Key Highlights

• Funding of $2 million was led by Abundant Venture Partners, with additional support from MemorialCare Innovation Fund and Zeal Capital Partners.
• SpendRule’s AI platform automates validation of service invoices against complex healthcare contracts to prevent overpayments.
• Early deployments include health systems OSF HealthCare, Kettering Health, MemorialCare, and MUSC Health.

A venture-backed startup targeting the supply chain, SpendRule is focusing the power of AI on helping health systems prevent overpayments on purchased services, a sore spot for supply chain execs. Its contract intelligence platform automates validation of service invoices before payment.

CEO and co-founder Chris Heckler, a healthcare supply chain veteran, spoke with Healthcare Innovation about how the company was able to launch with deployments already underway across several health systems, including OSF HealthCare, Kettering Health, MemorialCare, and MUSC Health.

Joining the conversation was Dave Fergus, chief supply chain officer at OSF HealthCare. 

Health systems enter into very complex contracts. For instance, they might have many different service times and rates — during the day or after hours or on weekends and holidays. There are all different aspects to what the vendors can charge health systems for doing services such as elevator maintenance. “Now we’re enforcing the contract terms on the front end instead of paying and then two years later getting a credit back from a vendor,” Heckler said. 

In our conversation, Heckler highlighted his 25-year career, including founding a healthcare supply chain analytics company called Valify, which was sold to HCA Healthcare in 2019. Facing a five-year non-compete agreement, he began looking for the next problem he could help solve in this space. 

He decided to focus in on purchased services and reached out to Fergus and other supply chain execs to talk about pain points. “We talked about using AI to do things that we couldn’t do before,” Heckler recalled. “We’re always showing health systems where there are potential savings. But there are bandwidth issues within the health systems, and they can’t get to them all. I wanted to get to where our software actually reduces costs, not just point out where there’s potential.”

SpendRule’s platform trains on contracts to identify discrepancies between invoices and contracts.

Heckler said co-founder Joseph Akintolayo had already built and sold a company using AI for compliance in the banking industry. Heckler brought him into the healthcare realm and they began a co-development program with OSF and other health systems. “We got thousands of contracts in to help break the system, right? You want to break it so you can fix it,” he said. “It trains itself over and over and over. But surprisingly, it doesn’t have to know anything about translation services or elevator maintenance. It’s basically putting a brain on every contract, and now it memorizes that contract. So when the vendors use those same words in the invoice, it’s matching those up.”

OSF’s Fergus explained why this idea was so appealing to him. “Purchased service contracts can be really complex. We can do the analytics to understand how much I am spending right now per square foot or unit of service. Thankfully, Chris’ former company was super helpful in getting us there,” he said. “We may be negotiating really good rates on the hundreds of contracts we have in this space, but I can’t tell you whether we are getting the value that we contracted for. In fact, I could tell you anecdotally, I know I’m not, because I am using a third-party and some of my own people to look at it retrospectively to go back and get that right. By the way, a lot of it is not because somebody is intentionally invoicing incorrectly. Some of these purchased service vendors have contracts with hundreds of different health systems, so it gets really complex on their side.”

The SpendRule team helped OSF think through the possibility of catching discrepancies at the point of invoice. “That was super compelling,” Fergus said. “I’m spending a lot of money on people and third parties to know that we’re getting the value that we negotiated in contracts.”

Heckler said SpendRule’s goal is make sure every customer gets a 10x ROI in the first year. He said he was thinking of launching the company with OSF and another health system as pilot sites, but Fergus introduced him to a group OSF is a part of called the Abundant Alliance, which is run by Abundant Venture Partners. Its platform accelerates commercialization through the Abundant Venture Studio and seeks to ensure rapid adoption via the Abundant Alliance of 22 healthcare systems.

After seeing a description of the concept, nine total health systems signed up to be co-development partners. 

“We got all nine of those health systems meeting every single week for the past six or seven months in a huge co-dev program,” Heckler said. “We asked them if they could wave a magic wand to solve a problem, what it it be? What are you doing now in Excel that you would want to automate? The main problem they had in common was that they don’t know if they’re paying their contracted rate.”

“Another reason Chris was able to get people to join in so quickly is because he was a former founder who had delivered tremendous value about what he promised, and now he’s in an adjacent space he knows really, really well,” Fergus said. 

SpendRule has raised $2 million in funding in a round led by Abundant Venture Partners. Others in the round include MemorialCare Innovation Fund and Zeal Capital Partners.

Heckler said the company is already expanding into health benefit contracts. “It’s interesting to see the current health systems we’re working with actually pulling us into other areas outside of supply chain. I had a call this morning with the health benefits department of MemorialCare about contracts.”