Derek Lo acknowledges healthcare administration isn’t a particularly sexy topic, but it’s mission critical for every digital health startup. Health insurers and hospitals in the U.S. spend more than $800 billion each year on administrative costs. If these startups can’t figure out how to license doctors across multiple states or get paid by insurers, they won’t be able to scale or generate revenue. His company, Medallion, is soothing these pain points with automation. “You need to solve them first before you can make money,” says Lo, 26, founder and CEO of the San Francisco, California-based company. “This is not a vitamin, it's truly a painkiller.”
That’s why nearly a hundred startups, including Ro, Firefly Health, Ginger and Eden Health, have signed up for Medallion’s software since the company launched in March 2020. On Wednesday, Medallion announced a $30 million Series B led by Sequoia Capital valuing the company at $200 million. Optum Ventures also participated in the round, along with individual investors including Oscar Health cofounder and CEO Mario Schlosser, Cityblock cofounder and CEO Iyah Romm and Stripe’s chief product officer Will Gaybrick. The company has raised $50 million to date.
Medallion aims to do for healthcare what Stripe did for e-commerce: use software to fix back office functions that consumers (in this case, patients) never see but are crucial to the interaction. Healthcare providers, whether they’re doctors, nurses or mental health counselors, need to be licensed in the state where the patient is located. Given there are more than 150 different state-level boards, each with their own unique and byzantine set of rules, that license clinicians in the U.S., this can be an arduous task. And that’s not the end of it — even when a provider is licensed with a state, there are thousands of health insurers, each with their own enrollment rules and credentialing background checks, to contend with before getting paid.
“These are the problems that software was built to solve,” says Andrew Reed, a partner at Sequoia Capital, who has invested in technology companies, including Github, Robinhood and UiPath. He sees the opportunity to modernize healthcare infrastructure problems in the same way. “These are data management problems, workflow problems, and automation problems.”
Lo estimates Medallion has saved its customers more than 100,000 administrative hours in the past year. Without Stripe, e-commerce merchants can’t get paid, and without provider networks, digital health startups can’t get paid. “Medallion is a gateway to launching and generating revenue,” says Lo.
The human body does not change how it behaves when it crosses state lines.
After selling his first company, the coding education startup Py, to Hired.com in 2019, Lo was searching for his next project. One idea he was kicking around involved using software as a way to crowdsource rare disease diagnoses. That idea was inspired by Lisa Sanders, a physician and professor at Yale who writes a column in The New York Times that aims to unravel medical mysteries. On a visit to the East Coast in January 2020, Lo caught up with Ro cofounder and CEO Zachariah Reitano. (Disclosure: Forbes Media has a small investment in Ro.) After discussing his new idea, Lo asked Reitano about the challenges he had experienced with scaling Ro, which is how he got an earful about provider licensing. “The human body does not change how it behaves when it crosses state lines,” says Reitano, yet the system of state medical licensing boards “never really considered or anticipated telemedicine.”
When Lo returned home, he started researching and recalls being “shocked” at the outdated processes. Take California for instance, where the state medical board sends a fingerprint card in the mail, which the provider needs to take to a local police precinct to get inked. Plus, the more licenses a provider has, the more difficult it is to get another, says Lo. “If you have 49 licenses, you would think that to get the 50th one would be way easier,” says Lo. But it actually ends up being the hardest, he says, because the person has to get all the other 49 states to send in verifications. “I think ultimately what Medallion can do is really automate all non-medical administrative tasks to unburden the healthcare system and unburden healthcare providers so that they can focus on taking care of people,” says Reitano, who was the company’s first investor.
Since then, Medallion has expanded beyond licensing to payer enrollment, which is gathering all of the information insurers need in order for a provider to participate in their network, as well as credentialing, which is a souped up background check to verify things like board certifications and malpractice claims. Medallion charges a baseline fee based on the total number of providers and then prices based on the type of work required—licensing, enrollment or credentialing. The company has grown from 25 customers at the beginning of the year to nearly 100 with no marketing team. “It truly has been word of mouth,” says Lo.
The funding will go towards hiring, as the company builds out its engineering and operations teams and expects to double its current headcount of 100 employees by the end of next year. “We believe what we're doing is meaningful,” says Lo, “in that we are, at the end of the day, reducing the cost of healthcare and increasing access to patient care.”
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