When the largest U.S. healthcare clearinghouse went dark in a massive cyberattack, it exposed the fragile, outdated plumbing powering the medical system's financial backbone. In this episode of HealthTech Remedy, we sit down with Zack Kanter, founder and CEO of Stedi, to uncover how his company is replacing decades-old billing infrastructure with modern, developer-friendly technology. By tuning in, you'll learn how upgrading the invisible layers of Electronic Data Interchange (EDI) is the crucial first step to unlocking the true potential of AI in healthcare.
Zack shares his unconventional journey from selling automotive parts to tackling the massive technical debt hidden within healthcare's revenue cycle management. He breaks down why legacy clearinghouses relying on batch processing aren't equipped for real-time APIs, and how his team built a drop-in replacement in just five days during an industry-wide crisis. The conversation also explores how seamless, automated data pipes are the missing link required for agentic AI to finally transform administrative workflows. Listen in to find out how fixing this underlying plumbing is preparing the medical system for a fully programmable future.
If you are ready to explore the foundational technologies shaping the future of care, be sure to subscribe to HealthTech Remedy and leave us a review. Don't forget to check the show notes for more information on Zack, Stedi, and the resources mentioned in today's conversation.
Episode Resources:
Dr. Tim Showalter:
Welcome back from Orlando, Trevor.
Dr. Trevor Royce:
Oh, thanks, guys. It is good to be back.
Dr. Tim Showalter:
You need a vacation after that vacation, right?
Dr. Trevor Royce:
You do. Disney is like Vegas. One night, two nights max, and then you have to get the heck out of there.
Dr. Tim Showalter:
I also am fascinated by how it's such a tiered system. We were talking about this yesterday. If you don't want to wait in line, you have to pay extra. There is just a lot of stuff.
Dr. Paul Gerrard:
And it's just gotten worse over the years.
Dr. Trevor Royce:
Yeah, you'd think it's for everybody, but there are a lot of layers to Disney. There are the haves and have-nots.
Dr. Tim Showalter:
I had one of the lowest points of my marriage when we took our kids to Disney. This has been 10 plus years ago, probably. All right, should we hop in?
Dr. Trevor Royce:
Let's do it.
Introduction to HealthTech Remedy
Dr. Paul Gerrard:
This is HealthTech Remedy. Today's topic is revenue cycle management, or as we used to call it in residency, someone else's problem.
Dr. Trevor Royce:
Welcome to HealthTech Remedy. This is the show where three physician leaders in health technology break down the stories behind today's most innovative health companies and speak with the leaders shaping the future of care.
I'm Trevor Royce. I'm a radiation oncologist with experience in real-world evidence, informatics, and AI diagnostics.
Dr. Tim Showalter:
And I'm Paul Gerrard. I started my career in physical medicine and rehabilitation before focusing on reimbursement policy, molecular diagnostics, and market access for AI-driven products.
Dr. Paul Gerrard:
And I'm Tim Showalter, radiation oncologist and former med device entrepreneur, now focused on scaling AI technologies that improve care for patients.
Dr. Trevor Royce:
Today, we're diving into Stedi, a company rebuilding one of the most invisible but essential and impactful layers of the healthcare infrastructure: Electronic Data Interchange, or EDI. I'm going to pass this right over to Paul because I think you've got some thoughts on this one.
Understanding Electronic Data Interchange (EDI)
Dr. Tim Showalter:
Electronic Data Interchange is the plumbing of how things work in billing and revenue cycle management in healthcare. It's not like somebody comes in and just writes a check or hands you some money.
They have a payer, deductibles, and coinsurance amounts. Does the patient actually have the up-to-date insurance card on file? Are they eligible?
When a patient comes in for a service, there is a lot of information transaction that has to happen between the provider and the insurance company to figure out who owes whom and how much. Of course, whenever you have lots of these information exchanges with many different parties involved, lots of things can go wrong.
Dr. Paul Gerrard:
This is one I've never even really thought of as a clinician, I have to admit. But when someone points it out to me, it's obvious that this is a really critical piece of the overall process. Without this, you can't have a hospital. You can't get reimbursed for things.
