weight solution

Glide Health’s initial product is a light-weight software solution that integrates directly into existing RCM platforms and within the existing workflow process and screens — a key attribute to ensuring successful adoption in the healthcare industry. Underpinning Glide Health’s offering is its ability to source and collect relevant data from throughout the RCM network, deploy AI models to predict individual financial outcomes and automate manual data entry and submission claim tasks. The result is a revenue intelligence layer sitting on top of the existing RCM framework that constantly gets smarter.

Glide’s initial software product comes with three main features:

• Financially personalized care: It allows doctors, clinics and hospitals to educate their patients in real time on the out of pocket cost for each potential treatment path and avoid the financial uncertainty until months later when a bill ultimately arrives. To the provider this not only means more personalized care but also avoids failed or delayed patient payments, with the added benefit of seeing upfront as additional data points in existing workflows what costs they will be reimbursed for as well.
• Intelligent revenue operations: It also optimizes and automates much of the manual data entry process handled by back office staff to help reduce the administrative burden of providers. The system proactively and automatically conducts pre-authorization checks on claims to ensure that ones with low likelihood of being accepted by insurance are not created while prioritizing and auto-populating those claims with high chance of reimbursement. The systems constantly evolving knowledge graph of what payers cover and what new claim codes are added significantly improves back office efficiency and reduces revenue leakage.
• Revenue forecasting and optimization: On top, the same knowledge graph also provides a specific and accurate forecast on accounts receivables, aging, financial risk and most importantly the levers and specific actions to take to improve the metrics

The US healthcare industry is gigantic yet hard to crack for a brand-new startup. Securing early customer deployments is key to gaining integration into legacy platforms and securing industry validation. We’re thrilled to see Glide secure partnerships right out of the gate with both a Fortune 10 health industry company as well as one of America’s largest Oncology network.

We believe Glide Health is elegantly solving an increasingly complex problem in a growing multi-trillion-dollar industry undergoing significant transformation. The macro trends are in favor of the market Glide Health is going after and there is a clear need for an offering like theirs to modernize the capabilities of the existing RCM platforms that are falling behind. Glide Health’s solution is lightweight and low friction for RCM platforms and providers to adopt as opposed to requiring replacement or complex overhaul of entrenched legacy systems. As in other complex industries such as the industrial sector, it is the specialized AI-native startup that takes the role of introducing cutting-edge technology to legacy platforms that are not evolving fast enough. Importantly, the integration of such technology is customer led as they demand more from their RCM platforms.

In 2019, there was over $9B in M&A activity in the RCM industry as incumbents look to grow and innovate. We believe Glide Health has fantastic potential to leave its mark on a gigantic industry in desperate need for change.

Exciting times ahead and a huge welcome to Glide Health!

This article was written by Daniel Darling and Pascal Unger, Managing Partners at the San Francisco based Seed firm Darling Ventures.

Darling Ventures is your partner from day one. We write your first pre-seed / seed check investing out of our third fund and are happy to lead or join your initial round of financing. We focus our investing on software startups using DATA INTELLIGENCE, AUTOMATION and/or DECENTRALIZATION to transform the enterprise, industrial sector or traditional markets such as healthcare and finance.

We’d love to hear your thoughts: Daniel Darling & Pascal Unger