Taxo Raises $5M to Revolutionize Healthcare Administration with AI Reasoning Engine

Exclusive: YC-backed Taxo just raised $5m to slash healthcare admin with an AI "reasoning engine"

When British doctor Ahmed Kerwan began working as a physician, the paperwork burden shocked him. On some days, he would spend only three hours actually caring for patients, with the rest of his workday spent on things like dealing with insurance claims. There are already dozens, perhaps hundreds, of startups using AI to reduce the notoriously complex admin burden in healthcare. From note-taking specialists like Abridge to AI assistants startup Ambience, these startups are racing to streamline efficiencies. Kerwan, now an entrepreneur, is the founder and CEO of one of such company called Taxo. His startup offers an app that doctors and others use for tasks like getting prior authorizations from insurers, patient intake, and medical billing. What sets Taxo apart, Kerwan says, is its AI "reasoning engine," which transparently explains the process behind its decisions to users, helping it build trust with doctors. Reasoning models went mainstream in the AI world late last year by fleshing out their logic openly to users. At Taxo, the tech helps reduce hallucinations while increasing prior authorization approval rates to 98%, compared to an industry average of about 80%, according to Kerwan. Taxo built its 'reasoning engine' by adding a healthcare-specific layer on top of existing models like OpenAI's and Anthropic's. It says the system is trained on hard-to-access healthcare data that makes it difficult for others to scrape overnight. "We didn't want to be steamrolled every time OpenAI launches a new model," Kerwan told TechCrunch. The reasoning trend in AI remains early and only really gained traction with the rise of Chinese startup DeepSeek. Investor interest in Taxo, however, suggests there's a chance for the technique to gain broader adoption beyond foundational AI companies. The startup recently closed a $5 million seed round led by Y Combinator, General Catalyst, and Character Capital. Founded last year and based in San Francisco, Taxo tells TechCrunch it passed $1 million ARR six months after its launch. It now serves about 15 customers, ranging from clinics to government providers. When ChatGPT was released, doctors were understandably cautious about using it because they couldn't trace why and how it was making specific recommendations, Kerwan told TechCrunch. He's hoping Taxo changes that. "You can see exactly where we got the information and why it's being given," he said.

Taxo raises $5M to reduce paperwork for doctors so they can care for patients - SiliconANGLE

Taxo raises $5M to reduce paperwork for doctors so they can care for patients Taxo.ai Inc., a company building an artificial intelligence reasoning engine for healthcare administration, said today it raised $5 million in seed financing to reduce the burden on physicians so that they can spend more time on patient care. The funding round was led by Y Combinator, General Catalyst and Character, with participation from prominent angels including Zeus Living founder Kulveer Taggar and Rocket Money founder Yahya Mokhtarzada. Founded by Dr. Ahmed Kerwan, chief executive of Taxo, a practicing physician himself, Taxo addresses a critical pain point in healthcare by using AI to automate administrative tasks that currently consume a significant portion of medical professional's time. The company's approach aligns with the 2025 trend of developing intelligent agents capable of handling complex work. The name of the company comes from the word for "taxonomy," the branch of science that deals with classification. It's also related to classifying medical claims if they were acceptable, rejected or needing more information; one of the prototype iterations of the software that would evolve into Taxo. However, "taxonomy.com" was too expensive, so Kerwan opted to buy "taxo.ai" for only $100. "First and foremost, we started by creating an AI that integrates with electronic health records to automate all the paperwork specifically in payer and provider communications -- so, prior authorization, letter, claim, adjudication, coding, billing, etc.," Kerwan told SiliconANGLE in an interview. Most doctors are often reluctant to use tools they consider to be a "black box," unless these tools provide clear reasoning for their decisions and connect all outputs to the original records. To address this concern, Taxo ensures that all its results are auditable, which is intended to build trust with healthcare providers. "It mirrors all the data from your existing software in one place, in a standalone app," explained Kerwan. "Then you can have it do a number of communication and paperwork-related functions." The AI software also ensures data security and regulatory compliance including the Healthcare Insurance Portability and Accountability Act. Kerwan explained that right now there's such a paperwork burden that sometimes he has had days where he had three hours of seeing patients and then six to seven hours of doing paperwork. It's not always doctors who are burdened by paperwork. For example, there are back-office staff hired or outsourced specifically to do prior authorizations -- a procedure where health insurance plans require a doctor's office to get approval for particular services or medications. "We just want to help reduce the need for all this excessive hiring and all these excessive hours being spent on paperwork," Kerwan said. Under the hood, Taxo doesn't use a specialized foundation AI model, instead, it uses a model-agnostic approach through a unique "meta-layer" that sits atop a foundation model. That means Taxo can incorporate multiple foundation models and isn't locked into any single AI technology and can fine-tune for specialized healthcare administration tasks. Kerwan explained that this also avoids having to train and fine-tune a foundational model, which would be extremely expensive and take a long time to bring to market each time. It would also allow the company to adapt rapidly alongside emerging AI technology. "We can't compete against Anthropic or OpenAI, but we also want to get better as AI gets better," Kerwan said. Now that Taxo has secured funding, Kerwan said that the company will build out the AI meta-layer technology and to do that it intends to focus on hiring AI talent. Another focus of the company will be partnering with healthcare institutions by forming a team on the ground that will act as anthropologists to help build custom solutions. "My first degree was actually in anthropology before medical school," Kerwan said. "I think it's not just the technology that matters; it's also understanding the culture of the enterprise, how they think, how they work, the day-to-day."

