Blueprint For Saving 11 Billion Dollars In Healthcare Costs: MD On-Line CEO Bill Bartzak (Part 5)

SM: What was the early financing of the company? When did you raise money?

BB: The first money I raised was in 1995. That took us through five months. I did not take a salary for the first year and a half of the company. We raised $100,000 with the first group in 1994 and $500,000 through the end of 1994. I lived off the money that I had from selling my previous company.

SM: So you had received $500,000 in funding, and that funded you while you rolled out the solution to Oxford over the next three years. What happened next?

BB: Because of the exposure to Oxford, other insurance companies saw that we were able to convert doctors from paper to electronic quickly. They started to embrace what we were doing and started working with us. The next company was Pacific Care in California. From there it just started progressing to the point that we are now on all of the major insurance companies’ Web sites as their solution.

Our growth was a series of baby steps. The sales cycle to get into these companies was slow. The deal that just closed with WellPoint was a two-year process. That was where we needed to have patience, and fortunately we had a great team. It was about persistence and not giving up on people who did not return our phone calls. That was the norm for us. Nobody would return our phone calls.

SM: Once you have closed an insurance company as a partner, what does it take for their providers to adopt and embrace your system?

BB: The first thing that has to be done is to educate the doctors’ offices that our new partnership exists. Cigna is a great example of this. They sent an email to every one of their providers letting them know about MD On-Line. The same thing happens with each partner that we have. The marketing is co-branded between the two companies. The way we market the service is that doctors can send [claims] to the insurance company we partnered with free because we get subsidized by those insurance companies.

SM: Do the insurance companies give you a list of all of their providers, or were insurance companies just sending out periodic emails? How do you deploy yourself into the provider network?

BB: First the insurance company makes the announcement. We then do a lot of mailings to the doctors to reinforce the relationship. We then do follow-up phone calls. We have a sales team that is constantly contacting the doctors. We let them know that we are calling on behalf of an insurance company and MD On-Line, and that they can submit their electronic claims to that insurance company free, forever.

Our goal is to have them use that free service to submit to their insurance company with the hope that they will eventually start using our paid service, which would enable them to send [claims] to all of the insurance companies.

SM: What is the business model structure of all of this? Who pays for what?

BB: We get paid by the insurance companies on either a contract basis or on a per-transaction basis. We also get paid because we do not have to charge very high fees. Our fees to doctors’ offices are typically $75 a month. Because we are subsidized by insurance companies, we can keep that number low.

SM: You said earlier you are saving about $5 per claim. How does that equate to what you receive from insurance companies on a per-transaction deal?

BB: Insurance companies pay a company like ours approximately 25 cents per transaction.

SM: So you are charging a fraction of that per-transaction savings?

BB: Correct.

This segment is part 5 in the series : Blueprint For Saving 11 Billion Dollars In Healthcare Costs: MD On-Line CEO Bill Bartzak
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