Dr. Trevor Royce:
What comes to mind as an analogy is finance, where you have these entities that help clear all these transactions for different parties. They sit in the middle of this very complicated web of exchanges.
They take a cut for their services and can be incredibly impactful players in that industry. The exact same thing is happening in healthcare. There are incredibly large and numerous transactions in healthcare. They're very complicated.
Someone has to make sure everything is going to the right place to the right person at the right time. Stedi describes itself as a healthcare clearinghouse. As we've touched on, they basically have developer-friendly APIs that help with these transactions: eligibility checks, claims, and other core healthcare transactions.
They connect all the pieces of the U.S. healthcare system to make those electronic transactions possible.
The Impact of the Change Healthcare Cyberattack
Dr. Tim Showalter:
In 2026, we can't really talk about EDI and clearinghouses without talking about a big event that happened in 2024, which was an outage from Change Healthcare. There was a cyberattack that took down Change Healthcare, which was the largest U.S. clearinghouse for about two months.
They processed something like 40% of the U.S. claims volume. That was a really big deal because it meant the whole infrastructure for handling all this mission-critical business-to-business information processing was interrupted.
Dr. Trevor Royce:
I think it'll be great to hear from Zack Kanter later, the founder of Stedi, to describe what that was like all of a sudden. I remember as a provider when Change Healthcare went down because they were involved in so many different pieces of the healthcare system, including on the radiology side of the clinics where I was working.
All of a sudden, they weren't working. To hear the story from Zack as an entrepreneur having a company that solves a lot of what Change Healthcare does, it's a seminal moment. All of a sudden, the biggest player, the 500-pound gorilla in the room, is not operating anymore.
I suspect Zack had all sorts of calls and was working around the clock. It was an all-hands-on-deck, "let's build this thing" moment for him. I can't wait to hear his story there.
Modernizing Legacy Healthcare Infrastructure
Dr. Paul Gerrard:
It's pretty wild because the U.S. healthcare system has these wonderful advances in technologies, and yet we still fax things around to each other. I imagine the legacy systems for these transactions are probably pretty old.
If you were to rebuild it from scratch with today's technologies, with AI and APIs, there's a real opportunity to do it differently. With Zack's background and what we've heard about Stedi so far, I imagine that's really the key innovation: bringing contemporary approaches to them.
Dr. Tim Showalter:
A lot of the standards for EDI are decades old. They predate cloud computing, the APIs that we use today, and modern software development practices.
This old set of standards and old infrastructure meets modern technology. Things have evolved in a very patchwork fashion that serves the incumbents well but is maybe not the best thing for modern, tech-forward customers.
Programmable EDI and AI Potential
Dr. Paul Gerrard:
I imagine that the tech founders in healthcare welcome Stedi as a company. If you're building in this space and trying to improve the system overall, you would expect that you've got real-time APIs and programmatic legibility throughout the process.
You want infrastructure that is prepared for AI agents, with seamless setup, integrations, and the ability to have real-time responsiveness to issues. I'm guessing that's not how things evolved over time for some of the legacy clearinghouses.
Dr. Trevor Royce:
Another thing we'll have to touch on with Zack is how his company is adopting in this world of AI. They handle so much data and so many transactions. There are going to be AI use cases here, and we'll have to hear from him firsthand how he's applying that.
Dr. Tim Showalter:
To make things concrete, back before the internet, you had to mail and fax things. As we talk about all the time on this show, fax is still alive and well in healthcare, though maybe a little less than it used to be.
In the early days of the internet, you dealt with early websites for shopping. There would be manual clicks and portals. Nowadays with cloud computing, people maintain data on their side and try to exchange it with the other side.
Things have gotten to the point where you can automate a lot of these things. Traditional clearinghouses and EDI involve web portals, manual clicks, and batch processing on the schedule of the other side.
Where Stedi comes in is they try to turn this into something automated that can happen seamlessly. Submitting a claim, checking eligibility, or enrolling with a payer is all available as a JSON API call.
