Deal Radar 2009: HealthEdge

As the call for radical changes to the US healthcare system grows louder, tech companies continue to offer new solutions, such as value-based plans, and software that improves basic administrative tasks such as claims processing. Our latest company in the category, HealthEdge, provides an enterprise-class software suite that allows healthcare payors to take on new business, streamline their current business and give real-time responses to market changes and new regulations. Their main product, HealthRules, includes next-generation claims and benefit administration, business intelligence and portal solutions.

HealthEdge CEO Rob Gillette has nearly 30 years’ experience in the technology sector. He began his career in telecom and satellite data communications and later was part of the team that built Shoppers Express, the first web-based grocery service. Earlier in his career, Gillette was the founding CTO at Callidus Software. Prior to founding HealthEdge, he was EVP of Products and Technology at deNovis, a startup healthcare software company. Although deNovis had excellent technology, the operational issues led Gillette and Albert Waxman of The Psilos Group to branch out and start HealthEdge after acquiring the deNovis IP, which represented a $100 million investment.

The Burlington, Massachusetts-based company has raised $29 million so far with The Psilos Group as the sole investor.  Funding has been on an as-needed basis, rather than a traditional ’round’ funding structure. The only publicly announced round was in April 2008 for $13 million. 

In 2005 when HealthEdge was founded, the market was dominated by large players like TriZetto, Amisys and DST.  QSCI was emerging as a player, but when they were acquired by TriZetto, they lost dominance. In the past two years, the majority of payors have been looking to upgrade their existing systems and are seeking new technology from their vendors. This is the segment HealthEdge caters to.

The company aims to differentiate itself from the competition in several ways. HealthEdge has new technology based on a current view of the marketplace and does not have a prefabricated model that businesses need to “shoehorn” into. Its aim is to allow users a level of efficiency, transparency and flexibility that is not easily achieved with other approaches. Unlike established companies in the market who have a services- and BPO-focused model, HealthEdge makes innovating and investing in its products a priority.

The available market is approximately $1.8 billion annually.  This is calculated as 300 million lives in the US at $0.50 per member per month. The top segments are 100,000 to 2 million life health plans and TPAs. HealthEdge also focuses on innovative startup health plans, especially in the value-based plan space. Although revenue numbers are undisclosed, the company expects to achieve profitability by 2010.   

HealthEdge currently has six customers, including Mississippi Administrative Services, CareGuide and OneBeacon. Two additional customers are at the contract stage. At present the company sells directly to enterprises but is exploring partner-based sales as another option. HealthEdge is priced on a subscription model, so the company enjoys growth on a stable base of recurring revenue. It offers a price structure made up of two components — the first is per member per month (PMPM), which includes the license, maintenance and support, and the second component is implementation, which includes configuration of HealthRules and conversion/integration with third-party systems. Pricing varies based on the size of plan and IT infrastructure, the number of interfaces/trading partners and the quality of data.

We have looked at a number of payee-side solutions so far, including AthenaHealth. Obviously, the payor side also needs serious streamlining. Let us see what HealthEdge can deliver in the upcoming months.

Recommended Readings:
Critical Innovation In Healthcare Claims Processing: athenahealth CEO Jonathan Bush
Deal Radar 2009: Medsphere
Deal Radar 2009: Triveris
Transforming Healthcare: Epocrates CEO Kirk Loevner

This segment is a part in the series : Deal Radar 2009