by Jack Liu
The problem we solve: The market opportunity has been driven by trends related to the vast implementation of value-based care (VBC) models in recent years to improve the quality and cost of healthcare. On the payer front, VBC has driven payment methodology changes with respect to Medicaid/Medicare reimbursements to health organizations as well as private payers. On the provider front, VBC has fueled health system integration - mergers/acquisitions of healthcare organizations and physician groups to deliver the best care, manage overall wellness of patients, and to control overall costs. Due to these market trends, provider compensation models have become increasingly complex, and healthcare organizations are experiencing great pains and challenges to incentivize and pay their providers accurately, timely, and optimally.
About our solution: Our product is a finance and ops SaaS platform built around a fully configurable proprietary rules engine that can adjudicate compensation models and plans of any complexity imaginable and automate the calculation, analysis, and delivery of incentive compensation for healthcare providers. Our platform design and architecture stems from a proven product framework and strategy rooted in the Fortune 500 Incentive Compensation Management arena (an established software category for nearly 20 years) and has been adapted to address healthcare specific use cases. By automating time consuming and error prone manual processes, the ProCARE platform allows time and effort to be focused on organizational reform and strategy rather than process management.Progress to date:
ProCARE is the only vendor to have developed a fully configurable rules engine whereas all other competitors have canned models with some variable configurations. We continue to differentiate and win deals over incumbents and other vendors in the market through the flexibility, efficiency, and scalability of our product. Our technology has been fully tested and validated with 2 beta clients prior to the market release in Q4 2018. Product-market fit has also been confirmed through our current clients and continued traction in the market as we have over 2500 providers in delivery this year. We are in early revenue stage and have had several minor releases within the last year and a major release scheduled for the beginning of 2020. Product development risk is low as the market release is stable and fully functional. The minor releases have been centered around enhancements and performance optimization. We plan to patent our proprietary automation processes in the near future. There is a potential in licensing our back-end rule engine to 3rd parties as we are currently involved in discussions with an established, complementary software vendor interested in white-labeling our product. The biggest barrier to entry is the highly specialized knowledge and domain expertise required in designing and developing enterprise software like ProCARE.
Creator: Jack Liu
Bio: Jack is an innovator that is passionate about solving business problems through technology and automation. He has extensive experience in software development, Incentive Compensation Management, and the implementation and delivery of compensation solutions. He draws upon his experience from various Fortune 100 and 500 companies across multiple verticals to develop a disruptive technology solution specifically aimed at the physician compensation market.
The ProCARE platform is a value-based care play that helps drive alignment across payers, systems and providers which will ultimately improve quality and cost outcomes for patients.
ProCARE allows providers (physicians and advanced practice providers) to track performance, incentive earnings and payments on a routine frequency. They are able to audit and trace payments all the way back to encounters and procedures. Dashboards and reports shows exactly what and how they're being measured and compensated. It alleviates the mistrust in the health system and confusion in the contract arrangements through full transparency and traceability.
ProCARE solves an important problem that is impacting mission-critical function of health orgs with increasingly vast provider populations and complex compensation arrangements. The healthcare admins are mired in managing tons of spreadsheets and manual processes. ProCARE systematically automates these time consuming and error prone processes while providing full transparency and control so that ultimately everyone in the healthcare ecosystem will benefit from the improved outcomes of redirecting time and focus to healthcare strategy and optimization rather than just managing processes.
We currently have a strategic partnership with Coker Group, a healthcare management and strategy consulting firm. We have been able to provide value and define a more efficient and effective pathway for their service delivery around physician compensation strategy and redesign by using our platform to model, evaluate, and optimize the compensation models for their clients.
Key Milestones Achieved and Planned
We released our platform to the market in October 2018. We have 2300 providers in various stages of delivery and will target to double that by Q2 2020.
Our Competitive Advantages
We are the only vendor to have built a fully data driven and configurable rules engine from the ground up. We also have a proprietary methodology and process to automate the evaluation of provider compensation and contract arrangements. Stakeholder groups that we are targeting beyond healthcare finance leadership and administrators include GC, in-house consel, compliance officers, and a new customer segment that we just fell into is veterinarian clinics.
Barriers to Entry
Beyond our proprietary automation processes, the barriers to entry lies within the highly specialized and unique mix of domain expertise that our core team posses.
Funding, Partners and Alliances To Date
We've closed on 2 rounds of financing so far. First round closed in Q4 2016 and totaled $700,000 led by Coker Group and we also closed a bridge round for a $300,000 convertible note this year. We are targeting to close $2MM - $2.5MM in equity financing to scale up markets, sales, and services to support the anticipated growth.
