Midstream Health, an autonomous financial operations platform for health systems, announced Thursday that it raised $20 million in Series A funding.
The company connects contracts, claims, purchasing, pharmacy and payment data, and leverages AI to identify and prevent lost revenue. Its customers include CommonSpirit Health, Mount Sinai Health System, Houston Methodist, Fairview Health Services and Keck Medicine of USC.
“We call it the ‘second financial brain’ for a health system. … Hospitals are multibillion-dollar enterprises, and most of them don’t have any form of managerial finance,” said Sumit Kadakia, CEO and co-founder of Midstream Health.
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The Series A round was led by Valtruis, and included participation from Andreessen Horowitz (a16z), Foundry and CommonSpirit Ventures. In total, Midstream has raised $29.2 million.
“In this environment, health systems need solutions that can improve their financial position quickly,” said Mike Spadafore, managing director of Valtruis, in a statement. “We’re backing Midstream because it’s built first-of-its-kind infrastructure to turn complex financial data into action. Where enterprise healthcare technology can take years to demonstrate value, Midstream delivers within the quarter.”
The financing will be used to expand Midstream’s product and engineering capabilities, according to Kadakia. In addition, the company will improve its sales and marketing functions and build a dedicated research function.
The funding round comes as more than 110 rural hospitals have closed over the last 20 years and about 720 are at risk of closure due to financial challenges. This is a personal issue for Kadakia, whose father practiced at two rural West Virginia hospitals that have since closed.
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“Health systems are losing margin they’ve already earned,” he said. “One system can have thousands of contracts across supply chain, pharmacy and managed care, each with its own pricing tiers, rebate triggers and amendments. Nobody has time to check every one against what the system actually buys and pays, so a six-figure rebate can disappear because one form was missed. Meanwhile, most healthcare AI money has gone into the claims fight between hospitals and insurers. Every dollar one side wins, the other side loses, and the total cost of care goes up.”
Midstream is on pace to reach $100 million in client savings by the end of 2026, Kadakia noted. Long-term, the company seeks to better enable value-based care.
“Value-based care was built on an unstable foundation,” Kadakia said. “To take on risk, a hospital needs a clear view of what care is actually costing it and why, and the systems to give hospitals that view were never built. If we give them that foundation, they can take on more risk, and that’s how you start to deflate the arms race between payers and providers.”
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