You write code that talks to their system directly with no portal clicking, no file uploads, and no waiting for batch runs. Of course, that requires some technical sophistication on the part of the healthcare provider who wants to use them as well.
Interview with Zack Kanter: The Stedi Journey
Dr. Paul Gerrard:
Trevor, I know Stedi started in 2017. I think you found out more about the history and Zack's philosophical approach. You want to give our listeners an overview there?
Dr. Trevor Royce:
His background is interesting. It sounds like he started in the auto industry. He is a real entrepreneur who saw this opportunity in healthcare that fit with a lot of the transactions and clearinghouse infrastructure he had done in the auto parts world. Now almost a decade later, they're raising $90 million.
Dr. Paul Gerrard:
It's pretty remarkable. It's not a flashy product that people are going to see in the headlines. It's not the front-end thing. A lot of doctors will never have heard of it, but obviously he's built a real infrastructure there.
Dr. Trevor Royce:
It's so complicated in healthcare with the regulatory and data restrictions and privacy requirements on these data exchanges that it's a big problem to tackle.
Dr. Paul Gerrard:
I love this because we've seen a lot of examples where people have identified major technical debt built up in the system. This seems like one where the new emerging problems within the existing infrastructure identified an opportunity to innovate and prepare us for the next generation. It's great to see Stedi moving into this area where you need really strong standards to scale.
Dr. Tim Showalter:
Is it worth talking about how this fits into the future world where we want AI—and the flashy thing, agentic AI—to automate as many workflows as possible and how a programmable EDI system enables that?
Dr. Paul Gerrard:
Yeah. You need the hospital's agent talking to the payer's agent back and forth.
Dr. Tim Showalter:
And you can't do that without the pipes being built first.
Dr. Paul Gerrard:
Well, maybe we should transition to the conversation with Zack.
Dr. Trevor Royce:
Absolutely. Looking forward to talking with Zack Kanter, founder and CEO of Stedi, hearing what he's built and how he's built it.
Welcome back to HealthTech Remedy, a podcast where we explore the innovations reshaping healthcare and the brilliant minds driving them. Super excited by today's guest, Zack Kanter, the founder and CEO of Stedi, a company whose mission is to rebuild the infrastructure for how data moves between organizations.
Zack, I'm looking forward to hearing your perspective on the problems you guys are tackling and how you're solving for them. We'll also hear about Zack's career path and the journey to date. Zack, welcome to the show.
Zack Kanter:
Very happy to be here. Thanks for having me.
From Automotive Parts to Healthcare EDI
Dr. Trevor Royce:
I guess it'd be fun to hear a little bit about your journey and what led you to where you are today, what you're working on, and how you found yourself running Stedi.
Zack Kanter:
Sure. I come from a very traditional healthcare trajectory, as many people did. I started in automotive parts, which is a little bit unusual.
I was very interested in cars growing up. When I was getting my first car at 16, it was a 1995 Chevrolet Caprice, a former police car that needed a lot of work. I started looking for parts for it and ultimately started buying and selling car parts on online car forums.
That was my first real job. I ran that through college and it became my full-time job after college. I ran that business all the way through my twenties and sold it when I was 30, probably in 2018.
In building that business, I came across this problem of business-to-business transaction exchange. People are often wondering how this relates back to healthcare. In the world of automotive parts, retail, logistics, supply chain, transportation, and manufacturing—anything related to the movement of physical goods—there are transactions that need to be exchanged.
These include purchase orders, ship notices, invoices, inventory feeds, and all the communication transactions between someone like an AutoZone and one of their suppliers, or between Amazon and Procter & Gamble or Walmart and Rubbermaid. When those transactions need to be automated, they are not sent via PDF.
They are automated via a set of technologies called EDI, electronic data interchange. If you've ever heard of the term X12 or X12 EDI, that is also the way that healthcare claims, eligibility checks, claim status transactions, acknowledgments, ERAs, benefits enrollments, and many different transactions are processed via EDI and specifically via this X12 standard.
