Caring
for the Bottom Line
by Melissa
Wells
CareMedic helps hospitals operate with improved cash flow,
aided by its Medicare reimbursement software.
It can
take most small businesses 10 to 25 years to earn their
first million. But sometimes, fate dips its hand into the
pot and up comes gold. That's the case with CareMedic Systems
Inc., a St. Petersburg-based company that got its start
in 1996 writing Medicare reimbursement software for a handful
of hospitals. The husband-and-wife team of Allan and Lynn
Adams collaborated with Douglas Gremald in St. Petersburg
to write the computer programs. But little did the group
know then that at the same time they were hunching over
a keyboard, the United States Congress was deciding to use
Florida's "fiscal intermediary" (insurance companies
that process claims for Medicare) system as a standard for
the nation.
 |
Anthony
Stefanis, president at St. Petersburg-based CareMedic,
is all smiles about the software firm's tremendous growth
in revenue.
photo: Dave Spataro/Red Kite Studios |
"Timing
is everything," says Anthony Stefanis, CareMedic's president
and chief operating officer. "Our software then had a national
application."
The
rest is history. In 1997 a year after its start CareMedic's
revenues were just $35,000, hardly a year's pay in today's
salary standards for computer programmers. But by the year
2000 revenues had grown to $4.95 million on 133 installations
and the company had a workforce of 57. Last year's revenues
were $11.77 million on 398 installations with 81 employees.
"That was a 138-percent increase in revenues and a 150-percent
increase in the size of our client base," Stefanis says.
Of course,
it wasn't just luck. It helped that the three techno-wizzes
founded CareMedic with Michael Vasquez, a Des Moines, Iowa
entrepreneur with years of executive experience in healthcare.
Vasquez, recognized by Ernst & Young as Entrepreneur of
the Year, is chief executive officer.
CareMedic
has accumulated an impressive client list by offering software
that helps hospitals, home-health care agencies, nursing
facilities and physician practices to submit error-free
Medicare claims. Its clients read like a Who's Who of healthcare
providers, including Johns Hopkins Hospital and Health System,
Stanford University School of Medicine, Mayo Clinic, HealthSouth
Health Care, Iowa Health Systems and the Iowa University
School of Medicine.
"There
are 6,000 hospitals in the United States," says Stefanis.
"We have only 398 but they're very prestigious."
As testimony
to the software's effectiveness, Stefanis adds that they
have not lost a customer. That is due mainly, he says, because
filing Medicare claims using CareMedic's software can typically
result in reducing the number of days a claim spends in
accounts receivable thereby increasing cash flow for the
hospital.
"Installation
of CareMedic's revenue management systems produced an immediate
and dramatic impact on our Medicare accounts receivables
days," says Jolene Hansen, billing manager at Sioux City,
Iowa.-based Mercy Health Center. "They dropped from 55 to
33 during the January 1999 to October 2000 time period.
That translated into a roughly 40-percent improvement in
cash flow."
In the
year 2000 alone, CareMedic software processed more than
$15 billion in Medicare revenue for its clients nationwide.
As a natural extension of its product offering, in 1997
CareMedic added a Medicare compliance software package for
hospitals. "This and our Medicare reimbursement software
are the primary source of revenues for our company," says
Stefanis. "Our clients have asked for help with the non-Medicare
side of claims."
Last
April, the company introduced a new software package that
specializes in revenue management from Medicare, private
insurance and private pay. "We identified a market opportunity
to provide our clients with an ŒAll Payer' claims processing
and management tool," says CEO Vasquez.
In part
because of the branching into new areas, Stefanis projects
that this year's revenues will be "$18.4 million on our
base business. We rolled out All Payer in five states last
year and 11 this year. We'll saturate the rest of the country
in '03. Some additional opportunities are surfacing that
have us excited."
One
of the exciting developments, signed into effect in June
2000, has been the firm's strategic alliance with Ernst
& Young LLP. "This is a strategic partnership for distribution
purposes," says Stefanis. "They have over 2,000 hospital
clients and we have an exclusive five-year contract that
they will provide our software for the revenue cycle management
of their clients. In exchange, we will work only with them
as opposed to any other Big 5 firm."
