Healthcare Reform Through Entrepreneurship: Phytel CEO Steve Schelhammer (Part 2)

SM: Was Home Healthcare of America, your first exposure to a venture business, successful?

SS: It was hugely successful. It has become Caremark, which is one of the biggest in the world. I stayed there for just under three years and then they were bought by Baxter. That was the second time I worked for a company that was purchased by Baxter.

SM: Were you in a position to benefit from the equity of those purchases?

SS: Yes. That was the first one, and it was what really opened my eyes. I really enjoyed building, innovating and bringing solutions to the marketplace. Of course, the other aspect is that America is a place where if you innovate and bring something to the marketplace, then you also get rewarded. I saw that through the equity position I had.

Through my time at Caremark I got to know Doug Stickney, who was an entrepreneur. He founded Quantum Health Resources, which went on to become a public health company and was a great success. Doug came after me and asked me to go to North Carolina and start his operations on the East Coast. Doug and I were friends, and he was based in Orange County. I went and started a whole new business model for Quantum.

At the time we were providing services for people with hemophilia. I quickly came to realize that the business I thought I was getting into was not the business we needed to deliver. That population was catastrophically impacted by HIV due to tainted blood supplies. I realized there were a broad group of needs that were driven by the reality of this disease, needs more than just providing clotting factor. I went to work and built a whole new service delivery model that included psycho-social support, counseling at schools, a whole range of pharmaceuticals, travel support services and a comprehensive service model around the person as opposed to just around the disease.

I introduced that new model to Quantum Health Resources and brought it to market. It was a huge success, and the company grew rapidly. I had a very nice equity position in that company. We then went public, and it was a great success.

SM: What year was this?

SS: That was 1989 through 1994. I left before they were purchased to start my first company.

SM: Tell me about your first entrepreneurial venture.

SS: The first one I ran was Accordant Health Services. It was a disease management company wherein we provided services for 15 unusual or rare chronic diseases. The inspiration for that company came from my time at Quantum. I was very close to people and was able to see how patients with unusual diseases were moving and maneuvering through the healthcare landscape. People who have a progressive, chronic disease have many different needs with many different physicians. The system does not work well at all for those people.

SM: You said there were 15 diseases you were managing. What were they?

SS: Lupus, multiple sclerosis, cystic fibrosis, hemophilia, myasthenia gravis, Crohn’s disease and others like these.

SM: Was there a method to selecting people with those diseases as opposed to other diseases?

SS: Yes. It was a niche play. I always felt as though HMOs and employers were going to build their own programs for prevalent chronic diseases and that the marketplace would go away. That is happening right now. I believed that if I could carve out a niche, I would have a longer play with my business opportunity than if I tried to play in that space with everyone else.

I wanted to stay with unusual, rare diseases because I did not believe anyone would build a program for a single disease. There was a strong commonality among those diseases in regards to the cause. Most of those diseases were either autoimmune in nature or brought on due to protein deficiencies. We sold those programs to managed care plans.

This segment is part 2 in the series : Healthcare Reform Through Entrepreneurship: Phytel CEO Steve Schelhammer
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