That's thanks to the HIPAA Act. Most people know HIPAA as a privacy and compliance framework, but it also standardized the transactions used in healthcare and said everybody must use X12 EDI for these transactions.
Long story short, in the auto parts world, I was horrified at the state of software when I started using EDI platforms. One was worse than the last. I went through three different providers and three different implementations, culminating in an 18-month implementation throughout which everything that could possibly go wrong, went wrong.
I ultimately decided that in order to have transactions flow the way I wanted, I was going to have to have my own system built. I thought it was quite simple: you have a transaction that comes in from an Amazon or an O'Reilly Auto Parts and you want it to appear in your system automatically without clicking any buttons. When you ship it out, you want the tracking number and invoice to go back.
I had my own system built and that automated the business for the next five years. I ultimately sold that company to a private equity firm and I started Stedi with the dream of turning this idea of business-to-business transaction exchange into a platform that could solve this for all industries.
Not just auto parts, but retail, shipping, supplies, logistics, healthcare, and all the different transactions. It's a longer story, but in that journey, the ultimate destination we were shooting for was a concept I loved from the original mission statement of Uber: transportation is reliable, running water for everyone everywhere.
If you go look at their website now it's some corporate nonsense, but that original mission statement was very good. When I thought about that, I said what we want to do for business-to-business transactions should be as reliable as running water.
In a developed country, you turn on the water and you don't have to think about whether it is going to be hot or cold or brown. It just works. Over the years building Stedi, we progressively worked our way up this technology stack.
It's a huge build to get support for all these different transactions and nuance. It turns out as much as everybody within healthcare thinks the transactions and state of automation are bad, the degree of automation possible in healthcare is orders of magnitude better than what's possible in retail and logistics.
Ultimately in this journey, the only industry in which we could offer this concept of transactions as reliable as running water was in healthcare. Today, Stedi is a healthcare clearinghouse. We automate transactions between providers and payers.
We can work with either side, but most commonly we're working with a provider and helping them to automate their claims and eligibility checks.
Why Healthcare is Well-Suited for Standardization
Dr. Trevor Royce:
Just an amazing journey. Thanks for sharing coming from an auto parts world to healthcare transactions. Let's unpack that a little bit about how healthcare was a natural place or well-suited for this type of standardization. Can you go into detail about what specifically it was about the healthcare infrastructure that made this work?
Zack Kanter:
It's really two things: the shape of the transaction, what's called the schema, and the connectivity options. It might be easier to contrast it with everything outside of healthcare.
When you're talking about a purchase order from Walmart, Best Buy, or Amazon, those technically use X12, but there's no regulation that requires they follow the standard. They might insert different pieces that aren't really allowed. Everybody has taken some liberties with the specification.
Amazon might work off of the 5010 version and Walmart might work off the 4010 version. When you think about the X12 specification, there are hundreds or thousands of different components. It involves every possible thing you might ever need to include in a purchase order.
Amazon might say here are the 32 things we need, and Walmart says here are the 58 things we need. But they might choose different pieces. Amazon will say they want to use a vendor part number, and Walmart might say they're going to use a vendor item number.
Those are both valid selections within X12, but they have a different semantic meaning. As someone integrating with those two companies, you have to account for those differences. If you map them the same way, you have a problem because those mean different things.
The first point is that the transaction schemas are different. In healthcare, the regulations that came from HIPAA narrowed this down a lot. They designed a schema for a claim that is opinionated and comprehensive. Nobody by law is allowed to use something beyond what the schema has.
When you look at the schema for a Walmart purchase order, it might be 25 pages. The healthcare claim schema is 650 pages; it is very comprehensive. But at least when somebody like Stedi or a large health system works with this, they know this is the maximum we're ever going to see.
In software engineering, you'd say this is now a bounded problem instead of an unbounded problem. If they've made something required, you can't leave it out. If they've made something optional, you can decide not to use it, but you can't take something that's not used and say it's required. It narrows the universe.
Number two is how connectivity works. Outside of healthcare, there is really no such thing as someone having a master connection into Walmart. This was the shock I had with my auto parts business.
