When Dr. Ahmed Kerwan, a British physician, first began his medical practice, he was astonished by the overwhelming amount of paperwork he had to contend with. Some days, he would only spend a mere three hours attending to patients, while the remainder of his workday was consumed by tasks such as handling insurance claims.

The healthcare industry is already witnessing the emergence of numerous startups that leverage AI to alleviate the notoriously complex administrative burden. These startups, including note-taking specialists like Abridge and AI assistants startup Ambience, are competing to optimize efficiencies. Kerwan, now an entrepreneur, is the founder and CEO of Taxo, a company that offers an app designed to streamline tasks such as obtaining prior authorizations from insurers, patient intake, and medical billing for doctors and other healthcare professionals.

According to Kerwan, what distinguishes Taxo from its competitors is its AI-powered “reasoning engine,” which provides transparent explanations for its decision-making processes, thereby fostering trust with doctors. The integration of reasoning models, which gained popularity in the AI community late last year, enables Taxo’s technology to reduce errors while achieving a prior authorization approval rate of 98%, significantly surpassing the industry average of approximately 80%, as stated by Kerwan.

To develop its “reasoning engine,” Taxo built upon existing models like those from OpenAI and Anthropic by adding a layer specifically designed for the healthcare sector. The system is trained on complex healthcare data that is difficult for others to access, making it challenging for competitors to replicate overnight. As Kerwan explained to TechCrunch, “We didn’t want to be overshadowed every time OpenAI releases a new model.”

Although the trend of using reasoning in AI is still in its early stages and only recently gained momentum with the emergence of Chinese startup DeepSeek, investor interest in Taxo suggests that this technique may have broader applications beyond foundational AI companies. The startup has successfully closed a $5 million seed funding round, led by prominent investors such as Y Combinator, General Catalyst, and Character Capital.

Founded in the previous year and headquartered in San Francisco, Taxo has achieved significant milestones, including surpassing $1 million in annual recurring revenue (ARR) within six months of its launch. The company currently serves around 15 clients, ranging from clinics to government providers, and continues to expand its customer base.

Kerwan noted that when ChatGPT was initially released, doctors were understandably cautious about using it due to the lack of transparency in its decision-making processes. He hopes that Taxo will change this by providing clear explanations for its recommendations, enabling users to understand the reasoning behind its decisions. As he stated, “You can see exactly where we obtained the information and why it’s being provided.”