Our ideal customers are medical groups, hospitals, academic medical centers, and integrated health systems that have large physician groups employed and/or contracted. To date, we have relied heavily on referrals from service partners like Coker Group (advisory and equity partner) and through SEO for our sales opportunities. Since the market release of our software platform in Oct 2018, we’ve closed several significant deals and are in various phases of implementation/delivery including:
1) a regional hospital in eastern AZ – this was a beta client that was referred to us by Coker Group and have been working with us since our beta phase in Q1 2018. They renewed their subscription contract with us earlier this year and have been able to sunset all their legacy systems and manual processes around compensation management and delivery since going live on our platform, and we continue to provide value-add through additional consulting scope and product enhancements;
2) a national cancer
The market opportunity has been driven by trends related to the vast implementation of value-based care (VBC) models in recent years to improve the quality and cost of healthcare. Reaching this goal requires many complex components across all actors in the healthcare system to fall into place, from changes in care pathways to fundamental changes in reimbursement methodology and health system org structure and strategy. On the payer front, VBC has driven payment methodology changes with respect to Medicaid/Medicare reimbursements to health orgs as well as private payers such as Aetna, Cigna, BCBS. On the provider front, VBC has fueled health system integration - mergers/acquisitions of healthcare orgs and physician groups to deliver the best care, manage overall wellness of patients, and to control overall costs. Due to these market trends, provider compensation models have become increasingly complex, and healthcare organizations are experiencing great pains and challenges to incentivize and pay their providers accurately, timely, and optimally. VBC is the top driver for healthcare IT spending (Becker’s Healthcare Report 2018) in the US and is forecasted to reach $149B with a CAGR of 11.7% by 2025 (Allied Research – Healthcare IT Market). Our target market is focused on larger medical groups, hospitals and health systems that employ over 70% of physicians and advanced practice providers in the US which totals over 1 million providers. Maintaining an average subscription rate of $30 per user/month yields a market potential of over $360MM. There is also great potential for expansion into non-physician practitioners, dentists, clinical nurses, and veterinarians.
Projected 3 Year Growth
Our revenue plan is to achieve 150,000 subscribers in the platform with a gross margin of 75% and operating margin of 64% which will yield $40.3MM in revenue and EBITDA or $25.8MM in 2022. This critical mass of providers on the platform will allow us to expand our product footprint into the Big Data realm and provide additional revenue streams via products and services around market data and analysis.
Our current revenue streams consist of recurring subscription revenue based on a monthly rate per provider and one-time implementation fees. Future revenue streams will include white labeling licensing, market data and big data analytics. Based on our analysis and customer feedback, we are the “premium” solution in the space with an average of $30/user/month subscription rate and average implementation costs of $40k. We have a relatively low burn rate and revenues will cover our burn in 2020. To reach economies of scale, a critical mass of about 4500 users is required.
The competitive landscape of physician compensation management consists of 2 main segments: 1) Antiquated homegrown, manual processes/spreadsheets that cannot address the increasingly complex requirements, and 2) consulting and BI solutions that require routine services and development overhead. The limitations and lack of scalability and transparency of the current solutions are impacting mission-critical functions which fuels an emerging market for new technology. The current market is heavily fragmented and is being disrupted by a new breed of compensation software that have surfaced within the last 3 years such as Heisenberg II and Simpliphy. Coker Group and ECG are among the few service firms to have strengthened their position by investing in new technology. Before ECG had partnered with Hallmark to develop Heisenberg II, they had pushed for an exclusive partnership with ProCARE. However, due to the binding nature of the exclusive agreement, we rejected the deal and forged a non-exclusive partnership (equity and strategic) with Coker Group.
Our ideal customers are medical groups, hospitals, academic medical centers, and integrated health systems that have large physician groups employed and/or contracted. To date, we have relied heavily on referrals from service partners like Coker Group (advisory and equity partner) and through SEO for our sales opportunities. Since the market release of our software platform in Oct 2018, we’ve closed several significant deals and are in various phases of implementation/delivery including: 1) a regional hospital in eastern AZ – this was a beta client that was referred to us by Coker Group and have been working with us since our beta phase in Q1 2018. They renewed their subscription contract with us earlier this year and have been able to sunset all their legacy systems and manual processes around compensation management and delivery since going live on our platform, and we continue to provide value-add through additional consulting scope and product enhancements; 2) a national cancer care network with multiple sites and facilities across the nation that had found us through Google and requested a demo through our website. After presenting a demo to the finance and comp teams, we developed a business case and proposal that was ultimately presented to and approved by their executive board. We have implemented and delivered our solution for the first site (headquarters) and have e-board approval to expand the scope to all sites by mid-year 2020. The master discovery list for the second site has already been completed and implementation of the next phase will start in Q4 2019; 3) a multi-specialty integrated care system in central Ohio with over 1700 providers who also came to us through SEO and is in late-stage implementation with delivery at the end of 2019.
We were able to attract early adopters by offering risk-free trials and flexible subscription agreements to our clients. The free trials were de-scoped versions of the full implementation and provided the customer full access to the platform for 30 days with a significant subset of their business requirements implemented. Although this strategy proved to be effective and necessary for early sales, to cut down the time to close, we are now offering an assessment and workshop in lieu of a free trial that can be delivered in a matter of a few days. The assessment and workshop serve 2 purposes: 1) to conduct some initial discovery and requirements gathering for us to gain a better understanding of the customer’s challenges and pain points and 2) to custom tailor a demo based on the specific data and requirements of the customer and prove how their challenges can be resolved with our technology. Even though our COGS is tremendously low given our current passive sales model, we need to scale up sales as this emerging market matures to ensure optimal growth. Current marketing/sales initiatives include: 1) joint marketing efforts with our service partners in the space like Coker Group, Health Advisory Network, and Ancore through social media, podcasts, and printed marketing collateral 2)Industry conferences and speaking engagements 3)Content marketing campaign leveraging various targeted customer personas in operations, finance, and legal/compliance through email and social media 4) establish thought leadership through industry publications and whitepapers, and speaking engagements 5) continue to forge sales and service partners with consulting firms and complementary technology vendors in the space. Once a critical mass of users is reached, we will expand the initiatives to include community building through online forums, user conferences and events. Engineering-as-Marketing strategies are also considered for customer acquisition through a free/freemium app for non-enterprise customers.
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Seems to be a really interesting project
Need more KPI from the first beta sites. Overall cost of implementations, measurable value that was created.
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