You come across companies who say they are pre-integrated with NetSuite or Walmart. Pre-integrated doesn't mean it's plug-and-play; it means they've done it once before. Every single time a vendor integrates with Walmart, Amazon, or Maersk, it happens point-to-point from scratch.
They go through an IP whitelisting process and an SF2B file testing process. When you sign your next vendor, the whole thing starts over again. In healthcare, it works very differently because of the existence of the clearinghouse.
People are not writing love letters to their clearinghouses, but the concept is very good. As a provider, once you get your medical license and go through credentialing, you can instantly start sending claims through clearinghouses to thousands of different payers.
That concept just doesn't exist in logistics and retail. When you combine a master schema that outlines all possible values with turnkey connectivity, that concept of plugging into the water system is actually possible.
The Technical Challenges and Implementation
Dr. Trevor Royce:
What a fantastic and cogent answer. In some ways, it's refreshing to hear that some of these clinical informatics efforts or regulatory efforts that have standardized these information systems have borne the fruit to enable these types of programs that you build. That's terrific.
Zack Kanter:
Well, I think there are pros and cons. If it didn't exist today and everybody were using all their own standards, people would ask why we have to use X12 and why we don't use APIs or modern formats like JSON.
It's not really the format itself that makes things difficult. It's the size of everything and the amount of validations that need to be done. The scope of work is really large. If you proposed some new regulations saying everybody has to use the same JSON format with a 650-page spec, most people would tell you that's not possible.
You can't get everybody to agree. I view it as one of the miracles of the modern world that we have this specification, albeit an older one with some rough edges. That is an enormous pro.
There's more in the pro column. When you get into the body of a transaction outside healthcare, there's not much standardization. If you have a SKU, there really isn't a master audited catalog of all SKUs.
But when you get into healthcare, you have CPT codes, CDT codes, and HCPCS codes. You have ICD-10 codes. You have CARCs and RARCs. These are all deterministic rules where you can run them and get an expected outcome.
The con to all this is that the lift is huge. You have listeners starting companies who want to build the next EHR or RCM system. The quantity of data they need to license is massive. You need to license X12 data, CPT data, and CDT data.
You have to account for all the differences. If you're validating ICD-10 codes, are you validating them on the right dates they were rolled out? Are you validating according to the age and gender of the patient?
Every time you pick up a rock, you find two or three more rocks underneath it. It's a very exciting problem to solve, but it's extremely capital intensive. It's a multi-tens-of-millions-of-dollars effort to build out the validations you need. That's the service we provide.
Scaling Stedi During the Change Healthcare Crisis
Dr. Trevor Royce:
It sounds like there's a natural fit there. Many startups in healthcare struggle with getting off the ground and integrating their technologies into enterprise systems. Can you discuss how you made that leap? Where did you start out as you entered healthcare and how did you grow from there?
Zack Kanter:
There's common advice in the startup world to start with the problem you actually want to solve. If you want to launch a clearinghouse, start building one and pick a transaction like eligibility checks. Get that working really well, then move into claims.
The problem is that works when you have a relatively narrow set of complexity. It works less well when there's a really broad set of features that need to be built. A clearinghouse encompasses thousands of features and hundreds of different types of edits.
We started in a different direction. We decided to build broad support for the entirety of the X12 standard from the ground up. We built support for all 321 transaction types and all versions going back to the beginning from day one.
I told investors this was going to take a long time and cost a lot of money. But when we did it, we would be the only people who have done this in 30 years. And indeed we did.
It took time to get to that first set of building blocks. We built eight individual Lego blocks that developers could use to build their own EDI systems and launched those in 2022. In March of 2023, we built a SaaS platform on top of that to make it easier for people to get up and running.
We built user interfaces where people could configure their trading partner relationships, see transactions they had sent and received, and retry things. Still, at this point, we weren't quite at the point of turnkey transactions.
The plan was to build that turnkey process for healthcare transactions—also known as a clearinghouse—in the back half of 2024. In February of last year, a few months before we planned to work on this, Change Healthcare got hit by the cyberattack.
