N.Y. startup raises $36M for 'patient-friendly billing' business
Cedar, a SoHo-based startup that helps large medical groups and hospitals issue more understandable bills, has raised $36 million in a Series B funding round.
Cedar's software helps billing departments generate easier-to-read bills that explain to customers what they are paying for. The software also enables billing departments to chat with patients online.
"We strongly believe patients really want to pay their bill if we make it transparent and easy for them," Cedar co-founder and CEO Florian Otto said. "Reducing friction increases the likelihood for patients to pay and increases the collection rate."
Providers are now collecting more payments, but sending bills by mail and following up by phone is an antiquated approach, said Vicki McKinney, chief operating officer of Westmed Practice Partners, the management-service organization for the 450-physician Westmed Medical Group, based in Westchester County. Depending on patient preference, bills can be sent by email, and practices can send reminders by text message.
In the metro area, consumers spent $854 in out-of-pocket medical costs on average in 2015, up 15% compared with 2012, according to an analysis by the Health Care Cost Institute last year.
"Self-pay has definitely gone up," McKinney said. "It has become more important. High deductibles play a big part here. People are paying a lot more money."
In the three-month trial period, McKinney said, Westmed increased collections by 32% and its average payment time dropped 64% to 14 days compared with mailing bills from its in-house print center.
After completing the free pilot, Westmed recently signed on to become a paying customer.
By August it will conduct all its direct-to-patient billing through Cedar. McKinney also said UnitedHealth Group's Optum360, which helps providers collect bills, is exploring using the software in a pilot program. Optum is the parent company of Westmed. Otto and McKinney declined to disclose the pricing for Cedar, but McKinney said Cedar takes a percentage of collections, a common practice among revenue-cycle vendors.
The funding round was led by Kinnevik, a Swedish investment company, and included money from Founders Fund, Thrive Capital, Lakestar, Sound Ventures, Instagram's Kevin Systrom and Flatiron Health's Nat Turner. To date, Cedar has raised $50 million from investors.
Otto said Cedar uses data such as a patient's payment history, the size of the bill and the median home price in the patient's ZIP code to personalize how to reach them and develop a payment plan.
"We're coming up with the best outreach strategy for every single patient," he said.
The company was founded in 2016 by Otto, who became a maxillofacial surgeon in Germany before working as a consultant for McKinsey & Co. in Brazil, and Arel Lidow, a former vice president of product management at AppNexus. Most recently Otto was vice president of sales for Zocdoc for three and a half years before leaving to found Cedar in early 2016.
Cedar is now located around the corner from Zocdoc, whose co-founder, Cyrus Massoumi, was an early investor. The company has 26 full-time employees and contracts with eight large health systems as well as some major local medical groups. Crystal Run Healthcare, Montefiore Medical Center, Maimonides Medical Center and Southampton Hospital are all clients.
"We're going to build our team here," Otto said.
"N.Y. startup raises $36M for 'patient-friendly billing' business" originally appeared in Crain's New York Business.
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