Exclusive: Fathom files $46M Series B to streamline medical billing

Automated medical coding startup Fathom filed a $46 million Series B round, CEO Andrew Lockhart tells Axios exclusively.

Why it matters: Pandemic-related clinician shortages are spiking demand for automated medical software that promises to boost efficiency while cutting costs. Fathom tackles the laborious medical reimbursement and documentation process — a particular pain point for health systems.

Deal details: Lightspeed Venture Partners and Alkeon Capital led the round, bringing Fathom's total capital raised to $61 million.

• Cedars-Sinai, Inflect Health, ApolloMD and insiders Founders Fund and Tarsadia joined.
• Alongside the funding, Fathom named Lightspeed partner Galym Imanbayev, and Alkeon general partner Mark McLaughlin to its board of directors.
• Fathom will use the fresh funds to hire more engineers and expand its specialty support offerings.

Flashback: After starting pharmacy company TinyRx with cofounder Chris Bockman and thinking about pivoting the business model, Lockhart tore a knee playing basketball — an experience that ended with a massive bill and a desire to automate the medical coding process.

• "It’s hard to have a scalable impact on the clinical side, which pushed us towards the administrative side," Lockhart tells Axios.

How it works: San Francisco-based Fathom uses natural language processing (NLP) in an effort to speed the reimbursement process at 2,000+ provider sites, serving roughly 20 million patients and 3,000 providers.

• Lockhart says the company is growing quickly and has been "flirting with profitability for several quarters."

State of play: Digital health infrastructure is a hot sub-sector of health tech, with companies that support small startups and hospital giants alike raking in recent funding.

• Rhyme (FKA PriorAuthNow) in February raised $25 million to streamline the treatment approval process.

• Medical software company Tebra in July raised $72 million at a $1 billion+ valuation.
• Capable Health, a maker of plug-and-play enablement tools for digital health startups, in May raised a $6 million seed round.

What they're saying: Lightspeed Venture Partners' Galym Imanbayev tells Axios he's spent the better part of 10 years looking for a medical coding company to back but stayed away after seeing several companies tackle the problem with messy, human-intensive tools.

• Fathom has "reached an inflection point at which their model can perform in a way that doesn’t require any human interaction," he says.
• "They're not just doing data aggregation but data architecture, which allows them to take learnings from one specialty and apply it to another," he adds.

⚓ One fun thing: Fathom's name is a double-ode to its core deep learning tech: As a verb, fathom means to understand. As a noun, it's a measurement of nautical depth.