The
next revenue opportunity presenting itself is the provision
of outsourcing services to hospital financial offices. "Until
now we've trained our clients to do this themselves," says
Stefanis. "We're now starting to say Œwe'll do it for you.'
There are people already assisting hospitals with claims
management who have come to us to use our business management
tools. Now we're looking at this as potential business for
ourselves."
As CareMedic
has grown over its five-year history, the privately held
company has had three rounds of funding. "At the end of
each round, we have a new board member," Stefanis says.
Currently two of the founders, Stefanis and three investors
serve on the board. Last summer a seventh executive with
a unique insight into the healthcare industry joined the
board. The newest member is Jerry P. Widman, until recently
the chief financial officer of St. Louis-based Ascension
Health System, the largest not-for-profit multi-hospital
system in the nation. Widman also sits on the boards of
two large hospital systems and another health care-related
firm.
"He
brings terrific credentials to our board," says Stefanis.
"He comes to us because of his industry understanding."
What Widman understands about the industry has him excited
about CareMedic. "This is a dynamite company," Widman says.
"They're the ŒTurboTax' of Medicare reimbursement. They
have computerized the fiscal intermediaries' rules and regulations
for payment into a software package just like the TurboTax
founders have computerized all of the tax regulations of
the IRS. The advantage to a hospital using this system is
a reduction in days of accounts receivable and increased
cash flow. And the clerks are more productive."
Widman
explains that in the business office of a hospital if a
clerk misspells a word or omits a required code in a field,
the Medicare fiscal intermediary will reject the claim and
return it by Œsnail mail' for correction and resubmission.
These seemingly insignificant operator errors add days to
the process of payment, which impacts cash flow. "With the
CareMedic system, the screen tells the clerk the claim won't
go through Medicare processing and explains the mistakes,"
Widman says. "The clerk makes the corrections and the screen
says the claim is ready to be processed. The claim is then
electronically submitted to Medicare. CareMedic's denial
rate for claims is less than 1 percent."
As the
company adds hospitals and services, it has been increasing
its management staff. "We added a CFO and three VPs this
year," Stefanis says. "This is a sign of our growth."
Also,
"all of the founders are still with the company," says Stefanis,
who joined CareMedic in 2000 after 30 years as an executive
with IBM and at a division of Equifax.
With
the goal of continually improving its products and services,
CareMedic has also established an advisory board composed
of 10 to 12 of its clients. "They'll come together twice
a year to review our strategy and ensure we're responsive
to their needs," says Stefanis.
It's
also preparing for its first users' conference in June at
the Renaissance Vinoy Resort in St. Petersburg. The conference
will include industry speakers, roundtables and breakout
sessions. "We'll inform them of what's going on in Washington,
D.C.," says Stefanis. "We'll also give them the latest development
in our products. We're doing it here in St. Petersburg so
they can interact with our employees."
Stefanis
also expects the company's staff to increase to 100 this
year. When it comes time to set up its outsourcing operation,
that number could expand significantly again.
"The
outsourcing function doesn't mean we're going to get rid
of business offices all over America," says Widman. "The
business offices will spend less time on the minutia of
claims processing and more time on managing outsourcing
relationships. The trend to outsource in the healthcare
industry has begun and will continue."
As hospitals
begin to hand over the claims processing function to CareMedic
and as the operation continues to grow, Stefanis is requiring
each person on staff to read "Who Moved My Cheese?" by Spencer
Johnson, M.D., on the New York Times best seller list on
handling change in the workplace. That has corresponded
with the firm's recent move to its new 15,000-square-foot
corporate headquarters office in the Bayview Tower in downtown
St. Petersburg.
"We
moved and had no hiccup in our customer service," Stefanis
says.
He places
a premium on his staff. "Our people are allowed to move
inside the company to grow," he says. "The future leaders
of our company are here."
And
his most pervasive challenge amidst such rapid growth is
to keep the company profitable. "We're a sound company looking
to grow geometrically," Stefanis says. "We have been profitable
and are not in debt. Our focus on increased profitability
will come through our internal organization and the effectiveness
of our strategic partners and new opportunities. We have
5 percent of the hospital market and we're staying in the
sweet spot."