Taxo Raises $5M from Y Combinator, General Catalyst, and Character to Build Out Autonomous Systems for Healthcare

Enter your email to get Benzinga's ultimate morning update: The PreMarket Activity Newsletter SAN FRANCISCO, March 27, 2025 (GLOBE NEWSWIRE) -- Taxo, the world's fastest, most accurate data extraction and reasoning engine for healthcare administration, announced today it has raised a $5M seed round of funding. The round was led by Y Combinator, General Catalyst, and Character, with participation from prominent angels including Kulveer Taggar (founder of Zeus Living) and Yahya Mokhtarzada (founder of Rocket Money). Taxo will use the funds to continue to develop its AI platform and hire for key roles. "Taxo represents the next frontier in healthcare AI -- not just automating paperwork, but transforming medical decision-making with unprecedented accuracy," said investor Kulveer Taggar. "By reducing administrative burden by 90% while maintaining 98% decision accuracy, they're addressing healthcare's trillion-dollar efficiency crisis at its root, allowing medical professionals to reclaim their time for patient care." Today healthcare is burdened by systemic inefficiencies, forcing healthcare professionals to spend more time navigating paperwork than providing patient care. A reliance on manual workflows and unstructured data -- like PDFs and faxes -- creates error-prone, labor-intensive processes that drain resources and cost the industry trillions each year. This ultimately results in reduced service capacity, delayed treatment, and employee burnout. Taxo is addressing this issue head on with its proprietary engine that automates the entire workflow pipeline -- from data extraction to advanced reasoning and decision-making. It's also fully compliant with HIPAA and SOC2 standards, and every decision it makes is explainable, with direct references to source documents. This transparency gives healthcare organizations the confidence to rely on it even in the most regulated environments. Dr. Ahmed Kerwan, a practicing physician, experienced firsthand the immense burden of paperwork that detracted from his ability to provide care. Determined to find a solution, he pursued a fellowship at Harvard and MIT to explore the intersection of AI and healthcare. "We are thrilled to work with our legendary investors who have decades of expertise in technology. They understand our mission to dramatically improve efficiencies in healthcare administration," said Ahmed Kerwan, Founder and CEO of Taxo. "We look forward to bringing Taxo's AI to governments, hospital systems, and other large organizations who deal with messy healthcare data." About Taxo Taxo is the world's fastest, most accurate data extraction and reasoning engine dedicated to healthcare administration. Its proprietary engine automates the entire workflow pipeline -- from data extraction to advanced reasoning and decision-making. Taxo uses its world-leading AI to dramatically reduce processing times and minimize errors for healthcare administration while ensuring every decision is transparent, compliant, and easy to audit. Taxo is used by leading healthcare organizations and government agencies around the world. Based in San Francisco, CA, Taxo is backed by Y Combinator, General Catalyst, Character, and other prominent investors. Kerry Metzdorf [email protected] A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/8813da53-3037-42cc-8b67-91da1beeaf30 Market News and Data brought to you by Benzinga APIs