ICHRA: The Next Big Thing?
Sam Bogrov·4 min
Healthcare
Why We Invested In Alaffia Health -- Reducing Fraud, Waste and Abuse in Healthcare Payments
AG
Amit Garg
February 14, 2022·3 min read
Excited to announce our investment alongside Arthemis in the $5M seed of Alaffia Health which uses machine learning to identify and eliminate fraud, waste, and abuse (FW&A) in healthcare claims. Tau Ventures is an AI-first fund in Silicon Valley investing primarily in seed and we occasionally take later bets when we see immense promise. We are investing in US / Canada but in exceptional cases will consider a deal outside. Alaffia was founded in 2020 in NYC and impressed us with (1) a strong need, (2) building an execution-focused team, and (3) creating a differentiated product.
1) The Need
The vast majority of FW&A comes from high claimants (defined in the industry as <$50K / claim), causing FW&A to be overall $1,000 per claim. A good benchmark is that someone covering 100,000 lives is incurring $10M of FW&A. Alaffia claims it can detect 75% of the issues and take 20-30% of the cut commercially. The TPA (third-party administrators) industry numbers in the hundreds in the US and is fairly consolidated regionally. What Alaffia is going for initially are TPAs with #members in the hundreds of thousands and smaller payors -- giving us conviction around their go to market.
2) The Team
The two cofounders (CEO TJ Ademiluyi and COO Adun Akanni, who are siblings) have significant experience in the space through their family’s business. During diligence we also developed conviction they know who and how to sell, case in point winning a large contract with Maryland Medicaid. TJ has been enlarging the sales team, which is now four people, that are being compensated primarily on the number of members they bring in. CTO Tai Aichholz is the first employee, he and TJ met while incubating Alaffia at ER, and decided to move from LA to NYC for the company.
3) The Product
Right now a person processing claims can go through 450 per month. With automation the number could double or even triple. We see further possibilities for AI in how you detect and even predict FW&A in large data sets.
We are honored and excited to be part of Alaffia Health’s journey, using technology to solve a big problem. More at https://alaffiahealth.com.
Originally published on “Data Driven Investor," am happy to syndicate on other platforms. I am the Managing Partner and Cofounder of Tau Ventures with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr -- good length; did read). Many of my writings are at https://www.linkedin.com/in/amgarg/detail/recent-activity/posts and I would be stoked if they get people interested enough in a topic to explore in further depth. If this article had useful insights for you comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are my own.
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Amit Garg