InstaMed Inc., a company with offices in Newport Beach and Philadelphia that processes healthcare payments, has raised $6.5 million in a third round of funding.
The company plans to use the money to expand its services, including for a marketing campaign.
InstaMed processes payments for more than 100 hospitals and clinics and some 2,000 doctors. It also works with billing services, vendors and insurers and other healthcare payers.
“We’re healthcare IT, but essentially we’re much more of a service provider than a software provider,” said Chris Seib, InstaMed’s chief technical officer and cofounder who works out of InstaMed’s Newport Beach office.
The company offers its services directly to hospitals and doctors’ groups, according to Seib. It also works with medical billing companies as well as installers of software for group medical practices and insurance companies, he said.
InstaMed allows hospitals, clinics and doctors’ groups to submit claims electronically and verify insurance for patients, Seib said.
“We’re also a payment processor, so that means we move money,” he said.
The new round brings InstaMed’s total raised to about $10.3 million.
A unit of Minneapolis-based U.S. Bancorp led the latest financing. NJTC Venture Fund of Mount Laurel, N.J., and an undisclosed private equity firm in Newport Beach also took part.
As part of the deal, Howell Mc-Cullough, an executive vice president at U.S. Bancorp, is joining InstaMed’s board.
U.S. Bank and InstaMed have worked together for about a year processing healthcare payments.
Founders
Seib and Bill Marvin, InstaMed’s chief executive, started the company in 2004. Seib and Marvin both were executives in the healthcare and life science practice of Accenture Ltd.
There, the two “consulted with the large health insurance companies like Aetna and WellPoint in this area of electronic communication between doctors and insurance companies,” Seib said.
“We recognized an emerging shift in healthcare being more payments coming out of the patient’s pocket and said, ‘Look, there’s a lot of work that can be done in making healthcare more electronic and it’s going to be more important to have a payment process that works,'” Seib said.
InstaMed handled its first transaction in 2005.
Competitors
Seib declined to say how many workers are at InstaMed, citing competitive reasons.
Competitors include Irvine-based Sage Software Inc.’s healthcare software unit and First Data Corp. of Greenwood Village, Colo., which provides electronic commerce and payment services.
The latest funding should meet InstaMed’s needs for 12 to 18 months and potentially see it to profitability, Marvin told Dow Jones & Co.’s VentureWire news service.
InstaMed is focused on building the business rather than either being acquired or doing an initial public offering, said Seib, who spent 13 years as a Newport Beach lifeguard and now is on reserve.
“Healthcare is a big opportunity and the problem we’re tackling is a large one,” he said. “We’re very focused on building and scaling to solve it.”
InstaMed raised $3 million in early 2006 and $800,000 in 2005.
