Axios Pro: Health Tech Deals

November 09, 2022

Axios Pro Exclusive Content

Happy hump day, Health Techies.

🚴 Situational awareness: Erin is moderating a late addition at HLTH in Las Vegas next week. She'll be sitting down Monday evening with Lance Armstrong to talk about facing adversity, from cycling to health tech investing.

1 big thing: Fathom files $46M for billing tech

Illustration of a filing cabinet in the shape of a red cross.

Illustration: Gabriella Turrisi/Axios

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

How it works: San Francisco-based Fathom uses natural language processing (NLP) in an effort to speed the reimbursement process at 4,000+ provider sites, serving roughly 60 million patients and 25,000 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 subsector of health tech, with companies that support small startups and hospital giants alike raking in recent funding.

What they're saying: Lightspeed's 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 much 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.

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