Deal Radar 2010: Office Ally

Office Ally is an electronic clearinghouse that acts as a go-between in processing insurance claims for doctors’ offices, clinics, and hospitals. Founder Brian O’Neill saw that although the United States often has the latest technology for clinical testing and patient care, it often lags when it comes to business operations in the health-care industry. O’Neill entered the market in 1999 with a physician as his partner—whom he bought out after about one year—at a time when the market was beginning to explode with opportunity and interest in health-care management technology and services for providers was increasing. The number of oppportunities should only increase as the United States reforms its health-care system. The Department of Health and Human Services’ Centers for Medicare & Medicare Services (CMS) and the and the Office of the National Coordinator for Health Information Technology (ONC) recently issued two regulations to help implement the electronic health records (EHR) incentive programs enacted under the American Recovery and Reinvestment Act of 2009.

In 1999, however, the market had only a few players in the clearinghouse business, and the prices for submitting claims electronically were significantly higher for insurance companies and physicians than they are now. Cost was thus a major barrier to physicians, and the pace of technology adoption was slow. Office Ally sought to eliminate the cost obstacle for physicians by offering them its core products free.

Based in Vancouver, WA, Office Ally’s core business consists of its clearinghouse; Practice Mate, a practice management system; EHR 24/7; Case Mate, a case management system; and Patient Ally, a patient portal that offers electronic office visits, messaging, and well care report cards. The company offers products free or at a very low cost. It gets its revenue from billing insurance companies, credit card processing, and e-prescribing. Office Alley helps insurers to communicate with patients and physicians; physicians communicate with patients and back around the circle in real time. For example, when a patient checks into a provider’s office, that office is notified that the patient needs a mammogram, or whatever procedure is recommended by the Healthcare Effectiveness Data and Information Set (HEDIS)/Integrated Healthcare Association (IHA) or National Committee for Quality Assurance (NCQA). The financial transaction is closed by Office Ally as well. The physician sees the patient, checks a few boxes on an electronic super-bill, and a claim is automatically generated and sent to the insurer. The insurer reimburses the physician and sends back the explanation of benefits electronically.In January 2010, Blue Shield of California and Office Ally announced the launch of a new Internet portal, Patient Ally, which will let Blue Shield members arrange online “e-visit” consultations with physicians, view lab results and immunization records, order prescription refills, get appointment reminders, and more.

The company’s clearing house is free to providers but charges insurers a per claim fee. EHR24/7, which meets the company’s current meaningful use requirements, is priced at $29.95 per month for the first physician and $15.95 for additional physicians within the same practice.

The company faces competition mainly from Emdeon, Capario, Gateway EDI, RelayHealth, and Availity on the clearinghouse side. For its other businesses, Allscripts, NextGen, and eClinicalWorks are its main competitors. The company feels that in terms of competitive positioning, Office Ally occupies a distinct niche. The company attributes this to the fact that its clearinghouse competitors went after large contracts like a large radiology group or laboratory while Office Ally has focused on all sizes, right from the start. O’Neill believes that the small size of his business gives it an edge over competitors, especially since Office Ally does not have to worry about appeasing its shareholders.

Further, Office Ally has a commitment from some insurers to load 9.4 million patients’ medical histories into its patient portal—close to one-third the population of California. Office Ally anticipates that it will have more than 10 million patients, including their complete medical histories, in its patient portal by the end of March 2010. This, Office Ally feels, will also set it apart from many competitors’ portals.

The company’s top targets are providers in the health-care industry including physicians, physicians’ assistants, nurse practitioners, chiropractors, acupuncturists, hospitals, psychologists, ambulance companies, and durable medical equipment (DME) providers. In addition, Office Ally targets all private and public insurers, including state Medicaid and Medicare funds. The company has 300,000 providers using its clearinghouse services and 48,000 providers using its practice management system, which is growing at a rate of 19,000 providers a year. The company has been profitable since 2003. Office Ally’s revenue, not taking into account advertising dollars, is $12 million for 2009. The company projects this figure to double by 2010.

Office Ally was funded through O’Neill’s personal funds, initially a 401(k). The company now funds all new products and growth from revenues. However, VC funding could be a possibility as Office ally’s market grows. O’Neill ruled out an exit as an option and said that his focus at the moment is “on building this business and ensuring that my employees and I do all we can to provide great products at a great price with outstanding customer service and cutting health-care costs.”

Suggested Reading:
*Athenahealth Growing Nicely
*Deal Radar 2009: Medsphere
*Streamlining Healthcare: AdvancedMD CEO Eric Morgan

This segment is a part in the series : Deal Radar 2010