Streamlining Healthcare: AdvancedMD CEO Eric Morgan (Part 4)

SM: How many employees do you have?

EM: We have about 140.

SM: What about Athena Health? They are a large, public company.

EM: They are a great company and they are doing very well. They have decided to use a different business model, one which includes the outsourcing business where you not only get the practice management and billing software but you outsource the people to do the billing and collection. In our target segment of fewer than 10 providers, we do not encounter them very often. Their sweet spot is a bit further up the food chain.

SM: Your sweet spot is medical offices with 10 doctors or fewer?

EM: We have customers with more than that, some approaching the 20s. We also have billing providers with hundreds. I would say that our sweet spot is in the range of one to fifteen doctors with a heavy emphasis on six doctors or fewer. That is where we really come into our own.

SM: I understand your differentiation being that you help smaller offices who do billing themselves through a SaaS model, whereas Athena is going after larger practices and hopes to entice them to outsource the entire billing process.

EM: A lot of our prospects who come to us from the web are in the process of firing their billing company because they are frustrated at the lack of data on what is happening with their collections. They are frustrated with their overall collection rate, and they want to bring it back in-house. AdavancedMD provides a manageable solution to doing it yourself because it automates so many things that are typically manual.

SM: How many doctor offices are there in your TAM? Let’s say physicians’ offices with under 20 practicing doctors?

EM: The statistics I have seen recently pegged the number of doctors in the US at 700,000.

SM: That is the number I have as well. I don’t have the breakdown of that number into segments. I am trying to understand how many of those actually fall into your target segment.

EM: I think it is like a lot of other market structures in America, where the base of the pyramid is a gigantic number of small, one- to two-physician practices. I think this is really a question of what our go-to-market strategy is going forward. Historically, we have looked at well over half of that market as addressable market for us. As time goes on, we are going to look to refine where we are going to focus our efforts. We think there are at least 300,000-400,000 offices that are addressable for us.

SM: In your current state, correct? I am assuming that if you change your focus, then it would require you to change your entire target audience. Is the point of bringing you on to run this company to enable you to go after the larger accounts?

EM: I would not over-read that if you are looking at my background. That is part of it. We do want to become more effective with larger accounts, but I would not say that is our strategy. We think we have a lot more products we can bring to market for the small doctor groups. We are not moving away from that.

One dimension that is significant for us is that there is an ongoing rollup of smaller practices happening right now in America. That gives those practices more collective viability. This month we signed a management company that has rolled up 40 dermatology practices. They behave individually like small practices, but there is a management company using our software to roll those smaller practices up. With a SaaS model it is infinitely easier to create centralized control of management, billing, collections and practice management when you have a SaaS-based platform.

This segment is part 4 in the series : Streamlining Healthcare: AdvancedMD CEO Eric Morgan
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