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Exclusive: CodaMetrix notches $40M for hospital revenue tools

an illustration of a stack of money with a hospital bracelet wrapped around it like a badn

Illustration: Tiffany Herring/Axios

Health care billing tech provider CodaMetrix notched $40 million in Series B funding, CEO Hamid Tabatabaie tells Axios exclusively.

Why it matters: The company promises its revenue cycle management tools will save providers time wasted on coding while boosting hospital efficiency without additional hiring.

Zoom in: Transformation Capital led the round, joined by existing backers SignalFire and Frist Cressey Ventures.

  • Funds follow CodaMetrix's $55 million Series A last February and will be used to fuel R&D and hire 50 additional staff.
  • Transformation co-founder and managing partner Todd Cozzens joins CodaMetrix's board of directors.

What's next: Acquisitions are on the table, Tabatabaie says.

  • "I'll be looking around in 2024," he says.

How it works: The Boston-based company combines machine learning, deep learning and natural language processing to turn clinical notes into billing and diagnostic codes, across radiology, pathology, surgery, gastroenterology and inpatient specialties.

  • CodaMetrix contracts with health systems in specialty areas — radiology, pathology, surgery, gastroenterology and inpatient specialties — and charges rates depending on the percentage of automation it provides.
  • The company tracks outcomes by determining how fast claims are processed, how many codes are needed for areas outside what is being automated, and how many codes its tech makes redundant.

The latest: CodaMetrix grew from partnerships with roughly 60 hospitals to arrangements with more than 200, Tabatabaie says.

The intrigue: Profitability is no longer on near-term horizon for CodaMetrix, Tabatabaie says this week, a change from his conversation with Axios last winter when he predicted the company getting to break-even by the end of 2024.

  • "We've decided to double-down on growth by building new applications for specialty areas," per Tabatabaie. "Profitability isn't going to happen by the end of 2024."

Behind the scenes: CodaMetrix's board met last fall and agreed to open up a Series A extension round, envisioning a term sheet in the range of $5-10 million, per Tabatabaie.

  • But after receiving inbound interest from several investors and meeting Transformation Capital, the group found itself signing a $40 million term sheet the first week of January, he says.

State of play: Hospitals have numerous revenue cycle automation tools from startups and public giants alike, but Tabatabaie says CodaMetrix's strength comes from its origin story inside Massachusetts General Brigham.

Editor's note: This story has been corrected to note that CodaMetrix has partnerships with hospitals, not health care systems.

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