You see this massive cyberattack happen. Change Healthcare was down. I remember texting somebody on my board saying it was unfortunate, and that in the long term, we'd be building the full clearinghouse which would cause people to rethink their supply chains.
When I sent that text, you just don't think they're going to be down for long. Surely after two days, they must be up any minute now. After five days, it became clear portions of their system might not ever come up again.
We got a growing number of potential customers reaching out in a panic. Every day they were getting $10 million further behind on claims. This was existential for some of these very large health tech businesses.
I got the team together five days into the outage and said we were dropping everything else to launch this now. Our goal was to get this done by Tuesday. On Tuesday, we launched a drop-in replacement for Change Healthcare's APIs.
From that point forward, it was pandemonium. It was one of those situations where you see seven-figure deals getting closed in 30 minutes. Obviously, there was a huge accelerant for us. We onboarded people doing a billion-plus dollars of claims volume annually.
It was like a snake eating a deer. If the snake is big enough, it can do it, but the digestion process is a rough couple of months. We built out all the missing pieces we needed and had some amazing initial customers.
Since then, things have just accelerated. Last quarter, we signed more customers in each month of that quarter than we did in the first half of last year combined.
Stedi’s Role in the AI Ecosystem
Dr. Trevor Royce:
What an amazing story. For context, Change Healthcare was processing over 15 billion transactions annually, basically 40% of claims volume. It goes to show you shouldn't let a good crisis go to waste. You guys were ready to do the hard work.
Zack Kanter:
You want to be in the right place at the right time. Change Healthcare went down and nobody knew how long it would last. We were fortunate to have built this foundation of underlying EDI infrastructure and validations required to do this. It pulled forward a year of go-to-market into a couple of months.
Dr. Trevor Royce:
It's probably a good point to reflect on what is capturing the nation's imagination: AI. I suspect what you guys have built with all these transactions is well-suited for AI. We'd love to hear about your AI strategy or how this new world will impact what you guys are doing.
Zack Kanter:
We have a couple of different ways of thinking about AI. By the numbers, a third of our customers are building generative AI products. I would say almost every YC startup solving revenue cycle problems is using Stedi.
You see voice agent companies automating eligibility check phone calls, and most are using us under the hood. They use us to perform the basic programmatic eligibility check to verify the patient's name and details.
That allows the agent, which is costly to run, to make a very specific ask on the phone call. They can ask if there are nutritional counseling benefits for Trevor as opposed to just confirming he is a member.
When you look at other clearinghouses, all were built pre-cloud computing and many pre-internet. They were series of acquisitions where technology stacks were never harmonized. There are two things very hard to build in after the fact: security and developer experience.
Stripe was able to build a product developers love because once you've established a baseline of software, it's very difficult to make it friendly for developers to use afterwards. Most clearinghouses today are oriented around logging into a user interface or submitting a batch-based process via SFTP.
Neither is really good for AI. What drives forward the ability for AI to do things is that these agents have programmatic access. Everything that you can do through our user interface can be done via API.
For our customers building agents—whether they are startups or established enterprises—they can use our platform for everything from claim resubmission to interrogating claims rejections. It makes it possible to do a lot more automation than you can do anywhere else.
Final Reflections and Conclusion
Dr. Trevor Royce:
I suspect you guys are well positioned because you don't have the technical debt or legacy constraints of 20-year-old clearinghouses. One final question for you: what is a former auto parts dealer driving today that's now in health technology?
Zack Kanter:
I would be ashamed of myself. I drive a completely bone stock BMW X7. There are no modifications to it. The nice thing is that it's under warranty and everything gets taken care of.
What you find is that your hobby better be your work. A company can absorb infinite amounts of attention. If it can't, then your market's not big enough or you haven't figured out product-market fit enough. We've been fortunate for the company to be able to absorb a huge amount of focus.
Dr. Trevor Royce:
Amazing. Well said. Thanks so much, Zack, founder and CEO of Stedi, a company proving that even the oldest systems can be reinvented with fresh vision and modern tools. It's been a real pleasure chatting with you.
Zack Kanter:
Thanks for having me.
